New General Ledger Functionality

"Approximately 75% of today’s companies still rely on multiple systems for their management and regulatory reports. In a world of ever increasing stringent corporate reporting regulations, coupled with improving efficiency and effectiveness of managerial reporting, mySAP ERP has introduced the New General Ledger, to provide a single solution that is flexible to meet the demands of tomorrow".
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Netweaver, Flexibility & Shared Services explained

“Businesses today need to react quicker, anticipate better and become more efficient”. A common phrase we hear and read everyday, but if we’re honest it’s a mission statement that every organisation has been striving for since the beginning of the industrial revolution. It is only how it is achieved that has changed; in the 1800’s it was automation, the 1990’s saw the appearance of SAP and ERP solutions; today it’s Knowledge Management and Shared Services.

Knowledge Management is a somewhat woolly term that has many definitions, from sharing information, to learning from mistakes. The question is, does it work? Well, we don't have to look any further than the Internet to see that it does. Be it basic and slow, the Internet allows us to make informed decisions on any purchases and allows our children to complete their homework.

From a business perspective, we are looking at providing the user, be it a clerk or Board Director, or even a supplier - the right information at their figure tips to make an informed decision. Without it, the business process stops and information gathering starts. SAP addresses this with their Service-Oriented Architecture (SOA). Service-Oriented Architecture makes mySAP ERP2005 (ECC6.0) the sound foundation for process and information integration, where users can be presented with access to your systems based upon their roles. No longer do they have to struggle though deep menu structures and irrelevant information as the new breed of Netweaver supports role-based access to the data they need through combining information, actions and tasks for them to act upon. It provides the framework to overcome "Your systems and deep menu structure" obstacles. Netweaver is providing all the information the user requires via a simple, web based front-end. From the user point-of-view they see just the data they require in front of them to complete their task, they don't care how many systems or databases have been accessed, for them it just works and is less laborious.

Lets look at an example: An internal technician requires some repairs to be carried out to a broken PC monitor. A basic solution would consist of the technician raising a requisition, the purchasing department reviewing the requirements and creating a purchase order. The goods would then be collected by an external vendor, repaired, returned and invoiced. This basic process can be enhanced by removing the element of information gathering performed by the purchasing department in contacting the technician to understand his requirements and his arrangement to have the goods collected and so on. We are now able to enhance the solution so that when the technician creates his requisition, he is presented with a list of suitable suppliers. This list could include additional information such as supplier contacts, web addresses, maybe turnarounds, or pick-up arrangements. It might go as far as including internal quality reviews on work completed before, providing enough information for the technician to make an informed decision and complete the task. The Purchasing department have no requirement to get involved. The technician has been able to decide which supplier to use based upon information in the system; controlled by the purchasing department. This is self-service in action.

Take that simple example one step further and consider Shared Services.

Shared Services – a definition: Is about bringing together a set of ‘back-office’ or ‘front-office’ services that are common to multiple business units. These services share standard end-to-end business processes and associated enabling technology. The relevant parts of these services are placed into a single governance delivery structure that is customer-focused and performance-managed.

V3-Connect have been involved with shared services solutions since the mid 1990’s. Back then the focus was on centralisation, cost-cutting and standardised processes. The sharing of information was usually limited to the service center it was based in, and was restricted mainly by the technology that was deployed or available at the time. Today shared services is all about adopting the flexibility and information sharing that solutions like Netweaver can provide, along with implementing best fit, best-in-class processes. Many consultancy organisations will boast of 20 to 60 percent savings by adopting their shared services solution. But as many organisations have discovered to their cost, there is no guaranteed payback. One survey found that:

• 50% Companies implementing a shared services solution expected a saving of more than 20%, but only a third achieved these results
• 25% achieved less than 10% savings; and
• Imposed procedures caused ill feeling or even rejection for some employees

There isn’t a one size fits all solution  Flexibility is the key, which is where role-based structure of Service-Oriented Architecture comes in to play. The use of role-based/self-service access allows the process to be tuned to meet the requirements of the individual business units. Their fundamental processes may be common, but the devil will be residing in the detail and “Best in Class” is likely to be in different colours for each of various business units. This also means there is no need to have a centralised or even a remote service centre. The use of Netweaver allows for common best in class processes, without the physical grouping together of desks. For example: you may wish your back-office structure to remain close to the coalface, so you are in effect creating a virtual shared service centre rather than a physical service center. Netweaver will aid organisations in creating an environment which they believe will be better suited to their employees needs and is the core instrument behind the driver “Where do people need to be, to enable them to perform more effectively?” A point worth noting is that Netweaver doesn’t impose a solution; it is flexible in facilitating the solution that is right for organisation today and pliable so that you can change it for your organisation of tomorrow. Remember the underlying process defined in R/3 still remains; what’s more practical is the ability to manage and make more appealing the desktop environment your system users will work in and experience.

Value added integration The self-service facilities within mySAP? ERP2005 (ECC 6.0) provide a suite of tools that are accessible via the web or through mobile devices. A simplified user access screen will impact on reducing training costs and will overcome the traditional barriers, giving access to anytime anywhere computing. These services and roles increase business buy-in, increase accuracy and reduce costs whilst giving your organisation a common tool-set that binds them together seamlessly.

