What is SAP S/4HANA Finance?

S/4HANA Finance architecture

SAP S/4HANA Finance is part of S/4HANA, which is built on SAP HANA, an in-memory database platform. By storing data in the computer's main memory rather than on disks, in-memory databases enable faster queries and can analyze more information quicker than traditional databases that typically serve as the data repository of an ERP system. With HANA at its foundation, S/4HANA integrates cross-organizational functions, such as accounting and procurement, into one system that combines records of business transactions with analytics.

The front end of SAP S/4HANA Finance is built on SAP Fiori, the vendor's user experience platform. Fiori uses a simple, consumer-style, tile-based design that can be viewed on various desktop and mobile devices.

Universal Journal is probably the most important differentiating aspect of the S/4HANA Finance architecture. It's essentially a single data table that stores all the financial information in an S4/HANA system. Older ERP systems usually have numerous general ledgers, each with a limited number of fields that can't be changed. Universal Journal, in contrast, centralizes ledger data in a single chart of accounts, which helps to unify multiple ERP systems, according to SAP. The fields can be modified, and there can be as many records as needed to capture all the data. Some companies have billions of records in their Universal Journal.

Universal Journal also provides a normalized data set, which, the vendor claims, helps users avoid the need to reconcile data and makes reporting easier. In addition, this feature supports machine learning, which often requires large sets of normalized data on which to learn. For example, S/4HANA Finance could learn what mistakes a user typically makes and approve a payment instead of waiting for the user to complete the steps they probably intended.

When S/4HANA Finance is deployed on a central server, it functions as a hub for financial data from multiple systems, including different ERP systems. In such cases, it's called Central Finance (cFIN). Both names are widely used, and it's easy to confuse them. Put simply, S/4HANA Finance is the accounting and financial management module of S/4HANA, while cFIN is a centrally deployed S/4HANA Finance module augmented with data integration software to connect it to other systems. According to SAP, S/4HANA Finance is the what, and Central Finance is the how.

Another architectural innovation of S/4HANA Finance is that it merges the separate financial accounting (FI) and controlling (CO) modules of the SAP ERP products that preceded S/4HANA. According to Oona Flanagan, author of the book A Practical Guide to SAP S/4HANA Financial Accounting, before S/4HANA, recording revenue or cost items required creating a general ledger account in the FI module and a matching cost element in CO. In S/4HANA Finance, cost items are recorded in the general ledger's master data records along with revenue items.

What are the benefits and drawbacks of SAP S/4HANA Finance?

The main advantage of SAP S/4HANA Finance is that it combines processing speed with integrated features for various financial functions, such as financial accounting and management accounting. Because of this, S/4HANA Finance enables much faster reconciliation of financial processes, such as the quarterly close, and provides a single source of financial truth for the organization, according to SAP.

Another key advantage is the ability to use real-time data with analytics to model and predict the effect of changes that a company wants to make, such as an acquisition. This can enable financial professionals, including CFOs, to play a more prominent role in corporate decisions.

SAP claims that S/4HANA Finance's consolidated financial data and real-time analytics provide additional benefits to users, including the following:

• The ability to keep existing systems in place when deployed as cFIN, thereby minimizing disruptions without the need to change master data.
• Partial automation of finance processes.
• Use of financial best practices.
• More standardized business processes.
• Lower total cost of ownership.

However, S/4HANA Finance's main technical and architectural advantages -- its unified financial database and integrated transactional, analytics and planning applications -- are arguably also its biggest drawbacks because they require organizations to make major changes in how they manage their finances.

A typical challenge is deciding which data and processes to move from an older ERP system to a greenfield deployment of S/4HANA Finance. First, the data quality must be examined, and the organization must determine whether it has the financial and human resources to move to the new system. Most S/4HANA Finance adopters must also decide whether to reduce the number of accounts in their chart of accounts, which can number in the thousands.

S/4HANA Finance deployment options

SAP S/4HANA Finance, like S/4HANA as a whole, can be deployed on-premises, in the cloud or in hybrid environments. CFIN is only available in a private cloud.

Another deployment option is the S/4HANA Finance module that comes with S/4HANA Cloud, the multi-tenant software as a service (SaaS) version of S/4HANA. It might appeal more to organizations that want more standardization of their financial processes, potentially faster deployment and access to advanced features, like artificial intelligence (AI) and predictive analytics.

S/4HANA implementations can also use a brownfield or greenfield deployment approach. The brownfield approach transfers an organization's existing SAP landscape to S/4HANA, allowing the organization to continue using some legacy functions. It's also usually less disruptive and time-consuming.

A greenfield deployment involves installing and configuring S/4HANA in a completely new environment. Organizations must redesign entire processes to fit this approach, making it more disruptive, costly and time-consuming. The result, however, is that an organization can use S/4HANA's ERP capabilities completely.

However, there's another migration option available: a selective data transition. With this option, organizations can selectively migrate specific data, processes and configurations from existing systems.

S/4HANA is also available for Rise with SAP. This cloud deployment and managed services offering enables customers to implement and run S/4HANA in a simplified SaaS model. This is intended to simplify the implementation and management of S/4HANA.

Many organizations have used a cFIN implementation as a first step to eventually migrate their entire ERP system to S/4HANA. Accounting is considered a back-end business function that doesn't change as much as front-end processes, like sales and supply chain management. According to SAP, swapping out a company's finance function is relatively easy, while leaving the others intact.

Organizations typically deploy S/4HANA Finance or cFIN to improve their financial reporting, planning and analytics; centralize their financial processes; or more efficiently handle financial transactions and functions, such as payments, cash management and accounting.

CFIN consolidates financial transactions from legacy ERPs in a single table with a normalized data set. This enables organizations to harmonize their finance data, which is often the first step in a broader digital transformation initiative in finance. The other financial systems don't need to be converted and can stay in their existing environments.

SAP S/4HANA Finance versions and release cycle

S/4HANA Finance releases are part of the S/4HANA release cycle. Since 2020, each release has been numbered according to the year it came out. Before that, the product names combined the year and month. SAP used to release a new version of S/4HANA every year, but starting with the 2023 release, it moved to a two-year release cycle for its on-premises version. S/4HANA Cloud, however, receives major upgrades twice a year and minor updates quarterly.

As an example of what to expect from these updates, the 2023 release added AI functionality and machine learning features for fraud detection and invoice automation, expanded support for cFIN and improved reporting flexibility.

What are new features in SAP S/4HANA Finance?

The SAP S/4HANA 2023 release also added the following features and expansions to the S/4HANA platform:

• Features for product sourcing.
• Improvements to the Model Product Specification app.
• Settable environmental, social and governance parameters.
• Further streamlining of the Advanced Shipping and Receiving Cockpit app.
• An Evaluate Capacity app.

The following new features were added to several other S/4HANA apps, including to S/4HANA Finance:

• Automated Supervision of Closing Tasks with Account Balance Validation enables the automation of validations and lets users define and execute account balance validation rules on numerous financial positions and dimensions.
• Predictive Liquidity Forecast for SAP Analytics Cloud enables better financial planning by letting users model cash flow in real time.
• The Check Electronic Document Consistency app helps to ensure the accuracy and compliance of financial documents.
• Subscription product bundles can now be defined and configured using Advanced Variant Configuration and configurable bills of material. This increases the flexibility for defining subscription-based tools.

SAP S/4HANA software is offered both on-premises and in the cloud. Learn how these offerings differ and what might influence an organization to choose one type of software over another.