Please check out our new Video Podcast on Value Driven Business Transformation and how Value Flow bridges the gap between operations and accounting in order to facilitate successful business transformations.
Or how Business Flows helps you from falling off the digital cliff
SAP's announcement to prolong mainstream maintenance until the end of 2025 will reassure SAP customers, that they receive adequate time to migrate to the new S/4 HANA digital platform. Taking into consideration the pressure on companies to ‘digitalize’, this seems like a fair amount of time. On the other hand, experience of past and current business transformation initiatives left many stakeholders uncertain about if or how to proceed with current deployments of SAP’s Business Suite and when best to change to the new technology. Considering this, 2025 seems nearer than you may think.
This will be the reason why many customers are currently evaluating S/4 HANA and rethinking their business transformation strategy.
During evaluations many questions relate to the major shift in technology such as
In memory technology
Fiori Apps (UI and mobile applications)
Application architecture and integration
To answer this, SAP and implementation partners such as Steeb offer ‘value maps’ with pre-scoped solutions for various industries.
As a starting point we believe this approach is of great value. Nevertheless, one must consider that simplification as proposed by SAP and the shift to new technologies can result in companies neglecting the requirements of their existing organization and processes.
Taking the magnitude of the strategic shift into consideration, we believe the evaluation needs to go deeper in order to answer questions such as
What are the core business drivers we want to excel in and how can SAP’s digital platform help us achieve these targets?
How much simplification can the company afford and in which areas do we need to stay ‘complicated’?
Which deployment strategies fit to my companies setup?
How are organization and people impacted by the new technology?
We recommend to focus on 3 elements in preparation of your S/4 HANA evaluations:
Scope your core operating models by defining E2E scenarios
Define strategic Business Drivers and map them to the scenarios
Define your enterprise structures and deployment entities (regions/countries/sites) and create sub-scopes of your processes
In Business Flows we offer accelerators for this preparation.
Comprehensive E2E business process reference model for industrial enterprises
Business/Value driver library
S/4 HANA Capabilities (mapped to Scenarios)
S/4 HANA Simplifications (mapped to Scenarios and Processes)
With this prepared, you can engage with business functions (experts) from your organisation and S/4 HANA experts (typically SAP or system integrator) to identify fits and gaps of the S/4 HANA solution, elaborate answers to the above mentioned questions as well as define a high level migration strategy.
In our webinar we would like to present to you our approach to S/4 HANA evaluations based on Business Flows and show examples on how to define feasible scenarios for your migration and identify the key opportunities and threats.
On the bottom line, we believe in the context of 2025 the End of R/3 is Near but you can Keep Calm if you go about it the right way.
From Value Creation to Finance & Controlling - Aligning the separated views on your business
When talking to professionals from purchasing, production planning, and sales & distribution, they often seem not aware how their business operations impact accounting. By the same token, accounting departments are repeatedly left in the dark about business operations during process design phases of major transformation initiatives. This misalignment can be very costly, causing gaps from process design through to business rule definition, and Key Performance Indicator (KPI) interpretation.
Business processes are essential building blocks for organisational change and change can only be brought about when the stakeholders share a common goal; aligning on what needs to be done, how it is to be done, and what the implications are, once the work is done.
It is widely believed that thinking about business processes from an End to End (E2E) perspective fosters operational excellence since the key process flows, business rules, business roles and expected business outcomes are considered at all levels within the organisation. But Accounting too has its share of rules, legal requirements, roles, and expected outcomes, and often depend on input from upstream processes to ensure optimal service delivery. Keeping this in mind, one clearly sees the potential risks associated with a misalignment between business operations and accounting.
The solution approach
To foster holistic organisational transformation, it is essential that all business areas are in sync at the earliest stage of process design. The Value Flow approach facilitates the marriage between value creating processes and their Finance & Controlling requirements. This shall be demonstrated in the following examples.
1. Perform goods issue for sales from stock
Based on a customer order, goods are issued from stock, triggering a delivery to the customer. When this occurs, the relevant accounting entries are made namely, a posting to Cost of Goods Sold (COGS) and posting of the inventory reduction. The illustrated BPMN model below visualises this business transaction and the corresponding accounting impacts. In this model, the accounting postings are presented in a separate pool.
2. Create Customer Invoice
Once goods have been issued and a delivery is triggered, we expect the customer to be billed accordingly. The creation of a customer invoice will result in the recording of a receivable on the customer’s account, and the posting of the revenue which is derived from the business transaction as shown below.
3. Cross-company Business
Though the above presented examples may seem simplistic, Value Flow visualisation becomes more complex when considering business transactions among companies from one corporate group. A cross-company sales scenario typically involves a customer, the company selling to the customer (selling entity), and at least one other company belonging to the same corporate group as the seller (delivering entity). Showing the Value Flow for the transfer of ownership of goods, and the invoice creation can be equally challenging and enlightening when considering aspects of materials transfer, cross-company billing, commission agreements, and accounting requirements for balance sheet and P&L account consolidation. The illustrated BPMN model visualises the transfer of ownership of goods during a cross-company business transaction.
4. Product Costing
When calculating the product cost for manufactured goods, it is necessary to keep detailed track of all incurring direct and indirect costs. To do so, controlling functions must ensure that related costs are recorded and allocated accordingly within the relevant accounting period. Value Flow can be used to visualise the material and time consumption related to manufacturing processes. This provides useful information when aligning the policies and computation method for product costing. The BPMN model shows the accounting impacts when materials are used in the production process.
The way forward
Value Flow representation enriches process documentation by establishing cross references between key Value Flow topics within a business such as COGS and inventory postings, and the various instances and related E2E scenarios. These should be defined at the same point in time as process design with an early involvement of accounting departments. Value Flow therefore offers a framework to ensure alignment between Operations, and Financial and Managerial Accounting in business transformation initiatives.
In the next release of Business Flows, we will provide reference models with Value Flow representation for all core business processes. These can be used as a template to refine according to the scope and concepts of your business transformation initiative.
For inquiries on the concept and how to establish value flows in your environment please feel free to contact me.
In this free 45 minute webinar with Signavio you will learn how to bring process initiatives to life with our Business Flows reference model and methodologies.
Business Flows will be introduced and presented with detailed use cases on how you can successfully put in place the framework for your process initiative or transformation project.
We will be covering:
Introduction to reference models and the motivation for Business Flows
Business Flows scope and process domains:
E2E concept and architecture
BPMN granularity and modeling in Signavio
Presentation of selected business scenarios and process
Applications for the use of reference models
Following the presentation you will have the opportunity to put your questions to our industry experts.
New technologies & digitalization, customer requests, regulations, globalization and other factors create an environment in which forward-thinking companies understand that continual transformation is essential.
Our philosophy is to serve our customers in building up the essential capabilities for their business transformation journey.
Covering all aspects of business transformation, from strategy to implementation, from processes to technology, from organization to culture and people - with our business transformation framework we provide Best Practice content and methodologies which will boost your transformation capabilities.
Watch our introductory video to Business Flows, our framework of Best Practice content and methodologies.