Did you know? What’s the essential component of business that keeps the businesses running, i.e., Finances? And it’s even more critical for businesses to keep track and manage their financial transactions in today’s digital world, where cyber-attacks are increasing every day. Research says 52% of ransomware attacks impact businesses’ systems and operations. This increases the risk for modern startups, SMEs, and enterprises.
Fortunately, there’s a robust solution for businesses to manage their financial transactions effectively. Introducing SAP Financial Accounting (known as SAP FI), the backbone of the SAP ERP system. It is a complete accounting module under which multiple sub-modules cater to all the financial requirements of business transactions, streamlining operations and accurate and real-time reporting.
What is SAP Financial Accounting?
SAP Financial Accounting (or SAP FI) is one of the main modules in the SAP ERP system. It helps organisations store and manage their financial data and transactions accurately to make data-driven decisions. Whether it’s accounting, tracking data, analysing financial transactions that happen between the company, vendors & customers, auditing, making in-depth reports on finances, or any financial operations that an organisation has, SAP Financial Accounting is a one-stop solution. It is mainly used to analyse the company’s financial position and manage external financial reporting with balance sheets, profit & loss statements, cash flow, company taxes and statutory reporting also called “Financial Statements”. It can easily integrate with other SAP modules, including SAP MM, SAP SD, SAP PP, SAP SCM etc.
Sub-Components of SAP Financial Accounting
Here are some sub-components or modules of SAP Financial Accounting:
- New General Ledger in SAP FI (New GL)
The SAP New General Ledger (New GL) streamlines the accounting process by removing the necessity to keep multiple ledgers. It provides robust support for both financial and managerial accounting within a single application.
New GL enhances financial accounting and reporting by enabling rules-based, real-time allocations across various business units. Additionally, it automates the reconciliation of journal entries between different units.
In contrast to traditional (classic) GL solutions, which require reconciling data from multiple applications to fulfill enterprise-wide reporting needs, New GL offers a more integrated and efficient approach.
- Accounts Payable (SAP FI-AP)
SAP Accounts Payable (FI-AP) manages and records all accounting data for your vendors. As a key component of the purchasing system, it automatically generates postings in response to operational transactions.
Additionally, it provides the Cash Management application with invoice data, aiding in efficient liquidity planning.
SAP FI-AP includes a built-in payment program that facilitates the processing of payments. The postings made in FI-AP are also recorded in various General Ledger (G/L) accounts, depending on the specific transaction.
- Accounts Receivable (SAP FI-AR)
Similar to FI-AP, SAP Accounts Receivable (FI-AR) manages and records accounting data for all your customers and is an essential part of sales management. All postings in FI-AR are directly recorded in the General Ledger (GL).
SAP FI-AR includes various tools to monitor open items, including a dunning program to remind customers of their outstanding payables.
Additionally, it provides critical data for effective credit management and liquidity planning, integrating seamlessly with the cash management module.
- FI-BL (Bank Accounting in SAP FI)
Bank Accounting in SAP FI (FI-BL) facilitates the management of bank master data and cash balances, in addition to handling both incoming and outgoing payments. It allows for the customisation of country-specific attributes, including:
- Specifications for manual and electronic payment methods
- Various payment forms, and more
- Asset Accounting in SAP FI (FI-AA)
FI-AA (Asset Accounting in SAP FI) serves as a subsidiary ledger to the General Ledger (G/L), designed to manage your company’s fixed assets within the SAP Finance system. It is versatile and can be used in any country, regardless of industry type.
Moreover, FI-AA is integrated with other application areas and facilitates data transfer to and from various SAP components. This integration allows for the direct posting of depreciation and interest to the FI and CO modules.
Benefits of Using SAP Financial Accounting
At the heart of every thriving industry lies finance, a vital component that demands skilful management for optimal efficiency. Here are some common benefits of using SAP Finance Accounting:
- Enhances security measures
- Decreases time required for recording company’s transactions
- Increases accuracy in financial reporting
- Help organisations make data-driven decisions
- Increase the ability to manage all accounts and data automatically
- Increase teamwork credibility
- Accelerate the product development process
Key Features of SAP Financial Accounting
SAP System has all the necessary features to help organisations manage their finances effectively. Here are some key features of SAP Financial Accounting:
- Organisation’s financial data can be easily accessible in real-time with SAP FI
- SAP FI can record all business transactions, from financial statements to individual documents, with an unbroken audit trail
- All the transactions processed in logistics are posted to financial accounting to ensure the value of goods and services is reflected in accounting with the help of automatic account determination.
- SAP Financial Accounting prepares operational information for organisations to help them make data-driven decisions
- SAP Financial Accounting made posting in sub-ledger accounts that also generate posting in a corresponding G/L account
Where Do We Use SAP FI?
There are so many areas where organisations can use SAP Financial Accounting (SAP FI).
Here are some common areas to use:
- Cash journal
- Inventory
- Tax accounting
- General ledger
- Parallel valuations
- Fast close functions
- Master data governance
- Financial statements
- Accounts receivable and payable
- Fixed asset
- Accrual
Wrapping Up!
Overall, SAP Financial Accounting is one of the important modules that help businesses store and manage their financial database efficiently and provide insightful information to make data-driven decisions. And that leads to the success of businesses. We hope this guide helps you understand the importance of SAP FI, its sub-modules, and how it can help organisations in accounting.
