Enabling Finance

Process Digitalization
With SAP Central
Finance
Paving the Road for Centralized Financial
Reporting and S/4HANA Transition

Internal Audit, Risk, Business & Technology Consulting

Executive Summary

SAP® S/4HANA innovations hold significant Disparate and fragmented accounting systems arise
from the coexistence of various SAP releases and
promise for businesses seeking transformation non-SAP systems within the same organization —
through digital technologies – such as massive typically, as a result of transformative events, such
as acquisitions, mergers, spin-offs or organic growth
data processing in real-time, cloud computing
to adapt to changes in the economic environment.
and network power, artificial intelligence, Such multiple systems often lead to labor-intensive
and manual reconciliations and reporting, and delays
communication bots, machine learning and
in the financial close process. They also represent a
virtual reality – to maintain a competitive significant obstacle to finance process digitalization,
as well as future mergers or acquisitions.
advantage in a digital economy. SAP Central
SAP Central Finance provides a non-disruptive solution
Finance is one such innovation. It is designed
to resolve this problem by acting as a hub into which new
to enable highly automated accounting entities can be integrated without imposing fundamental
changes to the main accounting system. It further helps
processes and deliver centralized reporting
in the transition strategy to S/4HANA due to its powerful
solutions by bringing disparate accounting components designed to harmonize data across various

systems into one centralized hub. SAP and non-SAP systems, including:

•• A solid master data management process at the

enterprise level

•• Simplified reporting and analytics (single source

of truth)

•• Fewer reconciliations and an optimized month-end

closing process

•• A standardized and automated process to integrate

new acquisitions and shorten the post-merger
transition period

protiviti.com Enabling Finance Process Digitalization With SAP Central Finance · 1

Excluding SAP Central Finance from an organization’s
SAP® S/4HANA transition strategy must be carefully Definition of SAP Terms
considered, as it would preclude an opportunity SAP HANA® (High Performance Analytic Appliance) is
to build a hub for the insertion of new entities into an in-memory platform for processing high volumes of
the core accounting system smoothly, efficiently data in real time.
and cost-effectively in the future and could delay or SAP® S/4HANA is the business suite designed to run
frustrate digitalization efforts. To mitigate this risk, processes in the context of a digital economy.
and regardless of their stage of transition to SAP® SAP Central Finance is both a deployment strategy of
S/4HANA, all multi-entity organizations should assess SAP ® S/4HANA and a product to build a centralized
and compare carefully the benefits of a centralized financial reporting and information hub that inserts
disparate accounting systems into the core accounting
financial reporting solution based on SAP Central
system of the organization.
Finance versus the option of excluding it from the
SAP® S/4HANA Finance is a subset of SAP® S/4HANA
transition strategy. This paper provides an overview
with a focus on financial and accounting solutions,
of SAP Central Finance, its architecture and key
including financial planning, accounting, financial close,
functionality, various deployment scenarios, and treasury and finance operations.
other key considerations, including the role of
business leaders in its implementation.

What Causes Fragmented Accounting Systems?

There is a host of reasons for the existence of different accounting system using their existing processes and
accounting systems within the same organization but technologies, and as a result suffer from:
the two major ones are:
•• Tedious and inefficient financial period-end close
1. Creation of new entities as part of organic growth or
•• Complicated and time-consuming reconciliations
the acquisition of new companies; and
•• Manual eliminations of redundant intercompany
2. Upgrading a part of the existing accounting system
transactions during the consolidation process
to a new technology, essentially creating a system
within a system. •• Error-prone adjustments in spreadsheets

In either situation, most organizations are aware of •• Lack of an authoritative source of truth with regard

the need to define a central accounting system that to financial information

provides a coherent, comprehensive and centralized •• Lack of visibility into historical details of
view of financial information and reports. intercompany transactions

Awareness aside, reality shows that most organiza- •• Time-consuming multi-currency conversions
tions fall short in their efforts to define a centralized and accounting

2 · Protiviti
Is SAP Central Finance the Answer?

