Written By: Dr. Ravi Surya Subrahmanyam,PhD Finance
Business Case
Conversion Starting Point > Your Customer currently runs a system on classic G/L and wants to upgrade to use the functionality of the latest version of SAP S/4HANA. You want to know if their current system configuration meets the prerequisites for System Conversion (ECC to SAP S/4HANA directly) and what kind of changes you need to prepare for before you do system conversion.
Abstract
The new General Ledger on SAP S/4HANA or ECC has certain advantages over Class GL. Examples: usage of parallel ledgers, Document splitting, Profit Center Financial statements, Segment' reporting that is required for segment reporting according to IAS and U.S. GAAP, etc. In addition, customers can enhance the new General Ledger flexibly, that is, they can enter user-defined fields and update the relevant totals. Many standard reports can evaluate the information from the user-defined fields. Customers can use the 'Document Splitting' functionality to create financial statements at the company code level and, if required, for entities, such as the segment. As a result, we no longer have to carry out time-consuming reconciliation tasks between FI and CO for the end of the period since cross-entity processes are transferred in real-time to the new General Ledger in Controlling.
Starting from 1709, in new installations of SAP S/4HANA, the new General Ledger Accounting is activated by default. The existing ECC customers moving from SAP ECC to SAP S/4HANA will also get new GL automatically. As a result, ECC customers will also move to New GL on SAP S/4HANA Conversion. However, they cannot implement document splitting or a further accounting principle/ledger during the conversion project. The architecture of the accounting module in SAP S/4HANA from the 1709 version is based on the concept of the former "New GL". The concept of the Subsequent Implementation of Document Splitting in SAP S/4HANA differs from the Migration Scenario 6 of the "New GL".
What options do SAP ECC – Classic GL customers have?
SAP ECC Customers with Class General Ledger can choose one option from below. But The decision to choose one out of these two is purely on business needs and decisions.
SAP ECC customers with Class General Ledger can convert their existing SAP ECC systems directly to SAP S/4HANA.
First migrate from Class GL to New GL and from there, convert the system to SAP S/4HANA.
Can I switch from the accounts approach to the ledger approach?
As of now, there is no SAP service for a subsequent switch from an accounts approach to a ledger approach. However, it might be on the way. We need to know the correct information from SAP if this is planned or not. Currently, the only way to convert from the accounts approach in the classic GL to the ledger approach in S/4HANA in an SAP standard conversion, is to migrate to the new general ledger as a separate project before converting to S/4HANA. However, the system can be converted directly from the classic GL to S/4HANA and optimized later.
I would like to implement a new accounting principle. Can I do this along with the SAP S/4HANA Conversion?
No. Implementation of further accounting principles cannot be performed in the same fiscal year as the SAP S/4HANA Conversion. This task should be taken as a new project separately. The prerequisite is to close the previous fiscal year.
We need to create a new non-leading ledger and assign a new accounting principle for it. This solution replaces the New GL migration scenario 7. This is the subsequent implementation of a new ledger in SAP S/4HANA Finance. This can be done using a standard tool. No service fees.
What options do I have for moving from the Classic GL account approach?
Classic GL-Account approach to SAP S/4HANA Account approach:
Classic GL-Account approach to Migration to New GL first and do ledger approach and then convert the system.
Classic GL-Account approach to Account approach in SAP S/4HANA, then move to ledger approach (verify this with SAP, if this option is available now or not).
What happens if Customers move from Classic G/L?
As part of the migration, classic G/L data is automatically transferred to the new data structures.
Existing EC-PCA (profit center), EC-CS (consolidation), and SL (special ledger) functions and features remain. Many customers continue to use Special Ledger for a while after the migration to ensure that certain important reporting requirements continue to run and replace Special Ledger with a new reporting method based on the Universal Ledger later.
Subsequent optimization like the implementation of document split after system conversion is always an option to benefit out of the new GL. But it is not possible during conversion or along with conversion.
Customers already running a migration project to new G/L in SAP ERP can continue doing New GL migration project. This may be needed just because of business needs.
What are the limitations from classic GL to SAP S/4HANA directly or what activities are Not Supported?
