How do financial processes differ between SAP ERP and S/4HANA

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Approaching nearly a decade since its inception, SAP S/4HANA Finance is poised at the forefront. With the impending 2027 deadline urging businesses to transition from existing FI-CO modules, there’s no better time to delve into the merits of SAP S/4HANA Finance. 

This blog post aims to give you a robust understanding of SAP S/4HANA Finance. We’ll scrutinize the financial processes within the realm of SAP ERP, elucidate the transformative impact of SAP S/4HANA, introduce the novel features exclusive to SAP S/4HANA Finance, and deliberate on the manifold advantages of embracing this solution—benefits that transcend the immediate urgency of the maintenance deadline. 

What You Need to Know About SAP ERP Financials?

SAP ERP Financials served as SAP’s primary financial and controlling solution until the emergence of SAP S/4HANA Finance. It focuses on two primary areas as an integral component of the SAP Enterprise Central Component ERP solution (commonly known as SAP ERP). Firstly, financial accounting (FI) enables businesses to manage their finances and other supply chain and sales-related transactions in compliance with legal accounting standards. Secondly, management accounting (CO) assists businesses in internally tracking and managing their finances according to specific business rules. Collectively, these components are often referred to as FICO or FI-CO within SAP circles. 

Originally rooted in accounting software, SAP ERP Financials boasts extensive development, particularly in key areas such as: 

  1. Accelerated Close Processes: Utilizing tools like the General Ledger and Closing Cockpit to expedite local and group closing procedures. 
  2. Enhanced Business Insights: Providing management reporting functionalities like profitability analysis and cost-center accounting to offer valuable business insights. 
  3. Efficient Financial Processing: Offering end-to-end integration and specialized transaction codes to streamline financial processes. 
  4. Improved Corporate Governance: Enhancing corporate governance standards through features such as security measures, reporting tools, and whistleblower functionalities. 
  5. Optimized Performance Management: Enabling in-depth analytics, business consolidation tools, and value driver trees to enhance performance management capabilities. 
SAP ERP Financial Diagram

What is SAP S/4HANA Finance?

SAP S/4HANA Finance represents SAP’s cutting-edge financial solution and is the successor to SAP ERP Financials. Initially introduced in 2014, it brings forth a plethora of advancements in economic processes. These include establishing a unified source of financial data, real-time financial closing capabilities, centralized accounts payable and receivable management, predictive accounting functionalities, and embedded analytics. Developed to operate on the SAP HANA platform, SAP S/4HANA Finance primarily leverages the SAP Fiori user interface. 

Furthermore, SAP S/4HANA Finance offers flexibility in deployment options, allowing businesses to choose between on-premises or cloud-based implementations. Updates are rolled out to solution owners every two years for on-premises deployments, while cloud-based users receive updates every four months. Additionally, a third option, Central Finance, exists, wherein SAP S/4HANA is utilized solely for financial processes, while other ERP-related tasks are managed separately. 

The functionalities of SAP S/4HANA Finance span across various areas of business, including: 

  • Financial planning and analysis 
  • Accounting and financial close 
  • Treasury and financial risk management 
  • Finance operations 
  • Enterprise risk and compliance management 

How Does SAP S/4HANA Finance Differ from SAP ERP Financials?

SAP made it clear from the outset that the concept of “simplicity” in the first version of SAP S/4HANA Finance was multifaceted. Users of the new solution would experience automated, real-time financial reporting, a simplified data model, and a lightweight architecture. 

The initial functionality of FI-CO enhanced the existing options in SAP ERP Financials. This encompassed improvements in financial planning and analysis, accounting and financial close processes, treasury and financial risk management, collaborative finance operations, and enterprise risk and compliance management. 

While providing a comprehensive list of changes is impractical due to the extensive nature of the updates—numerous blog posts delve into specific details, and SAP regularly publishes a simplification list of the latest features—here are some notable changes worth mentioning. 

The transition from SAP ERP Financials to SAP S/4HANA Finance heralds several significant changes. One of the most notable is the elimination of separate financial and management accounting modules. SAP achieved this by introducing a new ledger, ACDOCA, which consolidates all financial data into a unified source of truth leveraging the SAP HANA database. This consolidation accelerates the reconciliation process during reporting periods, enhancing efficiency. 

Another noteworthy change lies in the default option for profitability analysis. While SAP ECC defaulted to costing-based CO-PA, SAP S/4HANA now defaults to account-based CO-PA. Although the former option remains available, it typically operates alongside account-based reporting. 

Furthermore, SAP S/4HANA mandates the activation of the Material Ledger, a requirement absent in SAP ERP. This mandatory activation underscores the comprehensive integration of supply chain management data within the SAP S/4HANA suite, contributing to a more robust ERP solution. 

