Fri. Jun 9th, 2023

central finance

The Importance of Central Finance in an ERP Deployment

Central finance is a key component of the SAP S/4HANA ERP deployment. It provides a stepping stone to broader ERP deployments, enabling business units to continue using their existing SAP and non-SAP financial systems uninterrupted during implementation.

Compared to a data warehouse, central finance offers direct replication of finance transactions across systems, with robust control and error handling. It also allows for a more agnostic approach to business model changes.


S/4 HANA is SAP’s next-generation ERP system that can be deployed on-premise, in a hosted cloud environment, or a hybrid environment that involves some instances running on-premise and others in the cloud. Regardless of which deployment option is chosen, S/4 HANA has the ability to deliver many benefits for businesses.

With S/4 HANA, businesses can receive real-time reporting and analytics for their financial data, which helps them make more informed decisions to increase revenue, reduce costs, and improve profitability. These benefits are important to companies, and they can help them stay competitive in an increasingly volatile business environment.

While many customers opt to go with the standard on-premises S/4 HANA deployment, a growing number are choosing a hybrid deployment in which some instances run on-premise and others are in the cloud. This provides customers with the advantages of cloud computing while still retaining some control over their infrastructure and maintenance costs.

The main advantage of a hybrid deployment is that it can be configured to meet an organization’s specific needs. This can include a security or data governance requirement, for example.

A hybrid deployment can also be used to test out S/4 HANA and its capabilities before committing to a full implementation. This is beneficial for businesses that are not yet ready to commit to a major upgrade, but want to see how S/4 HANA can benefit their company before making a commitment.

With a hybrid deployment, companies can still get all of the benefits of S/4 HANA, including real-time reporting and analytics for their financial information. They can also use the system to automate processes that would otherwise be done manually, such as risk compliance and international trade.

Typically, a hybrid deployment can be completed in a shorter amount of time and with lower costs than a greenfield approach. However, this is not always the best choice for all companies.

When deciding between a hybrid and a greenfield implementation, one must consider the business requirements and the availability of resources. A greenfield implementation can be more disruptive, costly and time-consuming, but it also offers the potential for faster innovation and a greater return on investment.

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For many years, the MDGs have been a focus for countries and international community. The MDGs are a set of time-bound and measurably achievable goals that have made an impact on the lives of millions of people around the world.

However, the MDGs have a few shortcomings. One of these is the difficulty in achieving all the goals.

To address this problem, the MDG-F solution was developed in 2005. It was designed to help in the implementation and monitoring of the MDGs.

Using SAP Master Data Governance for Financials (MDG-F), you can centrally govern and control the master data in your system landscape, regardless of whether the master data is created locally or is processed in a centralized application.

MDG-F also provides a standard solution to perform time-dependent checks on the release of new master data objects. This is important to ensure that only valid master data gets released.

For this purpose, MDG-F combines the concept of so-called Editions with the idea that all change requests for an object must be collected in an edition and released on a specified date. Consequently, there is no overlap between different editions.

The MDG-F application is used to create, complete and change the master data in the so-called staging area before it is made available for use in underlying business applications. This ensures that only valid master data is released and is ready for use in your unified system landscape.

You can define the logical system and RFC destination for your Central Finance interfaces in the initial load settings. You can also assign authorizations for RFC users and configure decimal places for currencies.

In addition, you can activate the central finance business function in the source system to process consolidated statements for all your company entities. You can also use intercompany reconciliations in the Central Finance system to carry forward balances.

A central finance system allows you to duplicate clean accounting documents from a source framework such as a SAP or a S/4HANA environment. This process enables you to get the full benefit of the SAP Landscape Transformation Replication Server by duplicating the accounting documents correctly.


EC-PCA is an accounting model that is used for central finance. It offers a comprehensive and harmonized view of your company’s financial data, allowing you to perform accurate and efficient corporate reporting.

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During the initial load of FI/CO postings in the Central Finance system, you can use a simulation tool to check whether all data has been posted successfully and that the data is replicated correctly to the target system. The simulation tool retrieves EC-PCA documents from the source system and checks them based on the same checks that are performed during the actual replication of EC-PCA postings.

The EC-PCA simulation tool allows you to test the integration of non-SAP source systems with Central Finance. The replicated data is transferred from the source to the SLT staging tables and monitored through Application Interface Framework (AIF).

You can also run a consistency check report in the Central Finance system to verify that all data has been posted successfully. The report is accessed through the Business Partner and is available in the AIF for monitoring.

In the EC-PCA simulation tool, you can select which entities are contained in an initial load group. These include Cost Objects, Project/WBS, Finance and Controlling.

To simulate the process of posting the initial load, you can execute the EC-PCA Initial Load report in the Central Finance system after you have activated ongoing replication or the EC-PCA Initial Load. The EC-PCA Initial Load reports will contain the same data as the real initial load and can be checked using MDG mapping and value mapping.

After you have executed the EC-PCA Initial Load in the Central Finance system, you can run the RFINS_CFIN_CLEAR_INIT_LOAD report to reset the initial load. This will allow the Central Finance system to process the next cycle of FI/CO postings.

Ensure that the number of decimal places for currencies in your source system and in the Central Finance system is identical. If the number of decimal places in a currency differs between the source and Central Finance system, rounding is required. You can configure the number of decimal places in your source and Central Finance systems, or you can enter it manually in the EC-PCA Initial Load tool.

Group Reporting

Group reporting is a powerful tool that helps you to get more out of your data, empowering you to answer questions about trends in your business. It also provides the means to integrate all of your entities into a single chart of accounts and to share simple, standardized rules for finance functions.

Having a single system for all of your financial transactions and reporting gives you increased transparency and an advantage over competitors. It empowers you to make informed decisions and drive growth in your business.

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SAP Group Reporting enables you to create reports at any level and on any dimension, with a wide range of options. For example, you can report on company consolidation at a cost center, segment or profit center.

With group reporting, you can define a set of data sources for each financial statement item in SAP S/4HANA Finance, and you can control which data source is retrieved and when. The data sources can be non-SAP ERP systems or source systems that have been connected to S/4HANA via the SAP Group Reporting Data Collection module.

In addition, you can define a set of dimensions for each group report to help you understand and consolidate financial results by a particular business unit or other metric. You can use these dimensions for the consolidation process as well as for reclassification and elimination.

To use these tools effectively, you need to have a good understanding of how the different processes work within SAP S/4HANA and how they fit together. This knowledge will allow you to implement group reporting and get the most out of your data, as well as improve business processes across your enterprise.

Having a system in place that can provide this type of information is essential for many companies, particularly those that have multiple data sources and are looking to centralize their finance. It can also help you avoid data conflicts when implementing new solutions that require access to your existing ERP and finance systems.

Having a single system for all of the financial transactions and reporting can also reduce the amount of time it takes to generate reports, making it a valuable tool in your arsenal. It also allows you to use a more flexible data harmonization approach, which can be especially helpful in integrating acquisitions or divestitures.

Jeffrey Augers
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By Jeffrey Augers

Jeffrey Augers is a highly skilled and experienced financial analyst with over 12 years of experience in the finance industry. He has a proven track record of delivering exceptional financial insights and recommendations to clients, empowering them to make informed decisions and achieve their financial goals. Jeffrey holds a Bachelor's degree in Finance from the University of Michigan, and an MBA from the Wharton School of Business.