How to get better financial insights, faster, with Central Finance

What do CFOs in leading global companies want more than anything else in the world?

Most would probably say a single real-time version of the truth for their organization. That’s because getting comprehensive up-to-date visibility of the financial state of the business is still a major challenge in most large organizations.

Why is that? It’s because, with pockets of financial data dispersed in multiple ERP systems across the business, CFOs are still reliant on consolidation systems for the insights they need. That’s fine as far as it goes. But, as we all know, it’s far from perfect.

On the one hand, you lack line-item detail, so it can take the finance team a great deal of effort to work out what’s happening when any number moves up or down. On the other hand, the data isn’t typically available until after month-end close, so you’re usually a long way from getting real-time information.

So, what’s the solution?

The traditional answer is to look to a complete ERP overhaul. And, yes, that may be the right approach in the right context. But for complex organizations spanning multiple business units it will usually mean embarking on a huge transformation program.

And, let’s face it, many CFOs have been here before and know all too well the challenges involved. They’ve seen five-year roadmaps become seven-year roadmaps become ten-year roadmaps. They know how difficult it is to shoehorn disparate systems with distinct requirements into a single ERP instance.

The good news is there’s now an alternative approach. The SAP S/4HANA® for Central Finance concept (usually just known as “Central Finance”) offers a faster and more flexible route to a modern SAP finance landscape — and that single version of the financial truth — than traditional staged deployment.

With Central Finance, you’re creating a modern digital finance “core” based on SAP S/4 and mapping the data to your existing ERPs across the business. The beauty of this approach is that you can create this core much faster and without needing to significantly rewire the underlying systems. All the magic happens in the mapping between the two.

Is Central Finance right for me?

In our new report, Central Finance First, we explore the rationale for Central Finance and explain when it does and doesn’t make sense for an organization.

Put simply, there are three scenarios in which Central Finance should be considered. The first is where a large organization wants to get faster finance insights out of a diverse collection of ERP platforms, technologies, and data models.

The second is where the organization wants to get the operational and efficiency benefits of centralizing the finance function in a complex multi-ERP platform environment.

And the third is where the organization engages in regular M&A activity, and needs to integrate new businesses as quickly and easily as possible.

Choosing the right path

In all three cases, Central Finance will usually tick a lot of boxes. But it’s also worth considering how it fits into a broader SAP S/4 transformation journey.

For example, Central Finance can act as a stepping-stone to a single S/4HANA global instance for the whole business. In this approach, you create your S/4 foundation first, acclimatize the business to the new environment, and then gradually migrate your underlying systems into that core.

But it’s equally possible to see Central Finance as a destination in its own right. In this “two-tier” model, instead of migrating underlying systems, you transform them to S/4 individually, retaining your Central Finance core for global reporting.

Of course, Central Finance is not the only way to approach an S/4 transformation. Everything depends on the particular circumstances and objectives of the organization. And in weighing up the pros and cons, I think it’s helpful to consider three key questions:

#1. What’s your end-state vision for your finance function — and do you need a faster way to get comprehensive real-time financial data?

#2. Does your finance function need more flexibility and responsiveness to help the business solve not only today’s challenges, but those coming down the line?

#3. Do you need to simplify your reporting and/or increase your finance team’s engagement with the rest of the business?

Build a “living” vision of your business

For the right organization, Central Finance offers a compelling route to accelerated financial insights. It’s a way to start harnessing the true value of finance data, creating a “living” vision of the business that can adapt and evolve at the pace demanded by today’s ever-changing world.

Learn more

If you’d like to know more about the Central Finance concept, and how it could help your business, please visit our website and don’t hesitate to get in touch.

A special thanks to my colleagues Paul McDonald and Jose Moran Moya for their expertise and insights in preparing the above post.

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