Skip to main content Skip to main navigation Skip to search Skip to footer
Type to Search Subscribe View Tags

HCL Technologies

Central Finance: Decoding Innovation in the SAP S/4HANA Journey

Central Finance: Decoding Innovation in the SAP S/4HANA Journey
Luc Cayet - SAP Solutions Architect | June 28, 2017
466 Views

Global companies today grapple with heterogeneous ERP software systems. The complex and decentralized landscape prevents business records and transactions to be captured accurately and hinders seamless collaboration between vendors, suppliers, and partners. Additionally, processing huge volumes of data by leveraging predictive analytics remains a challenge. The problem aggravates when the company is pursuing an M/A strategy that requires quick financial integration.

To a great extent, these can be addressed by transitioning to SAP S/4HANA. It enables real-time reporting in the core financial applications resulting in faster decision making and reduced process run times. “Central Finance” (formerly known as central journal) is a key enabling component. Central Finance allows customers to connect their distributed system landscape, comprising of multiple older SAP ERP instances and non-SAP ERPs, to a centralized SAP S/4HANA Finance or SAP S/4HANA system.

Financial Accounting (FI) and Management Accounting (CO) postings are replicated into this Central Finance system where they are combined into one document, the universal journal entry, and posted to the universal ledger. Source documents aren’t merely replicated, but are instead processed through the accounting interface of the system, ensuring data consistency.

Central Finance function is one of the most proficient ways to consolidate the system landscape, as it does so without disrupting the current SAP ERP systems. Some of its other differentiating features include:

  • Centralized error handling
  • Access to existing master data mapping from SAP Master Data Governance
  • Document drill back to the original document in the source system
  • Replication of cost objects from source systems to the central system
  • Mapping functionality for harmonization of master data before posting into Central Finance
  • Single source of the truth for financial data for reporting and planning

Exploring the Central Finance System Landscape

SAP Central Finance can be used in conjunction with SAP Landscape Transformation Replication Server (SAP LT Replication Server) and SAP Master Data Governance (SAP MDG). Replication of the finance postings from the source system(s) to the Central Finance system is done by means of the SAP SLT replication server.  This occurs in real-time when documents are saved in the source system.  The diagram below gives the conceptual depiction of Central Finance landscape.

Central Finance

Mapping the different accounting objects as well as other relevant master data, i.e. vendors, customers, materials, in the source systems to one common set of master data in the Central Finance system can be achieved through business mapping in the Central Finance system or optionally through the use of SAP Master Data Governance.

Enhancing finance in S/4HANA

The Central Finance System provides a host of additional benefits:

  • Enables end-to-end visibility of disparate systems and data complexities
  • Facilitates enterprise-wide reporting through financial data availability (entered in the S/4HANA system or “replicated” there via Central Finance)
  • Aids quick financial data integration for new acquisitions
  • Supports data management from S/4HANA and non-S/4HANA systems via “on the fly” analytics capabilities
  • Allows effective evaluation of operations by removing system barriers
  • Simplifies planning and (real-time) data consolidation in the embedded BPC functionality of the S/4HANA system

In the past, organizations have struggled with traditional data warehouse solutions that fail to provide comprehensive enterprise visibility at a level other than high-level consolidations. The approach had several business challenges – high reconciliation efforts, data quality issues, and regular batch jobs for data loading, extraction, and transformation.

Central finance bridges the gaps through:

  • Real-time replication of financial postings from the source system(s) to the Central Finance system
  • Harmonization of the data model through the use of business mapping and/or Master Data Governance
  • Near elimination of data reconciliation through data model harmonization and real-time replication of data enabled by SAP SLT
  • Reduction in data quality issues via data integrity and validation checks.

Apart from these, multi-ERP environments also pose difficulties with establishing a shared services framework across the systems. The underlying reasons include the lack of a harmonized data model, diverse business processes and practices across business units, absence of common processing platforms, rapid changes including M&A, and long process harmonization and/or system consolidation timelines.

Central Finance provides a compelling solution to the above challenges - by ensuring the business functions are performed centrally, while day to day operations on the source system remain untouched.

Additionally, Central Finance provides a “toolkit”, enabling streamlined financial integration of acquisitions and gradual integration of operations after a merger, despite the complexity. It lets the acquired company operate on its legacy system while also connecting it to the central instance fairly readily. The key advantage here is that Central Finance allows easy decoupling of financial integration from operational integration.

Transforming business operations

Today, many companies that operate a multi-ERP environment are also interested in transforming their (financial) processes in a more agile and piecemeal way without having to undertake a large transformation project with a protracted timeline.  These transformation projects tend to be very expensive, carry a lot of risk, and are likely to be outpaced by future acquisitions.

Central Finance provides an alternative by allowing selective implementation and roll-out of certain business processes followed by others at a later point in time. This includes not only financial processes, but other business functions as well.

Central Finance represents a dynamic route to ERP system consolidation & migration to SAP S/4HANA at a low risk. In cases where an over-complex SAP estate exists on a variety of source versions, it may prove to be the most effective mechanism to generate some of the benefits of SAP S/4 HANA at an early stage, while eventually simplifying the overall process. HCL offers Central Finance Assessment as well as Central Finance as a Service Implementation to assist companies on this journey.


Contact Us
MAX CHARACTERS: 10,000

We will treat any information you submit with us as confidential. Please read our privacy statement for additional information.

We will treat any information you submit with us as confidential. Please read our privacy statement for additional information.

Sign in to Add this article to your Reading List
Register