Conversion directly from classic G/L to SAP S/4HANA does not support the following scenarios:
Implementation of document splitting along with System conversion. Later they can do it as a separate project.
Balance sheets at the profit center level along with System conversion. Later they can do it as a separate project.
Migration from a special purpose ledger to a new general ledger accounting.
New implementation of parallel accounting.
New implementation of segment reporting.
Implementation of the ledger approach for parallel accounting.
Change in chart of accounts and conversion of chart of accounts.
What business processes will be affected by the System conversion when we move directly from Classic GL?
Foreign currency valuation:
Reconciliation between controlling and financial accounting.
GL open item and line-item reports.
Balance carry forward, etc.
What other Preparations help in moving from Classic GL to SAP S/4HANA directly?
Below are some examples:
It is better to have a good understanding of the Classic GL scope in the source system.
Train end users on the transactions that replace after system conversion.
Have a schedule that allows several test migrations.
Check authorizations during acceptance tests.
Involve auditors or compliance experts where required.
Is there any configuration change in Asset accounting when we move from Classic GL to SAP S/4HANA?
Yes, we need to configure the system for migration to SAP S/4HANA from Classic GL. New asset accounting must be configured as part of the SAP S/4HANA prerequisites. We need to assign Leading ledger 0L to the depreciation areas along with the accounting principle.
Example:
The source system has 00 Ledger.
Now after moving to S/4HANA, as a part of New GL in SAP S/4HANA, we will be able to use Leading ledger 0L.
We need to assign this Leading ledger to the accounting principle first in "Assign Accounting Principle to Ledger Groups".
And assign Ledger to the depreciation areas on the Chart of Depreciation.
Additional information for Customers with Classic G/L
As part of the system conversion classic G/L data is automatically transferred to the New GL and new data structures when we run the SUM tool.
Existing EC-PCA (profit center), EC-CS (consolidation), and SL (special ledger) functions and features remain the same. At a later stage, we can move from EC-PCA to HANA-based PCA (UJE-based PCA).
Many customers continue to use Special Ledger for a while after the migration to ensure that certain important reporting requirements continue to run and replace Special Ledger with a new reporting method based on the Universal Ledger later.
Subsequent optimization (such as the adoption of a parallel ledger or document split) is always an option and is not possible during system conversion. We need to take them on a different project.
Customers already running a migration project to new G/L in SAP ERP should continue this project. The same goes for customers urgently requiring document splitting, Segment reporting, etc.
What are the most important points to be considered during system conversion? SAP ECC Classic GL to S/4HANA or New GL to SAP S/4HANA?
SAP S/4HANA Conversion can be done at the end of any period when all necessary prerequisites are fulfilled. We need not wait till the Fiscal year first date.
Many people think it is more a technical migration. It is technical and functional. It is a system Conversion. If we don't prepare the system perfectly before conversion, then errors cannot be adjusted after system conversion. Customers may have to live with errors or fixing may be very costly.
Always be prepared for functional changes. Training users is a very important aspect of the successful transition.
Consider whether data archiving makes sense, it is a time-consuming activity and it is better to take it as a separate pre-project before starting the Conversion project.
Conclusion
If the Current ECC system is in good condition, the trend is more likely to convert the system (Brownfield approach) even though the system is with Classic GL. The Greenfield approach takes longer. Often, the cost and effort of Greenfield is twice or three times as high as Brownfield's as we need to build the system with relevant business processes and custom code. So customers can convert either directly from classic G/L to SAP S/4HANA or first migrate from classic G/L to new G/L and from there to SAP S/4HANA. Keep in mind this is a complete system conversion and not just an upgrade and you need very meticulous testing during System conversion.
Many factors can affect the length of a conversion project. Customers must be supported quickly in every aspect. The experiences of project members and consultants will help conversion activity to run smoothly. The quality of data and size of the system make a lot of meaning for complexity. A few customers consider cheap and best policy without considering the experience of the consultants. It leads to a lot of trouble during and after system conversion. The system loses optimization capability if the conversion happens without considering the important conversion prerequisites.