Finally, with SAP and Microsoft Office applications have been afforded a considerable amount of joint development time, find out here http://www.sap.com/solutions/duet/index.epx and here www.duet.com all that’s going on and how the Duet software will provide access to SAP business processes from Microsoft Office, creating a link between enterprise and personal productivity applications. The combination of the types of processes supported and the familiarity of the Office interface makes SAP applications more relevant to wider range of users and has a benefit case for reduced training.

New General Ledger Functionality

So what is the New G/L? Well the short answer, it’s the coming together of R/3 “Classic” General Ledger, Profit Centre Accounting and Special Purpose Ledger*. And like all good things the sum of the total is greater than the individual parts. We now have all these items available directly in the General Ledger, which makes for a simple process, fewer modules to configure and maintain and most importantly - the elimination of reconciliation differences between each of the modules.

* If you are upgrading to mySAP ERP, you will initially upgrade to Classic General Ledger, before migrating to the New General Ledger. SAP Note 321190.

For example, many businesses look to produce a full trial balance at a dimension other than company code, say at profit centre. The main issue with producing a profit centre trial balance was the posting of balance sheet transactions, namely there was no account assignment to profit centres. This issue was resolved with some new functionality in the Special Purpose Ledger, called “Online Splitter”. Initially on limited release in 4.5, “Online Splitter” became officially available in R/3 Enterprise. The main advantage and purpose of the split processor is that it allows you to automatically split the line items into multiple lines in an FI document. In doing so, account assignment objects are transported to line items that normally do not receive an assignment, i.e. profit centre to balance sheet accounts. And where the balance sheet account is open item managed, the profit centre is transferred to the clearing posting and Hey Presto we have a full profit centre trial balance.

General Ledger Posting					Special Purpose Ledger Posting
	G/L	Profit				G/L	Profit
	Account	Centre				Account	Centre
DR	600000	3000	£1,000.00		DR	600000	3000	£1,000.00
DR	600000	1000	£2,000.00		DR	600000	1000	£2,000.00
CR	Vendor		£3,000.00		CR	Vendor	3000	£1,000.00
					CR	Vendor	1000	£2,000.00

The major drawback with the Online Splitter was you had to implement Special Purpose Ledger (if you hadn’t already done so) and although the splitting was conducted in real time, there was still the requirement to reconcile the three modules. Today the Online Splitter has become Document Splitting and now forms part of the new functionality of the New G/L. Although profit centres have been sighted as the main benefactor for document splitting, there are other dimensions that we could draw a full trial balance on, product line for example.

Implementation of the New G/L has also streamlined the compliance with various accounting standards many organisations are subjected to. Whilst all of us are familiar with balances for company code, sub-ledgers and so on (held in a single general ledger), the New G/L goes a stage further. In addition to our single general ledger, known as the Leading Ledger, the New G/L offers us additional “Non-Leading Ledger” that can be tailored to produce reports to meet the various accounting principals operating within an organisation. For instance, you could mange local GAAP in one ledger, track US-GAAP in a second and International Financial Reporting Standards (IFRS) in a third. But why stop there? Non-leading ledgers can also be used to capture information based upon a different fiscal year variant used in the leading ledger. All this functionality is available in real-time, and the benefit to reap should be a simplified month-end process.

Another benefit from this amalgamation of the three modules is Segment Reporting. One of the requirements of IFRS is to report financial information by line of business and geographical area. Prior to mySAP ERP, organisations used either used all or any combination of:

• Special Purpose Ledger
• Profit Centres
• Business Areas
• Profitability Analysis and;

a substantial amount of “burning the midnight oil” collating figures into spreadsheets to comply with segment reporting. Today, you can use document splitting, via profit centres, to derive a full segment trial balance. Taking it one stage further, you could tailor your leading and non-leading ledgers to capture your: GAAP, IFRS and Segment reporting requirements, as each transaction is processed.

This is some of the new functionality available within the New G/L in mySAP ERP. As we have already stated, it is the consolidation of the R/3 General Ledger, Special Purpose Ledger and Profit Centre Accounting. The sub-ledgers, such as accounts receivable and accounts payable remain untouched and Controlling still remains (although there are some changes around reconciliation between Finance and Controlling) in its present R/3 format.

One final thought about the New General Ledger, although Business Areas are still with us, its clear that SAP are looking to Profit Centres to take over their role within mySAP ERP*, so how long before we see the demise of the Business Area? Profit centres are more flexible than Business Areas, which allows the user to redefine or modify their profit centre structure. To modify or redefine business areas, you would have to go back to the IT department. Another clear example of Self-Service in action.

* SAP Note 321190.

About V3-Connect
The foundations of V3-Connect are based upon consultants who have extensive, real world business experience and believe that Business wants and needs to talk business. We understand that organisations would like to know the commercial value of new advances in IT, not the technical wizardry new software brings. Our people are foremost business consultants looking at how SAP can, and in some cases, how it can’t be used to meet your business requirements. The Mandant alliance is a crucial element in supporting V3’s client’s with the technical integration aspects of SAP, something which we consider is best left to the experts of this highly specialised discipline.

"V3-Connect joined mid-way through the design phase of the project, in a QA role. It soon became clear that they could provide a wide range of expertise. They came for a month and ended up staying for six. During that time we were able to develop some smart ways of working using some SAP standard functionality and some SAP developments."

-- Department for Transport (DFT) 2006

To learn more about the value V3-Connect can add to your organisation contact us via email at upgrades@v3-connect.co.uk or call us on 08702 403 268

We look forward to hearing from you.

http://www.v3-connect.co.uk