10 Best Practices for Implementing New GL

10 Best Practices for Implementing the New G/L Aylin Korkmaz Accenture UK © 2007 Wellesley Information Services. All rights reserved.

What We’ll Cover … • What is new General Ledger, and should I implement it? • 10 best practices for implementing new G/L • Tips to mitigate migration risks • Wrap-up

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What is New General Ledger (New G/L)? • With mySAP ERP 2004, SAP introduced new G/L • New G/L provides one-stop, integrated reconciliation of

multiple ledgers e.g., the cost-of sales ledger, Profit Center accounting ledger, and the consolidation staging ledger are combined into a one-stop ledger You no longer have to individually reconcile them

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Comparison of New G/L with Classic G/L

Classic G/L Legal requirements

CoGS Ledger New General Ledger supports:

Profit Center Ledger Management and segment reporting

Special Ledger Multi-dimensional, customer-defined

Legal requirements Mgmt. and Segment reporting Extensibility by industries Extensibility by customers Balanced books for any dimension Parallel sets of books Fast close TCO reduction Intl. accounting standards Compliance & transparency

Industry-Specific Ledgers B/S by grant, fund …

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New Features of the New G/L in mySAP ERP 2005 • • • • • • • • • •

Migration of existing SAP Data Reporting for Line Item Display and Open Item Accounting Simulation of the General Ledger View Statistical Key Figures Comparative Analysis Profit Center Derivation Archiving Local Currency Changeover Parallel Valuation Approaches/Transfer Prices for Materials Integration with FI-TV (Travel Management), HCM (Human Capital Management), Public Sector Management-Funds Management Government (PSM-FM) Check the following SAP Notes for release restrictions f f

741821 – Release limitations concerning mySAP ERP 2004 852235 – Release restrictions for mySAP ERP 2005 5

Should You Migrate to New G/L? • Does your organization meet any of the following criteria: Are you planning to use mySAP ERP? Are you an international company operating in multiple countries and on

multiple continents? Do you use multiple accounting methods (US GAAP, HGB, IFRS, etc.)? Do you (have to) perform management reporting by different business areas, e.g., product lines, line of business? Are you required to file by segments at period-end according to SEC guidelines? Do you produce consolidated financial statements across multiple legal entities? Do you spend an exorbitant amount of time reconciling FI and CO during month-end closing? Do you wish to reduce the complexity of your organization’s financial data structure? 6

Should You Migrate to New G/L? (cont.)

Solution

If you answered “yes” to most of the previous questions, your company is a good candidate for new G/L

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New G/L – Additional Key Considerations •

License and upgrade view: New customers

Have a mySAP ERP license. New G/L can be implemented and used. Upgrade customers f Have to acquire a mySAP ERP license to implement and use new G/L f

•

Implementation view: Financial processes scope

Detailed analysis of the target financial processes f Managing of changes to the financial processes Organizational and master data implications f New master data objects f Organizational structure mappings Integration with other systems f Outgoing and incoming interface impacts f Reporting system impact assessment f

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Best Practice 1: Streamline Your Segment Reporting • Segment reporting is providing financial information by

line of business, or by geographical or management area • New G/L offers better quality and modeling options for segment reporting than classic G/L You no longer have to wait until period-end close to build your

segments (an expensive and error-prone approach) Segment information is populated in financial transactions f

f

Because segment information is stored at the detailed document level, segment-based balance sheets and P&L statements are available within standard reporting, saving time and minimizing errors Account balances can be reviewed at the segment level, and periodic activities (e.g., revaluation and balance carry forwards) are handled with ease You no longer need to activate a special ledger to show financial position and performance by segment under company code level 10

1 – Streamline Your Segment Reporting (cont.) •

Business Area is also available as an account assignment field in new G/L Business area can also be used as segment reporting object

Tip

The business area will be retained in the present form Data and functions will be available in the future f

In the near future, SAP will focus on further developing functionality based on the Profit Center Entity • Check SAP Note 321190 for more information on reporting by Business Area and Profit Center in new G/L • Fields for Industry Solutions are supported in SAP ECC 6.0 •

Don't Customer fields can also be introduced for producing Forget B/S and P&L statements. But only after exploring the standard fields (Segment, Profit Center, and Business Area), that can be used.

