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Move to SAP S/4HANA

The move to S/4HANA is an important initiative for companies running on SAP as it is the foundation for enabling the organization to innovate and thrive in the digital economy. 

If you are considering the move to S/4HANA, you may be finding it overwhelming to review the over a 1,000 page SAP simplification list document. Your single most priority is to  ensure that in taking this on, there is minimal disruption to the business operations. 

To make this a little easier, I will discuss here some high impact areas that you will need to account for in planning the move to SAP S/4HANA. Obviously, each customer’s situation is unique and the degree of impact will depend on the footprint and industry solutions that are in use today on your ERP Central Component (ECC) system. Based on our experience following are some of the more prominent items to consider:


Item  Impact 
Business Partner Approach In SAP S/4HANA, Business Partner is the leading object and single entry point to maintain Business Partner, Customer, and Supplier (Vendor) master data. It will be necessary to replicate and synchronize ERP customers and vendors as Business Partners in S/4HANA. However, this may require cleanup of customer and vendor data before converting  to S/4HANA as a Business Partner.
General Ledger  This will be based on the Universal Journal in S/4HANA. As part of the conversion to S/4HANA, New General Ledger (New G/L) will be activated. Ledger for  Classic General Ledger and New G/L will be migrated to Leading Ledger “0L”. However, this will be one version of the truth that will include Finance and Controlling data elements. Further, Primary and Secondary Cost Elements will be maintained as General Ledger Accounts and will be  differentiated for the nature of the account by attribute of Account Type. 
Asset Accounting  This will be based on New Asset Accounting in S/4HANA. However, the new Asset Accounting will be part of the Universal Journal, all valuation postings will be made in realtime to the General Ledger, hence, eliminating the need for reconciliation.
Cash Management / Bank Management  This area is a major change in S/4HANA. However, you can use new maintenance transactions for  Bank Master, House Bank, and Account Id. Bank Account Management, a Fiori based solution is available with features  of workflow for account activation and signature approvals, Bank Communications Management, and Cash Management.
Credit Management   In S/4HANA  the target functionality is SAP Financial Supply Chain Management (FSCM) based Credit Management. Therefore, A/R Credit Management will be migrated to the FSCM Credit Management.
Revenue Recognition  Sales and Distribution (SD) Revenue Recognition functionality of  deferred revenue, realizing revenue before invoice posting is replaced by SAP Revenue and Accounting Reporting (RAR) to comply  with IFRS 15  / ASC 606.
Material Ledger   In S/4HANA Material Ledger activation is mandatory as this functionality is the new way of performing inventory valuation. However, Material Ledger Actual Costing is an optional functionality. 
Profitability Analysis  In S/4HANA Account-based Profitability Analysis is the recommended and preferred approach. This solution is also referred to as Margin Analysis. Additionally, the costing-based Profitability Analysis is still supported. Margin Analysis within the Universal Journal addresses the needs of internal and external accounting, supporting real-time derivation of reporting dimensions and embedded analytics. Further, new functions are available to split the Cost of Goods Sold (COGS) posting to multiple accounts in accordance with the relative weight of the assigned cost components that is quite helpful for granular analysis and reporting.
Material Number   In SAP S/4HANA, the material number field length has been extended from 18 to 40 characters. Logic is in place and executed automatically when SAP Business Suite system is converted into SAP S/4HANA. 
Output Management  Output management solution in S/4HANA has new features. The existing output solutions will work after the conversion to S/4HANA, thus, the new features are optional. These new features include configuration based on Business Rules Framework plus (BRFplus), seamless integration into Fiori apps, flexible email configuration and email templates as well as the support of SAP Cloud Platform Forms by Adobe.
MRP  SAP S/4HANA features MRP Live that reads material receipts and requirements, calculates shortages, and creates planned orders and purchase requisitions all in one database procedure. However, this enables real-time inventory monitoring and automated creation of procurement proposals, and clear visibility of material flow.
GTS / Foreign Trade  SAP Global Trade Services solution replaces Foreign Trade solution for international trade processes. 
Sales and Operational Planning (SOP) Integrated Business Planning (IBP) replaces this functionality in S/4HANA. SOP is not a future technology. Additionally, IBP supports all SOP features plus advanced statistical forecasting, multi-level supply planning, an optimizer, collaboration tools, an Excel-based UI, and Web-based UIs. 
Rebate Processing  Settlement Management replaces this functionality in S/4HANA. The Settlement Management Solution provides a single point of entry to maintain and to administrate contract-related conditions. Additionally, condition contract settlement allows to set up different rebate scenarios and settlement processes to fulfill business requirements by customization. Further, Condition Contract Management offers an overview of actual business volume even for retroactively contracts and a rich functionality to control open settlements, business volume, and accruals.  
Transportation  S/4HANA Transportation Management is the new architecture and is a recommendation as a future-proof product. Additionally, the existing solution Logistics Execution Transportation is available as part of the compatibility package.
Warehouse Management  Extended Warehouse Management is the new target architecture. 
Product Catalog SAP Hybrid for web-channel solutions replaces this functionality in S/4HANA, with the respective backend integration.


What’s Next..

Finally, as you formulate the strategy for the move to S/4HANA and navigate this change, engage the experts at Mindset Consulting  to work with you in assessing the best path forward. Further, we are helping our customers with assessments and identifying the business value and opportunities to develop the case for change. We will bring all our experiences gained over the years to you to serve as your trusted advisor throughout this journey! 


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Dinesh Chhabra is a Principal Architect at Mindset. He is an accomplished leader and an expert SAP Solution Architect with a proven track record of successfully delivering SAP enabled solutions for over 25 years, helping customers realize benefits of the digital age. He has extensive industry experience in construction, solar energy, professional services, manufacturing, chemicals. He is a seasoned professional with expertise in the Finance and Accounting domain coupled with a strong background in SAP S/4HANA Finance

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