SAP Central Finance Drives Move to S/4HANA, Making Tax Compliance a Priority

SAP Central Finance is driving migration to SAP S/4HANA as companies look to deliver value to their finance and accounting organizations, as well as improve on the configuration of previous financial systems. And for most companies making the transition, tax compliance is a priority.

In a recent survey by SAP Insider, 74 percent of SAP customers cited finance as the top beneficiary of their ERP software. SAP Insider found that organizations on the forefront of SAP S/4HANA adoption see the migration as an opportunity to establish new financial processes and eliminate inefficiencies. In many cases, those inefficiencies are the result of deployment of splintered financial architectures, with disparate local applications handling different operations in different global regions.

“Our financial folks are looking to SAP S/4HANA and Central Finance to reconcile the sins of the past, where our company codes were not set up in the right way and it takes us more time than needed to close our books,” one data management manager at a large technology company told SAP Insider.

SAP Central Finance helps improve financial processes

The SAP Central Finance module provides a conduit for moving financial data from multiple systems into a single source in preparation for a full migration to SAP S/4HANA. In centralizing financial data, companies can reap benefits by tightening integration between business units and eliminating manual and redundant processes. In fact, SAP Insider recommends that IT and SAP team leaders make their business cases around moving to SAP S/4HANA primarily about improving financial processes.

“Central Finance is one of the key things driving our look at SAP S/4HANA,” a director of technical enablement at a large utility told SAP Insider. “We may be doing a lot of M&A activity and we need to be able to integrate organizations and their finance teams quickly. We can’t be reliant on manual processes.”

SAP S/4HANA migrations involve a focus on tax compliance

Part of the move to SAP Central Finance, and ultimately to SAP S/4HANA, involves a renewed focus on tax compliance. SAP Insider notes: “With global regulations governing data protection and accounting standards increasing and changing at a rapid rate, organizations want a core business system that already supports most requirements. For this reason, 83 percent of respondents overall identified a globally and locally compliant ERP system as a key requirement, making this the second-most-important requirement.”

Governments are engaging in digital transformations of their own in an effort to boost tax revenues, so requirements for tax compliance are constantly changing. With 60 percent of survey respondents choosing some form of cloud deployment–public, private or hybrid–compliance becomes especially important given that some countries have laws about where financial information can be physically stored. Some governments require servers that hold critical information such as electronic invoices to be located either in country or in a political region such as the European Union.

Failing to take tax compliance into consideration could derail a move to SAP S/4HANA and seriously endanger a company’s entire digital transformation strategy. With 71 percent of SAP Insider respondents either evaluating a move to SAP S/4HANA, making the move currently or already using the new system, now is the time for organizations to put compliance at the forefront of their transformations.