How SAP S/4HANA Drives General Ledger Account Optimization

Diane Davidson, Owner, Clever Fox Advisory

One of the most extensive changes in the latest version of SAP (SAP S/4) is the combination of the FI (Finance) and CO (Controlling) tables into the Universal Journal.  Many recognize the benefits that a single table has on reporting, but there is also an enormous impact on the chart of accounts.  The SAP best practice is to adopt the SAP YCOA operating chart of accounts.  For those clients who choose to use their existing chart of accounts, there is a benefit to rationalizing their current general ledger accounts and utilizing the universal journal’s (350+) fields or dimensions.

Overview of the Universal Journal

The universal journal is a single table incorporating all financial information and select logistics and operational information.  Subledgers such as Accounts Receivable, Accounts Payable, and Asset Management are available in the ACDOCA table.   Before the development of the universal journal, these fields were stored in separate dedicated tables.   Although there are 350+ fields available, not every dimension is applicable for every journal entry.   The usage of fields is dependent on the purpose of the financial journal entry.  For example, an accounts receivable related posting may include the customer number and customer group. The universal journal is a columnar database, and it selects data based on the columns when searching for a customer receivable posting. The journal entries that do not have a customer-related field were omitted. The result is a single journal entry spread across multiple process areas.

Impacts to General Ledger

SAP provides a standard operating chart of accounts (YCOA), although this chart may not be suitable for all businesses.  Suppose a company decides to develop a chart of accounts or leverage an existing chart. In that case, this is the opportune time to examine the general ledger accounts focusing on consolidation, functionality, and the usage of dimensions.  The universal journal allows general ledger accounts (g/l’s) that are more generic and utilize additional fields for reporting granularity.  Figure 1 depicts a standard chart of accounts in SAP ECC with multiple customer accounts receivable (A/R) general ledger accounts.  Each general ledger account tracks an individual customer’s receivables. The chart of accounts can result in hundreds of excessive g/l accounts across the various sections of the balance sheet and income statement.

The universal journal’s new functionality can stamp each financial transaction with additional details, for example, customer group and customer number.   In Figure 1, the existing five accounts combined into a single customer receivables account by utilizing customer number and customer group. To view additional details about a customer, a user can filter by customer group or customer number to see the relevant financial postings segmented within the master g/l account.

Figure 1 — Chart of Accounts Comparison Between SAP ECC and SAP S/4  

Conclusion

As part of a new implementation or on-going maintenance, there is a benefit to review each section of the balance sheet and income statement looking for areas to combine or eliminate g/l accounts, and utilizing the 350+ fields available in the universal journal. An optimized chart of accounts results in time savings regarding account maintenance and closing activities.