More and more organizations are turning to SAP Central SAP Central Finance, as a component of SAP® S/4HANA,
Finance, part of SAP’s most recent platform, SAP® enables the automation and digitalization of centralized
S/4HANA, to solve the issues inherent in disparate and financial reporting processes and helps support:
fragmented accounting systems.
•• Central entity reporting
In a broad perspective, SAP S/4HANA is designed with
®
•• Central process execution
digital technologies in mind, with the purpose of creating
highly automated business processes. Applying digital •• Real-time financial close

technologies to enterprise processes is also known as •• Real-time integration with consolidation, planning
business process digitalization, and is a necessity for and analytical solutions, such as SAP Integrated
maintaining competitive advantage in a digital economy. Business Planning and Business Objects
Three key characteristics distinguish a digital solution
•• Leveraging SAP reporting tools, such as Fiori, to
from a traditional one:
visualize and analyze the centralized financial data
•• Mobility combined with constant connection to that are sourced from disparate accounting systems
central resources
•• Simplifying and streamlining general accounting
•• Vast networks of intelligence that are at the same time data that can be used by non-SAP financial
flexible enough to create personalized information management solutions

•• Real-time streaming combined with on-demand

distribution of various forms of data, including big
data, massive structured data used in enterprise
finance processes, images, neuronal hierarchies, etc.

How Does SAP Central Finance Work?

The architectural design of SAP Central Finance is aspect makes the reports coming out of SAP Central
based on data replication at the application level rather Finance reliable and secure even though the data is
than the database layer, which is used by traditional sourced from non-SAP accounting systems.
data transfer technologies. The application-level data
Some organizations use home-grown data warehouses
replication is executed in real time and at line-item level
or off-the-shelf systems to centralize financial
with embedded data harmonization functions. These
reporting and information. Such solutions have rigid
functions enable faster reporting, given the elimination
designs that provide limited functions because of
of redundant data, and increase the extent and depth of
challenges related to custom interfaces of non-SAP
real-time analysis of financial information.
sources, replication of data in an environment outside
In addition, SAP authorization architecture is applied of the core SAP technology, data transfers on an
automatically, providing auditability and security to the aggregated level, and complicated data validation
SAP Central Finance data and system. This architectural and reconciliation. SAP Central Finance can replace

protiviti.com Enabling Finance Process Digitalization With SAP Central Finance · 3

these home-grown data warehouses or off-the-shelf Figure 1, below, depicts S/4HANA’s core digital platform
solutions if they are used for centralized reporting and and the SAP Central Finance architectural components
financial information. In cases where such solutions used to enable business transformation, centralization
are used for business needs, such as cost allocations, of processes, designing of shared services, and
financial planning and similar sophisticated functions centralized reporting.
that go beyond centralized reporting, SAP Central
SAP Central Finance works in conjunction with the SAP
Finance can help harmonize the data coming from
landscape transformation (LT) replication server to
the accounting systems on a line-item level. In this
collect data written to databases in the source systems
case, SAP Central Finance will be the key source of
and replicate that data in real time by using the central
normalized and consistent financial data to non-ERP
accounting interface. From a leading practice design
(home-grown or off-the-shelf) applications.
perspective, it is recommended to use SAP master data

Figure 1. Components of SAP® S/4HANA and SAP Central Finance

Provides a finance hub for Creates a platform for

enterprisewide analytics accelerated onboarding
and central processes with early insights
PERMANENT MERGERS &
SIDECAR ACQUISTIONS

Supports the Creates a platform

strategy to to onboard smaller
transition to entities and
the cloud MOVE TO THE SAP® S/4HANA subsidiaries
SUBSIDIARY
CLOUD DIGITAL CORE ONBOARDING

SAP CENTRAL
FINANCE

INSTANCE SAP AND

CONSOLIDATION NON-SAP

Consolidates on one instance Harmonizes and

cross-system SAP capabilities SYSTEM centralizes financial
like credit, intercompany, CONSOLIDATION reporting and
treasury, and shared services information across
non-SAP ERP or
mixed landscapes

Facilitates migration and decommissioning of

selected existing SAP and non-SAP ERP systems

4 · Protiviti
governance (MDG) in conjunction with SAP Central Central Finance uses an error-handling mechanism to
Finance to define common data structures for master log the details of any exceptions. Using an interactive
data (also known as long-living data), such as company application, finance staff can then choose to correct
code, plant and cost center. SAP MDG is not an embedded the exceptions and repost or reprocess the items. For
component of SAP Central Finance. It is available as a example, they can correct the mapping that causes the
separate application in the HANA platform. Regarding exception. In the final stage, SAP Central Finance creates
short-living data (also known as transaction data), such a universal journal entry that corresponds to one or more
as production order, internal order and service order, it documents in the source accounting systems.
is recommended to define the common data objects by
Figure 2, below, depicts the common data objects in
using the business mapping component of SAP Central
the context of SAP Central Finance architecture and
Finance, which provides corresponding embedded cost
its ecosystem.
objects. After the execution of data mapping rules, SAP