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1 – Streamline Your Segment Reporting (cont.) • In new G/L You do not activate Profit Center Accounting (EC-PCA) f Instead, you activate the appropriate Profit Center Scenario for the corresponding new G/L ledgers Tip Ledger 8A is no longer used Profit Center Master Data and hierarchies can be used Check SAP Note 826357 to learn more about PCA in new G/L

Note 826357

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1 – Streamline Your Segment Reporting (cont.)

•

EC-PCA is not active in the corresponding controlling area. You can still use Profit Center Master Data and hierarchies. (Transaction code: OKKP)

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Best Practice 2: Segment Definition and Derivation • “Segment” is a new cost object which can be used for

segment reporting

Segment information can be populated either manually or automatically f Assign segment field in the Profit Center Master Data to derive segment automatically f If Profit Center Master Data is not used, custom derivation rules can be defined with BADI FAGL_DERIVE_SEGMENT to derive segment automatically f Manually update segment information at the time of the financial posting

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2 – Segment Definition and Derivation (cont.) • It is recommended to populate segment field by

assigning segments to profit centers

Cost Objects

Profit

• Cost Centers • WBS Elements

Center

Segment

• Internal Orders

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2 – Segment Definition and Derivation (cont.) • Segment assignment in the Profit Center Master Data

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2 – Segment Definition and Derivation (cont.) To Activate Segments: Solution

1. Define Segments (See next slide). 2. Derive the Segments (i.e., via Profit Center Master Data). 3. Maintain the field status group in the FI accounts. The

Segment field can be found in group Additional Account assignments (Txn: FBKP). 4. Maintain the field Status of the corresponding posting key

(Txn: FBKP). 5. Maintain scenarios. The segmentation scenario has to be

defined for the corresponding ledger (See next slides).

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2 – Segment Definition and Derivation (cont.) • Define your segments

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2 – Segment Definition and Derivation (cont.) • Assign scenarios to ledgers

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2 – Segment Definition and Derivation (cont.) Note

If Profit Center Master Data is not used, custom derivation rules can be defined with BADI FAGL_DERIVE_SEGMENT

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Best Practice 3: Document Splitting • Splitting enables line items in the document to be divided

for selected dimensions i.e., segment, Profit Center, and business area For example, a vendor invoice posted against multiple expense lines belonging to different segments f Vendor and tax lines are split to the corresponding segments according to the offsetting expense amounts belonging to each segment

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3 – Document Splitting (cont.) Document with splitting PK 31 31 40 40 40 40

Segment SEGMENT 1 SEGMENT 2 SEGMENT 1 SEGMENT 2 SEGMENT 1 SEGMENT 2

PC PCA1 PCA2 PCA1 PCA2 PCA1 PCA2

Document without splitting

Account Amount Vendor 232 Vendor 928 200 Postage Expense 800 Postage Expense Input VAT 32 Input VAT 128

Balance Sheet SEGMENT 1 Assets Input VAT

Liabilities&Capital 32 Vendor 232 Retained Earnings (for expenses) 32

Liabilities&Capital 128 Vendor

Assets Input VAT

Liabilities&Capital Vendor Retained Earnings (for expenses) 0

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928


Liabilities&Capital Vendor Retained Earnings (for expenses)

-800 128

-200 -200

Retained Earnings (for the expense)

128

Account Amount Vendor 1160 Postage Expense 200 Postage Expense 800 Input VAT 160

Balance Sheet SEGMENT 1

-200


PK Segment PC 31 40 SEGMENT 1 PCA1 40 SEGMENT 2 PCA2 40

0

-800 -800

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3 – Document Splitting (cont.) • Recommendations on splitting: Define your splitting characteristics f Characteristics that will be used to produce your B/S and P&L. Define Profit Center and Segment as splitting characteristics. Zero Balancing Characteristics f Make sure that you select this option for your splitting characteristics. Doing so will make sure that a zero balance is secured in each document. Mandatory Characteristics f Make sure that you select this option for your splitting characteristics. Doing so will make sure that the selected characteristics are populated in each document line. 23

3 – Document Splitting (cont.) • Recommendations on splitting: (cont.) Inheritance – Activate the inheritance f If no characteristics specified, characteristics will be inherited from the lines with characteristics Default Assignment f Make sure that you specify a default assignment for cases where the characteristics cannot be determined General Ledger Account Assignment to Item Categories f Revenue, Expense, Balance Sheet accounts have to be assigned to the right item categories (e.g., 30000, 20000, and 01000)

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3 – Document Splitting Tip

Tip

With ECC 6.0, you can simulate splitting before posting the document 25

3 – Document Splitting Tip (cont.)