Regarding revenue recognition, SAP S/4HANA introduces the Revenue Accounting and Reporting module, replacing the module found under Sales and Distribution in SAP ERP. This updated solution adheres to the latest IFRS standards and simplifies revenue recognition processes through features like optimized contract management. Additionally, seamless integration with other SAP solutions, such as SAP Billing and Revenue Innovation Management, further enhances revenue recognition capabilities. 

Innovations in SAP S/4HANA Finance

The introduction of SAP S/4HANA Finance represented a pivotal advancement in the financial landscape, introducing the notion of a unified source of truth. This involves aggregating financial data from diverse departments, ledgers, and geographical locations into a single repository. Capitalizing on the in-memory storage capabilities of SAP HANA, the platform enables the instantaneous generation of analytical reports accessible to authorized personnel on demand. Consequently, it offers immediate benefits to accountants analyzing historical and current financial activities, project managers overseeing complex projects within budget constraints, and planners utilizing past and present data to forecast future outcomes. 

1. The Universal Journal 

In SAP S/4HANA, the Universal Journal is a centralized pivot table across the enterprise, merging the conventional FI and CO data into a unified table known as ACDOCA. This integration significantly streamlines both legal and management accounting processes. Although this represents a substantial departure from the familiar practices of financial professionals, it retains the familiar posting logic. 

2. Predictive Accounting 

SAP S/4HANA introduces predictive accounting, leveraging existing sales data to generate estimated forecasts. These forecasts assist companies in strategic expenditure planning and product development decisions. Predictive accounting data is stored in a distinct extension ledger to ensure accuracy and prevent inadvertent inclusion in legal reporting documents. 

3. Consolidated Group Reporting 

Harnessing the capabilities of SAP HANA, which enable increased data inputs and accelerated reporting, SAP revamped traditional financial consolidation to revolve around a fully integrated framework. This encompassed the entire data flow, ensuring seamless connectivity across all data points and enabling cloud deployment. As a result, SAP S/4HANA facilitates a “continuous close” of consolidation, providing ad hoc reports that are consistently up to date and reflective of real-time information. 

4. Efficient Financial Closing 

SAP S/4HANA includes two tools designed to streamline the financial closing process for companies. The first tool, SAP Financial Closing Cockpit for SAP S/4HANA, offers businesses a standardized closing template as an add-on feature. This functionality is akin to the add-on tool provided by SAP ERP Financials but is seamlessly integrated into SAP S/4HANA’s new suite. 

The second tool, SAP S/4HANA Cloud for Advanced Financial Closing, is exclusively available in the cloud. It enables connectivity to on-premises solutions and facilitates the planning, execution, and monitoring of financial closing processes across multiple instances of SAP S/4HANA deployed throughout the organization. This tool proves invaluable for large corporations managing diverse SAP S/4HANA deployment options and operating across global locations. 

5. SAP Fiori Applications 

With the introduction of SAP S/4HANA, SAP introduced significant changes to the user interface of the ERP system. SAP Fiori applications have replaced the traditional access methods via menu paths and transaction codes. These applications offer a more intuitive and streamlined user experience, providing a lighter feel and simplifying access to reports and essential tasks. Additionally, SAP Fiori enables users to run these applications seamlessly on mobile devices and desktop workstations, enhancing accessibility and flexibility. 

Innovations in SAP S/4HANA Finance

Transitioning to SAP S/4HANA Finance offers numerous advantages, as this discussion outlines. Leveraging SAP HANA’s column-based storage, businesses gain access to real-time data retrieval capabilities, facilitating faster decision-making processes. Furthermore, the simplification of functionality, achieved through the elimination of redundancies and the introduction of streamlined processes, enhances overall efficiency and productivity.


SAP S/4HANA Finance represents a significant upgrade from legacy SAP ERP Financials tools. For businesses that have yet to make the transition, now is the opportune moment to do so. With SAP’s planned end of maintenance for SAP ERP components by the end of the decade, delaying the migration could lead to operational challenges and increased complexity in the future. Therefore, investing in the transition to SAP S/4HANA Finance is not just an investment in technology but also the future viability and competitiveness of the business. 

VE3 brings unparalleled expertise in comparing financial processes between SAP ERP and SAP S/4HANA. With our deep understanding of both systems and extensive experience implementing SAP solutions, VE3 ensures a seamless transition and optimization of financial operations. By partnering with VE3, businesses can leverage our expertise to maximize the benefits of transitioning to SAP S/4HANA Finance and stay ahead in today’s dynamic business landscape. 

Also Read “How to choose successful S/4HANA migration strategy for business success”


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