Figure 2. The SAP Central Finance Ecosystem

Business Events

Post-Merger Acquisition Subsidiary Future

Integration Onboarding Consolidation Growth

Long-Living Common Short-Living Common

Data Objects: Data Objects:
Client, Vendor, Cost Center Production Order, Service Order

Accounting
Transactions
Central Finance
Master Data
Governance (MDG)
Accounting Business Error
Interface Mapping Handling

Source Systems S/4HANA Finance

Universal
SAP ECC and SAP Landscape Journal
Other Releases Transformation
Replication Server
Non-SAP
Systems S/4HANA Enterprise

SAP HANA

protiviti.com Enabling Finance Process Digitalization With SAP Central Finance · 5

What Are the Key Design Principles of
SAP Central Finance?

The main design principle of SAP Central Finance is

defining a common data structure1 that unifies the data A well-designed common data structure is foundational
coming from different accounting systems. The design for downstream data analysis and information. By
of the common data structure determines how SAP designing the right common data structure, SAP
Central Finance replicates and organizes the accounting Central Finance can enable flexible analytical reporting
transactions for centralized reporting. A well-designed
in key areas such as financial planning and analysis,
common data structure is foundational for down-
cost center analysis, profit center analysis, and finance-
stream data analysis and information. By designing the
right common data structure, SAP Central Finance can related operations. On the other hand, the failure
enable flexible analytical reporting in key areas, such to create a good design of common data structures
as financial planning and analysis, cost center analysis, will render SAP Central Finance ineffective and add
profit center analysis, and finance-related operations. another inefficient system to the landscape of already
On the other hand, the failure to create a good design
disparate and fragmented accounting systems.
of common data structures will render SAP Central
Finance ineffective and add another inefficient system
to the landscape of already disparate and fragmented
accounting systems.

How Do Companies Deploy SAP Central Finance?

As a component of SAP® S/4HANA, SAP Central specific components (applications) for data transfer,
Finance represents both a deployment approach and master data governance, data mapping, exception
a product. It is a deployment approach because it uses management and error handling. It is important to note
a particular architectural design that replicates the that SAP Central Finance, as a product, is not a typical
accounting transactions in a centralized environment ETL (extract, transform, load) tool that is used for data
based on SAP® S/4HANA technology. Consequently, it transfer. The main difference between SAP Central
has a direct impact on the deployment strategy of SAP ®
Finance and a general ETL tool is that SAP Central
S/4HANA Finance. It is a product because it provides Finance provides pre-built SAP objects, such as cost

A common data structure is a conceptual model of SAP data objects, such as accounts, organizational hierarchy, cost center, profit center, production order, plant, etc.
1

6 · Protiviti
objects, documents and organizational structures. The success of the SAP Central Finance deployment
This is a powerful concept because it automatically strategy depends to a large extent on the efficiency of
transforms non-SAP data and any release of SAP data business processes and the solutions the organization
into S/4HANA objects in a centralized accounting designs to support these business processes. Manage-
system that benefits from all the functions and ment has the critical responsibility to redesign the
innovations provided by the digital technology. business processes prior to or as part of the solution
design cycle to avoid creating solutions that support
With these features in mind, an SAP Central Finance
inefficient processes. The solution designs provide a
deployment strategy should be designed to:
conceptual representation of business processes and
•• Digitally connect different accounting systems, show the articulation of business requirements. The
SAP and non-SAP, to SAP® S/4HANA core technical team can then easily use these designs to
finance applications set up the SAP Central Finance configuration. In the
absence of a solution design approach, the focus of the
•• Convert the components of a disparate accounting
system landscape to a centralized financial system, implementation will be the technical configuration of

i.e., SAP® S/4HANA the system rather than the automation of business
processes. It is the responsibility of the business
•• Create a financial reporting system that centralizes
to make sure the efficient process models exist and
different accounting systems
solution designs are created to automate these business
•• Enable an efficient, streamlined and repetitive processes. Only then can the system integrator align
model to onboard disconnected or new entities onto the configuration of SAP Central Finance to these
a centralized structure and process processes and related solution designs.

