Managing your organization’s finances and payments can be a complicated process. To assist this process, SAP has central finance implementation that allows customers to make use of centralized payments. ASUG recently sat down with Marcelo Trein, a support engineer at the SAP Center of Expertise and the author of a new e-bite from SAP Press called “Introducing Central Payments with Central Finance and SAP S/4HANA.” He talked about how customers can make use of this implementation and how they can streamline their financial systems in SAP S/4HANA.

ASUG: Tell us a little bit about your background and how it prepared you to write this e-bite.

Marcelo: I started my professional life as a developer and worked with several different technologies. The first time I was introduced to the SAP world was in a project where they were moving one of our applications that we developed to an SAP custom module called IS-OIL. That was about 15 years ago. Apart from that project, I did not touch anything SAP-wise until I got hired by SAP to work in the financial modules in SAP Labs, Latin America.

Then that's when I became a full-time SAP financials guy. I started working in the treasury components for SAP, helping customers with product support. Customers would come to me with a problem that they would have in their treasury component. I would go into their system, go through the documentation, and try to help them as much as possible. I ended up writing a few code correction notes as well when I was working there. During this time, I started studying SAP Central Finance on my own. I saw this opportunity for a fellowship with a different team, which worked with SAP Central Finance, so I applied for this fellowship and got selected. That's my current team now.

During one of my projects, I started learning about central payments. That's how I started getting experience with central payments: I asked my manager to put me on more central payment projects. Then I saw that there was not a lot of documentation around for central payments. It was still rather new, so I decided to start building my own small library. Whenever I found something like a blog or some information about central payments—or even when I faced some issue during some projects—I would note it down and document it. I was looking at the SAP Central Finance book by SAP Press the other day. I saw that there was not a lot in regard to central payments. Through a connection with one of my friends who is an SAP author, I was able to connect with SAP Press and present them with the skeleton of the e-bite, which they liked.

ASUG: Why do you think this e-bite is so vital for SAP customers right now in the middle of the current business climate?

Marcelo: Central payments are the next natural step from SAP Central Finance. In SAP Central Finance, we have customers usually implementing the solution as a stepping stone towards SAP S/4HANA, where you have all your source systems replicate financial documents into a single centralized finance system. Central payments would be the next steps where you take all your payment processes into that centralized system. More and more customers are moving towards central payments. There are a lot of projects going on. This e-bite is very, very useful for consultants and professionals who are implementing—or are starting or planning on implementing—central payments. This e-bite gives them an introduction to central payments, how it changes, the processes it touches, and what is needed to start preparing to implement.

ASUG: In layman's terms, what are central payments? How are they vital to a business? What solutions are available to SAP customers?

Marcelo: Central payments is paying everything. All the payment processes of your company are carried out in a single centralized instance. Say you have different systems in different countries. For example, you have systems in North America, South America, and Europe. When you move to central payments, all the distributed payment processes that you have in these systems become centralized in your SAP Central Finance instance. There's only one solution in regard to central payments available to SAP customers right now. That's in the SAP Central Finance system.

ASUG: Can you tell us a little bit about open items? What's the main difference when it comes to handling and managing open items and historic open items?

Marcelo: An open item is an item that needs to be paid. It's an accounts receivable. Say you invoice someone for $100. That is an open item until they pay it, and you clear it. If you have a standard SAP Central Finance implementation, you will have all the open item processes handled exactly where they are paid. In the example that I gave earlier about having systems all around the globe, you have the payment processes there. All the open items are cleared and in the source systems when they are paid. When we move towards central payments, we need to move all the processes that touch open items to the SAP Central Finance instance.

That's how open items would get managed from the time that you turn on central payments, onwards. Historical open items are the open items that exist before the activation of central payments. It is very common for companies to have open items that date back 20 years, sometimes more. Those open items get transferred to SAP Central Finance, and they are handled there. Usually what happens in the source systems is that we set them to technically cleared status. This means they will appear as if they were cleared in the source system, but the real clearing status of these items will be handled in the SAP Central Finance instance itself.

And central payments also brings Cross-System Process Control, which is a framework to make sure that, for example, if you modify a cleared open item in source, the system will tell you if that item can be modified or not because of this framework. This ensures that you don't have a difference in status between the item in the source system and the item in the SAP Central Finance system.