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Best Practice 4: Reporting Functionality • The extended data structure of new G/L is available in

standard reports

e.g., Document view, Line Items report, Balance Sheet report, Drill-Down reports

• Use Report Painter/Report Writer to create customer new

G/L reports using new G/L table FAGLFLEXT

There is a new standard report library, 0FL, for new G/L

• Use SAP NetWeaver® BI for more advanced reporting New G/L includes a new data source, 0FI_GL_10, for collection of mySAP ERP data within SAP NetWeaver BI

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4 – Reporting Functionality (cont.) New General Ledger

Balances for an account are kept by additional characteristic (Transaction Code: S_PL0_86000030) 28

4 – Reporting Functionality (cont.) Classic Balance Sheet report also reads from new G/L table

(Transaction Code: S_ALR_87012277) Use dynamic selections to further restrict the desired characteristics. You may need to create various selection variants to make the report execution easier. 29

Best Practice 5: New G/L Solution for Parallel Accounting • The need to provide parallel financial statements to

meet the requirements of international accounting standards is growing with the continued globalization of capital markets • Previous SAP releases provided methods to support parallel accounting, but mySAP ERP offers a new, simpler approach • New G/L lets you keep parallel ledgers simultaneously, according to different accounting standards SAP considers the ledger solution method equivalent to Don't Forget the account solution method. They recommend using the ledger solution method if you have a large number of G/L accounts. (SAP Note 779251).

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5 – New G/L Solution for Parallel Accounting (cont.)

New General Ledger

0L Leading Ledger Non-Leading Ledger Non-Leading Ledger

Other Non-Leading Ledgers

IFRS, US GAAP, Local GAAP Reports are based on the corresponding ledger

Only Specified Ledgers are Updated

FI-AR FI-AP … SD MM PP PM …

All Ledgers Updated Simultaneously

• Value flow: Postings via new transactions FB01L and FB50L Foreign currency Valuation Program FAGL_FC_VALU ATION FI-AA depreciation areas

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Best Practice 6: Set Up Your Ledgers Correctly • You can define only one leading ledger (0L). Ledger 0L

should be set up as your leading valuation.

e.g., US companies should set up 0L as US GAAP ledger, whereas European companies should use 0L for their IFRS valuation

• Local Accounting: Normally one ledger is enough for all

countries

Non-leading ledgers are activated for each company code

Parallel ledgers can increase the data volume in tables, so only activate non-leading ledgers for companies where they are required. (SAP Note Don't Forget 820495 – Data Volume and Parallel Ledgers). f Only postings to the leading ledger flow into the CO module, thus no postings to sub-ledgers would affect the Controlling ledger. f

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6 – Set Up Your Ledgers Correctly: Key Steps 1. Define the non-leading ledger

2. Activate non-leading ledger only for necessary company codes

Non-leading ledgers can not have currencies different than the leading ledger. 33

Best Practice 7: Activate Real-Time CO-to-FI Integration • Once activated, the FI/CO reconciliation program (KALC)

does not need to be run at period-end

Only activate the objects you need to be transferred back to FI

You can choose which CO postings will be transferred back to FI For example, if a CO posting crosses a Company Code, Business Area, Functional Area, Profit Center, or Segment, an FI document will be created 34

Best Practice 8: New G/L Allocations • Use FI allocations for segment and Profit Center

allocations • Make sure that you have configured allocation settings prior to setting up these cycles

Transaction codes: GCA6 for Distribution and GCA1 for Assessments

Do not use FI allocations for Cost Center allocations if you use the CO module Warning

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8 – New G/L Allocations (cont.) • Configure the settings for the segment field in

transaction GCA6 – Field Usage for Distribution With these settings, the field segment can be used as the sender and receiver field in distribution cycles The field is hidden in the cycles in the SAP-delivered settings

Allocations in FI generate only FI documents

Tip 36

8 – New G/L Allocations (cont.) •

You need to define a clearing account for allocation in General Ledger Accounting

Don't Forget

If more than 1,000 items are created during an allocation, the system splits up the FI document. The balance of the document is posted to the clearing account.