•• Create a foundation today for future centralization

of financial reporting, information and processes
Consider Future Processes
•• Automatically reconcile accounting transactions
Management should consider carefully the need for
in the centralized system to the various disparate
financial process redesign and related solution designs
accounting source systems as part of the company’s SAP Central Finance or SAP®
•• Consolidate on the same instance of SAP® S/4HANA S/4HANA transition strategies. It is important to review
future-state business processes and company objectives
the execution of processes related to credit control,
and embed these requirements in the SAP Central
intercompany, treasury and shared services that are
Finance and SAP® S/4HANA strategy and approach.
managed in any releases of SAP

protiviti.com Enabling Finance Process Digitalization With SAP Central Finance · 7

What Is the Role of the Business in the
Deployment Process?

Beyond the considerations above, it is essential for Central Finance is, ultimately, a business project with
management to grasp that the SAP Central Finance business objectives. In other words, the role that the
initiative is not limited to IT, and that the business business plays in SAP Central Finance deployment is
process owners must understand their central role in the as critical as that played by IT and system integrators.
overall success of the deployment. The SAP S/4HANA ®
Management should understand that role, the choices
and SAP Central Finance deployment must be designed to be made in how they prepare to execute it and the
from the outset to support the business. Organizations implications of choosing to delegate or deprioritize
cannot expect system integrators to develop these certain aspects of the role.
designs alone. Integrators are technical experts — not
If the business fails to fully embrace its role in the SAP
business process experts. This is why the business should
Central Finance deployment, it could face potentially
be responsible for defining the vision and operational
significant and costly risks. Interminable deployment
expectations for the future state of each business process
delays and budget overruns, business disruption post-go-
that SAP Central Finance will impact.
live and insufficient user adoption are just a few common
The quality of technical design of SAP Central Finance examples. Even when the project is supported by a
plays a crucial role in creating a centralized financial strong system integrator, it is critical for management
reporting solution to enable digital business processes. to assume responsibility for key activities before, during
However, a good technical design does not, by itself, and after the deployment. The eight areas below are the
realize the full value of SAP Central Finance. How responsibility of the business2:
successful the SAP Central Finance technical design
•• Program management and governance
is depends on how well the solution designs articulate
the future redesigned business processes to achieve •• Business process readiness and solution design
the efficiency and automation inherent in digital •• Organizational change enablement
technologies. Consequently, as organizations deploy
SAP Central Finance to create a centralized financial
•• User acceptance testing (UAT)

reporting hub and automate related processes, it is •• Data conversion

becoming increasingly critical not just for IT, but also
•• Data governance
for the business units themselves, to understand their
critical role in the overall success of the transition
•• Business intelligence and reporting

strategy. The deployment of SAP® S/4HANA or SAP •• Access management and financial compliance

For a detailed discussion, see Protiviti’s white paper, “Understanding the Responsibilities of the Business During an ERP System Implementation,” available at
2

www.protiviti.com/US-en/insights/understanding-responsibilities-business-during-erp-system-implementation.

8 · Protiviti
What Are the Most Common SAP Central Finance
Deployment Scenarios?

Whether organizations are in the process of defining disconnected ERP systems. SAP Central Finance can,
their transition strategy to SAP® S/4HANA or have if needed, facilitate potential further consolidation of
started the deployment process, they should consider the ERP systems in the future.
following SAP Central Finance deployment scenarios,
3. Scenario 3 — Multi-stage system consolidation:
depending on their specific circumstances:
The organization has a relatively short deadline to
1. Scenario 1 — Short-term value realization: The consolidate and decommission its existing systems.
enterprise wants to benefit quickly from centralized The full transition in this scenario is carried out
financial reporting and analytics, based on SAP® in two stages. In the first stage, all source systems
S/4HANA innovations, with short time to value are connected to SAP Central Finance. This is a
realization and at relatively low cost. Currently, this non-disruptive approach that allows the existing
is a popular scenario for many organizations as they systems to continue to operate as before during
define their long-term strategies for a full transition the transition process. In the second stage, the
to SAP® S/4HANA. This is a practical approach existing systems are migrated onto the SAP®
because it helps the organization determine the S/4HANA platform. After the completion of the
business processes and data structures that need migration to SAP® S/4HANA, the existing systems
to be redesigned as part of the long-term transition are decommissioned.
strategy to SAP® S/4HANA. 4. Scenario 4 — Future financial information hub:
2. Scenario 2 — One-step system consolidation: The The organization has adopted a deployment strategy
organization has defined its future strategy for the for SAP® S/4HANA in a homogeneous environment
enterprise business systems landscape — it has that provides centralized financial reporting and
consolidated its ERP systems to a final number and information and does not need the SAP Central
is not planning to consolidate any further at the Finance applications. In this scenario, even though
present time. SAP Central Finance, in this case, is SAP Central Finance is not turned on to replicate
deployed to create a centralized financial reporting the accounting transactions and it is not used for
system that provides a coherent and consistent view central reporting, it is deployed as a platform for
of the consolidated ERP systems and the remaining the future in case of mergers, acquisitions or other
similar events.

