Basics of SAP Finance ECC6 (Transcript)

To support the learning of the course Basics of SAP Finance, the following transcript has been provided to suit different learning styles.

Slide 1 Introduction

Welcome to Basics of SAP Finance ECC6 version.

Slide 2 Content

In today’s session we will be covering two basic aspects of SAP Finance.

The first is that of a Financial Document Overview and the second is the important aspect of Finance Module Integration.

Slide 3 Assumptions

But before we proceed let’s cover a few assumptions.

This course assumes that the participant is familiar with the concept of an ERP system, or Enterprise Resource Planning system. Enterprise resource planning (ERP) refers to a type of software that companies use to manage day to day business activities such as accounting, procurement and supply chain operations.  

SAP is an ERP system that consists of a number of fully integrated modules which covers virtually every aspect of business management. SAP stands for Systems Applications and Product in Data Processing.

SAP ECC6 or ERP Central Component is the successor of SAP R/3. SAP R/3 was designed to capture business transactions in real ‘R’ time as opposed to batch processing to upload journals periodically. This was based on a client/server architecture that comprised three layers: the database layer, the application layer and the presentation layer. The ERP component was introduced in line with the underlying SAP NetWeaver stack which enabled the use of web services.

In an upcoming learning offer, we will identify the Basics of SAP Finance S/4 HANA (or SAP Business Suite 4 for SAP High Performance Analytic Appliance) version, in which real time is truly achieved through in memory data management.

Slide 4 Course Objectives

Let’s review the course objectives.

On completing this course, you will be able to:

Firstly, identify the basic fields that are mandatory in a financial document posting,

secondly, describe the modular integration of a basic SAP Finance solution, and

finally, list the standard modules of an SAP finance solution.

Slide 5 Financial Document Overview

In a typical journal posting or financial document posting in SAP, only complete documents can be posted within a fiscal period. A complete financial document has to be balanced, meaning, both debits and credits should net to zero.

Other basic account assignment fields are also required, and these include the document date, posting date, document type, posting key, General Ledger account and finally the amount fields.

If a key entered is not defined by the system, an error message is issued and requires the user to rectify before continuing with the process.

These journals are posted by way of transaction codes.

Slide 6 Document Structure

What are some of the common fields in a financial document structure?

Within the header section of the ECC6 document structure, the mandatory fields for input include the company code, the document date, the posting date, the document type and the currency field. The document number is populated automatically when the document is successfully saved. There may be other fields that are mandatory like document header text or reference field which may be set to mandatory within document type configuration settings.

Within the line-item section of the ECC6 document structure, the basic mandatory fields for input include the posting key, the account and the amount field. There may be more than one amount field. Further, the screen view on the slide is specific to a pre-R/3 4.7 version. You may find that in a 4.7 Enjoy transaction like FB50 G/L Document Posting, the entry screen is structured in a single step.

Slide 7 Company Code

The smallest organizational unit of Financial Accounting (FI) for which a complete self-contained set of accounts can be drawn up for purposes of external reporting (legal valuation). This includes recording of all relevant transactions and generating all supporting documents required for producing financial statements. 

It is the main organizational entity in Financials (FI) in which several key settings are held to support integration to various other modules.

For example:

Currency Key – determines the local company code currency and foreign currency translation that occurs when financial documents are posted (See also table T001A)

Country Key – determines the indirect tax functionality that is captured within financial documents posted

Slide 8 Document Types

Let’s explore further on document types. Document types in SAP support several key functions.

When setting up a document type, you will need to define the account types that can be posted against. The number range generated for the posted document is also defined when setting up a new document type. Finally, there are some header fields like Document Header Text that can be set to mandatory input when a document is posted when using the document type. Some examples of document types are defined within the attached examples for each specific finance module. 

Some statutory GAAP requirements require a specific number range setup to segregate against the separate finance modules. Audit requirements may also require a distinction of manual versus automated journals. 

Slide 9 Posting Keys

Posting Keys indicate whether a line item is a debit or a credit and the type of account that can be applied within the line item. For example, Debit 40 and Credit 50 posting key allows the user to select the G/L account while a sub-ledger posting key like Credit 01 may be used only with a Vendor sub-ledger account.

With Enjoy transaction codes these posting keys are defaulted to support a selection free journal entry experience.

Slide 10 Currency

Understanding the currency setup is fundamental to supporting a robust SAP financial template solution.

When a company code is setup up, the company code currency is defined based on several key external reporting requirements. This is normally called the local company code currency key and is applied to the main General Ledger accounts that are created within a Chart of Accounts.

Any business transaction currency that is posted different from the company code currency is therefore deemed to be foreign currency and is then subject to IAS 21 Foreign Currency Translation determination.

The IFRS guideline also refers to functional currency, therefore in a multi-national company (MNC) setup, you may find that a third group currency key is required to be supported to ensure that the functional currency is also supported within the transactional system.

Slide 11 Finance Module Integration

Another aspect of SAP that is important to fully appreciate is the integrated nature of various components and modules that connect with one another.

Organizational entities are an important concept within SAP ERP as they form the building blocks of accounting and reporting. In FI (Financials) the main organizational entity is Company code. It represents a self-contained unit creating its own financial statement based on a legal valuation. In CO (Controlling), the organizational entity is Controlling Area to support a uniform structure for internal management accounting. The Trading Partner is key in supporting intercompany relationship within an organisation and in support of inter-eliminations from a consolidation perspective.

Master Data elements and hierarchies are another key feature in ensuring that a lower level of detail is captured within the organizational entities. As opposed to organizational entities that are set up less infrequently, master data elements are created more frequently and in relation to business specific requirements. Some elements of master data in FI are General Ledger (G/L) Master Data accounts and Sub-Ledger accounts that hold Customer master data records and Vendor master data records. In CO, the master data elements may include cost objects such as cost centers and internal orders and cost elements. In Profit Centetr Accounting (PCA) module, profit centers are set up to support revenue accounting.

Key business processes within FI and CO are undertaken on a daily transactional processing basis to capture cost and revenue-based transactions and the associated reporting requirements. At period end, specific transactions are executed to support a closing cycle based on GAAP requirements against a monthly, quarterly or yearly reporting view.

As these transactions are captured within the subledger and integrated to the General Ledger module by way of account determination, the same transactions are also captured in subsequent ledgers by way of account assignment against cost objects and profit centers.

Slide 12 Integration Points

The real time integration of SAP ERP is central to ensuring that less reconciliation efforts are required to be undertaken at period end, though it is recommended that reconciliation tools such as F.03 Financial Analysis and GCAC Perform Ledger Comparisons are undertaken to ensure that the ledgers are aligned.

The final slides (Slide 13 to 15) in this basic course identifies the key terms that have been introduced. Attempt to test your understanding before reviewing the key term definitions.

Thank you for your participation. We hope you have met the objectives set out at the start of this course. Review the additional material that has been stored in our website link.

Provide feedback to the team to help us improve our course content.

See you soon!

Daily SAP Learning Team