ASUG: In what ways are an organization’s core financial processes impacted by its leveraging of central payment functionalities in SAP S/4HANA? How are these processes simplified or expedited?

Marcelo: Virtually, all the documents where we have open items and all the documents that need to be paid, they are touched by the activation of central payments. They are moved to the SAP Central Finance system. The way that these processes are changed, there are many benefits. For instance, you can have all your reporting done in a single instance. You have one source of truth. You don't need to report for every source system anymore because all the information will be available in the SAP S/4HANA system. You have centralized open item management.

There is also a cross-system view of customer and vendor accounts. You can have a reduced cost in, for example, bank connections. This means you’ll need fewer bank connections because you will only have your SAP Central Finance instance connected to those banks, instead of several different instances connected to the same bank. You will have all the processes for accounts receivable such as centralized credit exposure, collections, dispute management, cash application. They will all be there in the same system.

ASUG: Can you lay out how financial supply chain management is affected by central payment solutions and SAP S/4HANA? Why is it so important for companies, given the current business climate?

Marcelo: With SAP Financial Supply Chain Management, you usually have distributed systems where you can carry those processes out from whatever system that they're installed in. They communicate across different systems. But when you go to central payments because you will have all the real payment information in a single instance, there are some exceptions, but you usually have to move those SAP Financial Supply Chain Management processes to the SAP Central Finance system itself. And all the information related to those processes will be there. So, potentially, you will have those processes working. Rather, you will have all those processes in the same system itself.

ASUG: Can you give us an overview of how these functionalities assist organizations as they go about handling their taxes?

Marcelo: Once you turn on central payments, you will start paying out of the SAP Central Finance system only. So, there is certain information in financial documents that impact tax. This information is only available in the SAP Central Finance system. You have to start doing centralized tax reporting out of the SAP Central Finance system. There are a lot of prerequisite steps that come with centralized tax reporting. For example, there are extended tax checks that need to be turned on in the SAP Central Finance system that make sure that the information in the SAP Central Finance system is, tax-wise, accurate, and it can be reported to the authorities safely at the end of your tax year. That's how the tax-related process is moved when you turn on central payments.

They're done in a single instance and a single system. That would be one advantage, but basically, you have to move the reporting to the SAP Central Finance system. There is also one important point to take into account in regards to tax. For example, in the U.S., Canada, and Mexico, we sometimes have an external tax calculation engine such as Vertex and Sabrix. Currently, SAP Central Finance has a limitation where you need to have the same external calculation engine in the central finance system that you have in the source system.

There are some limitations regarding, for example, customers that have two separate source systems with different external engines in each one of those systems. That's a problem because, as of now, SAP Central Finance doesn't support more than one tax engine. So, if some customers face that issue, then they need to head for some custom solution, and custom tax reporting may become necessary at the end.

ASUG: What should customers keep in mind when they go about activating central payment functionalities? What are some of the common mistakes that people often make, and how can they go about avoiding those mistakes?

Marcelo: What I have seen is there are prerequisites and there are steps to activate. Some of these steps involve some other prerequisites. Sometimes those prerequisites get missed out, or the steps get switched around. Then they face a plethora of different issues that can happen. In my e-bite, I have put very high-level steps to be followed. But each one of those steps might have some other steps that need to be carried out as well. The main mistakes that I have seen are the prerequisites not being done properly, or some things not being taken into account when you think out your SAP Central Finance project and you don't think about the next step, which is central payment. If you haven't started your SAP Central Finance project yet, think about central payments in the future because, depending on what you will do with your project, it could impact central payments activation further down the line.

ASUG: What do you want readers to take away from your e-bite? When they’re all done and they’ve read it, what do you want them to be empowered to do?

Marcelo: I would like them to have a clear understanding of what central payments activation entails and what it brings them. I also want readers to have a rough idea of the effort that it would take and all the processes that it will change for the reader's company.

ASUG is continuing the supply chain conversation with its upcoming virtual event, ASUG Best Practices: SAP for Supply Chain. On May 11 and 12, hear from customers, experts, and thought leaders on how the last year has challenged and changed supply chains, and what technologies companies are using to bolster their supply chains.

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