In the master data of the G/L account, define a field selection group that does not include any required entry fields • The account is a technical account that cannot be changed in the FI substitution (substitution call-up point 0002 – line items) •

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Best Practice 9: Set Up Your New G/L Scenarios • These scenarios are new to new G/L. They identify the

fields that are updated in ledgers during the posting.

The following scenarios are available: f Segmentation (FIN_SEGM) f Cost Center Update (FIN_CCA) f Preparation for Consolidation (FIN_CONS) f Business Area (FIN_GSBER) f Profit Center Update (FIN_PCA) f Cost of Sales Accounting (FIN_UK) • Only activate the scenarios you need to avoid unnecessary data volume • Assign scenarios to the relevant ledger only

Tip • Industry-specific scenarios are available for industry solutions 38

9 – Set Up Your New G/L Scenarios (cont.) • Preparation for Consolidation (FIN_CONS) This is needed if you use SAP BCS or EC-CS* • Profit Center Update (FIN_PCA) One of the prerequisites to enable B/S and P&L statements in new G/L for Profit Centers • Segmentation (FIN_SEGM) One of the prerequisites to enable B/S and P&L statements in new G/L for Segments *EC-CS = Enterprise Controlling Consolidations

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Best Practice 10: Leading Valuation in Asset Accounting • Depreciation Area 01 should represent your leading

valuation

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10 – Leading Valuation in Asset Accounting (cont.) In new G/L, unlike classic G/L, only differences are posted to parallel depreciation area, i.e., Local Accounting area • You can use a wizard to customize the parallel valuation (Txn: OADB_WZ) •

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Common Implementation Challenges • Not enough understanding of the new G/L concept • Continuing to think in “classic” terms • Confusion as to which objects to use for • • • •

segment reporting Rushing to create customer Z fields before fully exploring the standard fields Confusion about parallel ledgers Integration of G/L with other modules and reporting systems (e.g., SAP NetWeaver BI) Legacy data conversion or migration requirements 43

Tips to Mitigate Migration Risks • Manifest an agreement between you and SAP for

receiving unlimited and direct support from SAP over the duration of the project

i.e., until the new G/L concept and functionality has been completely configured, implemented, tested, and validated for business compliance and production readiness

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Tips to Mitigate Migration Risks (cont.) • Have a full-time resource on the project to address any

questions, issues, and requests around the new version, and to accelerate the issue resolution process i.e., a specialist familiar with new and “classic” G/L Also someone familiar with the company’s business practices

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Tips to Mitigate Migration Risks (cont.) • Develop a prototype during initial design and testing to

demonstrate that new G/L is a workable solution The prototype should have a clear approach to segment reporting and parallel accounting Splitting and Segment updating should be tested for various financial transactions to make sure that the standard splitting rules are enough to cover all financial processes and segments are updated

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Resources • SAP Financials Expert www.ficoexpertonline.com/ f Aylin Korkmaz, “Simplify Segment Reporting with the New General Ledger” (SAP Financials Expert, November/December 2005). f Aylin Korkmaz, “Streamline Your Parallel Accounting with the New G/L Ledger Solution” (SAP Financials Expert, April 2006). f Aylin Korkmaz, “Accelerate Your Closing Process with mySAP ERP New G/L and New Functions” (SAP Financials Expert, June 2006). • http://help.sap.com/saphelp_erp2005/helpdata/en/2d/830e

405c538f5ce10000000a155106/frameset.htm

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7 Key Points to Take Home • New G/L provides one-stop, integrated reconciliation of

multiple ledgers • You no longer need to activate a special ledger to track financial position and performance other than the company code level • Design and prove the concept of your management and financial reporting during the Blueprint phase

Make sure that segment definition/derive is inline with your reporting and business requirements

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7 Key Points to Take Home (cont.) • Don’t activate the scenarios if you don’t need them to

avoid unnecessary data volume • Use splitting functionality to enable line items to be divided for selected characteristics (to produce financial statements for the selected characteristics) • SAP considers ledger solution method equivalent to the account solution method

It is recommended to use the ledger solution method if you have a large number of general ledger accounts

• Don’t use FI allocations for Cost Center allocations if you

use the CO module 50

Your Turn!

How to contact me: Aylin Korkmaz [email protected] 51

10 Best Practices for Implementing New GL

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