How to Tell If Your Enterprise Organization Is Maximizing the Value of Their SAP Investment
On average, the implementation of a new ERP system costs 5% of an organization’s annual revenue, and almost 60% of those implementations exceed their scheduled timeline by at least 25%1. While that investment is indeed costly, the impact that a properly implemented ERP system has on the office of finance cannot be overstated.
Through the centralization of information and workflow, the value of a properly implemented ERP system, such as an SAP or S4/HANA, lies in its ability to improve collaboration, streamline tasks and help manage the financial close process by acting as your system of record. And with those benefits, it’s understandable that organizations spend so much time and money to maximize the benefits that their ERP provides for the business.
However, despite such a large investment, an ERP system cannot truly provide an organization with the unique automation capabilities that are necessary to create an efficient and effective close process. Below you’ll find three questions that you should ask in order to see if your organization is maximizing the value of your SAP investment.
1. How, if at all, is your information verified for accuracy?
Most companies have systems managing transactions beyond their ERP such as: bank accounts, point-of-sale and inventory or asset management. However, while an organization’s SAP investment helps streamline the close process it doesn’t ensure the integrity of your original data. Typically, even if there is a system in place to support the accuracy of the general ledger, the verification process is handled manually. Managing this process manually detracts from your SAP investment because of the potential for human error, and therefore risk, being added into your balance sheet and other financial statements.
2. How much information is being handled outside the ERP?
Due to events such as mergers and acquisitions, the need for vertical-specific IT requirements or just the growth of the organization, companies have naturally built up their own unique internal IT ecosystems. While well-intentioned, this typically leads to a collection of different types of ERP systems and in many cases, multiple instances of the same ERP instance, such as SAP or S/4HANA, that aren’t necessarily talking to each other. Because of this, there usually isn’t integration at the data level and a significant amount of information must be pulled outside of the ERP and processed manually within a multitude of spreadsheets at each period end.
When financial information is removed for manual processing, you lose the collaboration and centralization that ERP systems are implemented for and significantly increase the chance for errors. A few of the key factors leading to this increased risk is the complete lack of:
- Visibility and Control
- Policy, Quality and Audit Management
- Supporting Evidence
- Reporting and Aging
- Risk Assessment
3. How are you handling the intercompany process and any inevitable discrepancies?
Today, intercompany transactions can dwarf the external sales of large-scale organizations. In fact, according to a report by the World Trade Organizations, more than two-thirds of world trade takes place within the value chains of large global organizations.1
Despite the large impact that this amount of moving money has on both an individual organization as well as the global economy, intercompany accounting is rarely given the attention it deserves. Often times, the process is relegated to the end of quarter, with little time to ensure that any discrepancies are identified and appropriately handled.
But the intercompany accounting process is much more than just reconciliations. The journal entry attached to an intercompany transaction is much more complicated, and there are many more steps where things can go wrong, ultimately heightening the risk of mismatching general ledgers for the two or more entities.
When it comes time to audit these issues, the supporting documentation can easily go missing or be absent entirely and the remedy, whether it be through a standalone solution or manually, is to perform the process and handle the data outside of the ERP. Ultimately, this removes the ERP as your system of record and effectively minimizes the impact that any SAP investment can have for your company.
How to Maximize the value of your SAP investment
As a company and its workload grows, so does the opportunity for an SAP investment. However, the issues and risk of error increase and become more apparent each time data is manipulated outside of the ERP. Simply put, that process is not sustainable.
In order for organizations to both maintain a reliable system of record and ensure potential benefits for the office of finance are maximized, the ERP must be supported with strong investments in dedicated systems that address the needs of the finance and accounting teams.
For more information on how financial automation technology can help support your ERP investment, view our eBook: Your ERP is Just the Beginning: It’s Time to Close the Process.
 Dollar, D. (April, 2019). “How global value chains open opportunities for developing countries”. Retrieved December 3rd, Brookings