A Look at a Typical Closing Calendar, Tasks, and Ownership in SAP S/4HANA

Financial close, like all things in life, follows a natural pattern.

Accounting-relevant processes in SAP S/4HANA Finance are created on an ongo­ing basis and post in near real time to the general ledger from originating transactions (for example, vendor invoice receipts, material movements, and customer billing documents

Accounting-relevant processes in SAP S/4HANA created on a periodic and month-end basis post to the general ledger only in near real time when those activities are performed (for example, vendor credits, inventory cycle counts, and customer returns).

Interfaced postings are highly dependent on the systems in which they originate, integra­tion patterns to and from those systems, and business requirements. While it may be desir­able to post all accounting-relevant transactions in near real time to the ledger, it is often impractical, not a good use of resources, and may create confusion due to the volume of transactions being posted, especially when postings to the general ledger are summarized and then sent to SAP S/4HANA. Based on the natural dependencies from upstream activi­ties, ensuring cutoffs are communicated, activities are performed in a timely and orderly manner, and monitored for errors and completeness is critical for a smooth and effective financial close.

Client Example

Not properly closing the relevant general ledger accounts at the right time to prevent future posting to the prior period or posting to accounts already considered closed often creates undesirable consequences. Talk to any accountant involved in the close process who has worked in SAP for any reasonable amount of time, and they will nearly always have examples of how accounting entries slipped into the previous period unexpectantly. They will tell you that, depending on the timing of that mishap and where they were in the financial close process, it took significant effort to identify and rectify the impact it had on the time to close the books that month and caused misses to milestones.

If you ask an organization, “How many days does your financial close process take?”, you’ll more than likely get multiple answers. Closing the books in world-class organizations may take roughly five business days on a monthly basis. Whatever answer you receive, the most important follow-up question (assuming you’re speaking to an individual from a publicly traded company) is “Was that number of days to close all the way to reporting to the SEC or local regulatory agency?” You may find that the benchmark an organization uses for how many days it takes to close the books is based on their scope of responsibility. For example, you may hear that the initial answer only provides results to the individual business unit leads, executive leadership, or CEO, or the initial answer excludes financial consolidations or actually reporting results to the local regulatory agencies.

Example Closing Calendar

This brings us to what a closing calendar looks like with SAP S/4HANA. Our illustrative example shown in the table below is typical for relatively small enterprises using SAP S/4HANA. It loosely shows dependencies that reflect the way we like to organized our workflow, to include upstream and interconnected activities.

Day 1

• Payment run an close accounts payable

• Project settlement

• Cash application and close accounts receivable

Day 2

• Revenue deferrals

• Expense accruals

• Bank reconciliation

• Fixed assets depreciation

Day 3

• Intercompany reconciliation

• Allocations

• Balance sheet and P&L review

Day 4

• Balance sheet and P&L finalization

• Business unit financial review

• Financial consolidation

Day 5

• Corporate financial review

• Close period

• Report to regulatory agencies

This example is significantly simplified and could be a task list of more than 300 steps for large, global enterprises with shared service organizations running the global close. Names or groups and responsibilities may vary or timing may differ. Differences also exist based on how sophisticated the organization is, how complex the system landscape is, and what, if any, advanced close collaboration tool(s) are utilized.

Tasks are shared and owned across the organization, typically by country and region, for example, Americas, Europe, Middle East and Africa, and Asia. When multiple legal entities (company codes) exist for a given country, the activities are typically owned by an individual or group across all those company codes in the country, if not region. For any organization of relatively large size, these tasks are further divided by function.

In this case, accountants typically specialize in a given area, such as fixed assets or intercompany transactions. Other accountants focus on the group close process and the capabilities within SAP S/4HANA Finance for group reporting or that may reside outside SAP S/4HANA. For capabilities performed outside of SAP S/4HANA in non-SAP software, you’ll likely find the accountants responsible for group close may not understand the depth and nuances required in SAP S/4HANA compared to accountants who are involved in the day-to-day transaction processing.

Furthermore, larger organizations, especially those that have operations in Eastern Europe, South America, India, and Asia, typically create shared service centers in countries in those regions for labor arbitrage purposes. It’s easy to see the advantages from a cost perspective, as well as potentially being able to have a “follow the sun approach” to closing the books when accountants in those locales would naturally be working.

Depending on the specific location, these advantages may also include significant time zone overlap, for example, with European entities leveraging labor pools in Eastern Europe, India, the Philippines, or else­where. Highly educated talent pools often are near universities and, if the desired language is not the one that is the native tongue, it may be a very common second language. Some organizations go so far as to partially or completely outsource their accounting and close processes to firms like IBM, EY, or others.

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Editor’s note: This post has been adapted from a section of the book Financial Close with SAP S/4HANA by Francisco da Cunha, Piotr Górecki, Mandar Kashikar, Howard A. La Kier, Sonam Pawar, Rodney Reed, Marc Six, and Srinivas Sriram. Francisco is a leader in the Europe Middle East and Africa Center of Competence and TruQua EMEA, an IBM Company. Piotr is a program manager and enterprise architect in the IBM Global SAP Center of Competence. Mandar is a senior managing consultant with IBM consulting. Howard assists clients in their digital transformations enabled by SAP ecosystem solutions as the financial transformation go-to-market and delivery leader for TruQua, an IBM Company. Sonam is a senior managing consultant with extensive experience running business transformation programs enabled by SAP finance and related solutions. Rodney is a senior managing consultant in the SAP practice at IBM Consulting. Marc is a partner at TruQua, an IBM Company. Srinivas is the group reporting North America leader at TruQua, an IBM Company.