SAP Central Finance Migration: Tax Compliance Spells Trouble

This blog was last updated on April 22, 2019

SAP S/4HANA is the promised land for SAP customers: an entire suite of ERP functionality in one place with a single data store. The ability to run all ERP capabilities, both from SAP and non-SAP systems, from a single source represents delivery of a model IT professionals and SAP administrators have sought for years.

Getting there, however, will take some work, and that’s why the SAP Central Finance module exists. With Central Finance, companies can create a single point of access for financial data from disparate accounts payable (AP), accounts receivable (AR) and ERP applications and then bring that data into SAP S/4HANA at the company’s chosen pace.

SAP Central Finance, then, is the path to ERP nirvana. With it, finance teams can leverage the benefits of SAP S/4HANA Finance without disrupting the processes in source ERP systems and without needing immediately to convert each back-end system to SAP S/4HANA. SAP has managed to remove many of the barriers to single-source ERP that existed for decades, but there are still major challenges that finance and IT departments must face.

SAP Central Finance migration and compliance challenges

One barrier to success that many organizations might not have considered is tax compliance. Governments around the world are embarking on their own form of digital transformation, seeking to capture billions in lost revenue by mandating real-time tax enforcement. This “other” digital transformation is having a significant impact on even the best-run businesses’ plans for SAP Central Finance and SAP S/4HANA migration.

For SAP customers moving to SAP Central Finance, given the massive scope of the project and the sensitivity of the data involved, tax compliance will likely start out as an afterthought in migration plans. But it shouldn’t be. Global tax mandates are complex and change constantly, and they can be incredibly invasive in a company’s business processes. Failure to comply not only courts potentially significant financial penalties, but it can also seriously affect cash flow, as well as relationships with suppliers and customers.

Tax mandates also have the potential to disrupt and add significant cost and delay to SAP Central Finance and S/4HANA migration plans. Digital transformation of the financial core is paramount for businesses that need to continue selling goods and services in countries where continuous compliance and tax enforcement are becoming increasingly complex.

SAP S/4HANA migration alerts organizations to keep up with government mandates

Migration to SAP Central Finance can take years, and over the course of those years, tax mandates will develop and change country-by-country across the world. A financial system that can’t handle those changes dynamically could derail an entire digital transformation project. Beyond that, moving data into SAP Central Finance over a period of years without accommodating for changes in AP and AR processes as a result of changing mandates will create a single-source system that can’t support digital transformation because it can’t manage compliance.

SAP Central Finance can only be the road to SAP S/4HANA single ERP paradise if companies consider compliance as central to their migration efforts and not something to handle on the periphery. Smart companies realize that compliance is a major potential stumbling block on the way to using SAP Central Finance to move ultimately to SAP S/4HANA.