Smart (and autonomous) ways to close the books with SAP Advanced Financial Closing (AFC) and SAP S/4HANA Central Finance

What if there was a way to remediate the office-wide stress that oftentimes accompanies the month-end closing processes? What if we told you that it is possible to start these processes earlier in the month with both predictive and real-time month-end data?

SAP Advanced Financial Closing (AFC) is a hub solution designed to orchestrate financial closing processes. AFC enables users to start their month-end closing processes earlier in the period by adopting smarter and more autonomous practices. Together with SAP S/4HANA Central Finance and predictive accounting, financial data becomes increasingly transparent; datasets become unified and closing the books becomes easier.

SAP S/4HANA Central Finance receives financial accounting transaction data through real-time replication from both SAP and non-SAP ERP source systems. This data is then consolidated into a company-wide single source of truth, which is then used for financial reporting. With enterprise-wide financial data existing in one unified location, the ability to report on this data becomes simpler and the option to start closing the books earlier becomes more feasible.

Entity-level financial closing is a tedious, high-stress and complex task. Enterprises are often composed of more than one shared service location or ERP system and face differing accounting regulations that create closing challenges. SAP Advanced Financial Closing enables greater visibility for the finance management team to proactively track the financial progress of the company to enable a complete, accurate and timely close process.

SAP Advanced Financial Closing is deployed in the cloud and available in the software as a service (SaaS) model to be accessed from any web browser. AFC provides a closing template that helps financial teams document their tasks and procedures in a sequential timeline. SAP’s template includes best practice key closing tasks in addition to dependencies for the latest SAP S/4HANA release.

Companies use this template as a baseline and add and remove line items to create their company-specific closing checklist. After it's finalized, the template stands as an enterprise-wide view of the closing process and includes the standard operating procedures, the responsible parties, approval requirements and timing.

When a company decides that it is time to start the closing process, whether it be month-end or year-end, the template generates a task list for each responsible party involved. Teams are not responsible for manually adjusting the task lists each month as it is automatically done by AFC. To auto adjust, the individual task lists use the relative key date and organizational hierarchy information to define specific parameters for each task.

The manage closing task lists application is a flexible tool that allows multiple task list models to be assigned to the same folder level. This application gives the user the option to create a task list model for every major process that is subject to a financial close such as order-to-cash, procure-to-pay, record-to-report and others.

SAP Advanced Financial Closing accelerates the period-end close process through four strategies:

1. The losing template creates standardization to be reused at the end of each month.
2. The automations and scheduling to start in multiple ERP systems of a handful of closing steps, without manual interaction.
3. The workflow notifications keep all team members up to date.
4. The closing schedule and status is visible to everyone, regardless of location.

All four of these strategies, together with S/4HANA and SAP Central Finance, help modernize the month-end close process. Figure 3 shows how continuous accounting can expedite the traditional month-end close process by engaging intercompany, currency and consolidation processes earlier in the month.

In line with the concept of continuous accounting, SAP S/4HANA and SAP Central Finance can continue to support and provide prediction, improve accuracy and remove any month-end close surprises with predictive accounting. Predictive accounting is a solution that provides a future view of your company’s accounting results by automatically posting predictive journal entries and reversals in a dedicated ledger (extension ledger). This ledger mimics the document flow of a standard business process.

The generated journal entries not only follow the business document flow, but also reflect any changes made in the source document, allowing accurate completeness and validation of all master data. Predictive accounting places an increased ability in the finance department to combine predictive postings and actual postings to produce real-time and forward-looking insights that support period-end operational decisions.

Together with SAP Advanced Financial Closing, predictive accounting effectively addresses common business challenges. Here are some examples of how they help:

1. Period-end surprises become obsolete with the ability to predict the remaining results of all closing activities.
2. Real-time and forward-looking insights become more achievable using business process information as opposed to complex algorithms.
3. The ability to move tasks earlier in the period cuts closing to-do lists in half, making financial goals more achievable.

At a recent SAP for Central Finance Conference Americas, a cross-industry manufacturer of confectionery, pet food, other food products and a provider of animal care services gave a presentation on how they capitalized on SAP Advanced Financial Closing during their SAP Central Finance implementation.

They used AFC to automate and digitize processes to successfully implement SAP Central Finance at scale. After going live, AFC better optimized their master data processes through means of resource savings and improved quality that were not initially picked up on in previous test cycles.

Using automation, they reassessed their deployment strategy in a handful of ways:

• Digital workers replaced manual labor to perform automated reconciliation and detect variances. 
• The development of Business Objects Data Services (BODS) and bots led to journal automation and automatic file creation further lessening the need for human resources. 
• The implementation of master data control checks reduced the volume of application interface framework (AIF) errors after going live. 
• Machine learning administered the prerequisite master data cleansing tasks in the source systems. 
• The automatic queuing of company codes in the system brought enhancements in SAP Profitability and Performance Management (PaPM) and coding improved performance.

Integrating cloud-based financial tools into your enterprise’s digital portfolio is critical to keep up with new enhancements, capabilities and features. A new version of AFC was released in August of 2022. The recent release includes a new app to monitor communication systems and improvements to old apps such as managing closing tasks lists and processing closing tasks. AFC is ever-changing with SAP routinely releasing updates to the application.

The new app, Monitor Communication Systems, benefits system admins and technology teams, especially if they have complex multi-ERP landscapes, by increasing transparency of all connected systems to help in identifying errors sooner. The app has functionalities that allow users to drill down into the connection and synchronization status of all ERP systems across the enterprise.

Improvements to the Manage Closing Tasks Lists app include a consistency check, which indicates whether a task list can be generated based on validations. The app can also add organizational units to an existing closing structure, the option to adjust dependent successor tasks, and the possibility to perform mass actions on closing types.

Enhancements to the Process Closing Tasks app include the ability to queue scheduled jobs that run autonomously in the background, a view into the task status sources. Users are also now able to download spool lists for a further in-depth analysis.

The SAP Advanced Financial Closing solution gives organizations the power to capitalize on efficiency, accuracy and speed in their financial closing processes. Through powerful automation, AFC enables companies to initiate their closing processes earlier in the period bringing them faster time to value, improved transparency and a safeguarded close. Paired with SAP Central Finance and predictive accounting, AFC revolutionizes the entity close allowing clients to experience complete control over their period-end activities.