protiviti.com Enabling Finance Process Digitalization With SAP Central Finance · 9

Are There Other Benefits of SAP Central Finance?

Beyond centralized financial reporting, SAP Central •• Real-time analytics functionality, providing instant
Finance serves as the catalyst that helps to optimize insights into complex and multi-dimensional aspects
centralized business processes in the areas of client of financial information
analysis, credit management, dispute management,
•• High granularity at line-item level, creating an
collections, clearing of open items and settlement
authoritative single source of truth
of outstanding transactions. When the business
processes are optimized, they will be ready to benefit •• Real-time process execution, making closing “on

from the highest level of automation provided by SAP the fly” possible

Central Finance functions. However, the optimization •• Planning, forecasting and simulation, providing inte-
of processes can’t be achieved without going through grated and predictive views of financial information
a process redesign and solution design exercise, which
•• Intuitive user experience, offering user-
involves the harmonization of master data and the
friendly access to the deepest levels of available
improvement, standardization and integration of
financial information
financial processes in relation to the setting of a
centralized accounting platform. In addition to the SAP® S/4HANA key innovations,
SAP Central Finance includes several standard reports
Other major benefits of SAP Central Finance result from
and views to support the central management of
the key innovations provided by SAP® S/4HANA that can
business processes in single- and multi-entity organi-
be applied to disparate finance processes, such as:
zations, as outlined below:

Basic Reports

General accounting Trial balance, financial statement, general ledger account line items, general ledger account balances

Financial analysis
Cost center, internal orders, market segments, profit and loss, projects
(plan vs. actual)

Cost management Spend, unusual items

Advanced Reports

Global cash management, cash flow analysis, accounts payable and accounts receivable, future payables, aging
analysis, Dunning Level Distribution, days beyond terms, future receivables, overdue receivables, total receivables,
Clearing-based
days payable outstanding, vendor payment analysis (open payments), vendor payment analysis (manual and
automatic payments)

10 · Protiviti
Conclusion

The real value realization of SAP Central Finance is For most companies, centralized financial reporting
achieved when it is deployed to digitalize the finance and information, enabled by SAP Central Finance, can
processes and enable future growth. No two SAP bring remarkable efficiencies, open up opportunities for
Central Finance projects are exactly the same. How transformative growth in a digital economy, and provide
the implementation will be organized will depend a significant return on investment. It is important to
on several factors, including the desired deployment remember that the business, not the integrator or IT, is
strategy, the company’s prior experience with SAP ®
ultimately responsible for achieving that outcome.
S/4HANA, partner methodologies and much more.
However, all of the concepts presented in this white
paper apply in one form or another.

protiviti.com Enabling Finance Process Digitalization With SAP Central Finance · 11

ABOUT PROTIVITI

Protiviti is a global consulting firm that delivers deep expertise, objective insights, a tailored approach and unparalleled collaboration to help leaders
confidently face the future. Protiviti and our independently owned Member Firms provide consulting solutions in finance, technology, operations, data,
analytics, governance, risk and internal audit to our clients through our network of more than 70 offices in over 20 countries.

We have served more than 60 percent of Fortune 1000 ® and 35 percent of Fortune Global 500 ® companies. We also work with smaller, growing companies,
including those looking to go public, as well as with government agencies. Protiviti is a wholly owned subsidiary of Robert Half (NYSE: RHI). Founded in 1948,
Robert Half is a member of the S&P 500 index.

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12 · Protiviti
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