SAP Runs BlackLine to Improve the Financial Close

Many organizations are leveraging modern technology, like SAP solutions, to enable strategic, data-driven decision-making. Yet even with the most sophisticated ERP technology, finance and accounting teams are often executing critical accounting activities manually outside of the ERP.

SAP Account Substantiation and Automation by BlackLine complements SAP S/4HANA and other SAP software as a part of an end-to-end offering for Finance and Accounting by addressing the traditional manual processes that are often performed in spreadsheets.

Expanding upon its existing partnership, serving over 1,300 joint customers with BlackLine, SAP’s Corporate Finance team is now running BlackLine to address some of its own accounting challenges. This article, originally published on SAP's blog, discusses the initial use case, the challenges SAP was facing, and expected benefits.

SAP’s Corporate Finance team focuses on improving efficiency and strengthening risk management in their financial close processes.

What motivated the SAP Corporate Finance team to consider SAP Account Substantiation and Automation by BlackLine as a part of their approach to improving the financial close?

With the introduction of the IFRS16 accounting standard, regulators required changes in existing accounting processes. For example, the SAP accounts payables team needs to ensure that incoming lease invoices match monthly liabilities through straight-line depreciation from the capitalization of the leased contract. However, due to internal IT process restrictions, the related accounts are not “open-item-managed,” making reconciliation difficult. This situation led to the following challenges:

Often the reconciliation needs to happen on an individual lease contract level. This complexity is a challenge given the base of around 35,000 contracts. The global accounts payable team is spread over three continents and is responsible for over 140 legal entities. The colleagues are in 10 different teams. Managing the process and all process changes might be challenging at times.

There are around 1.5 million transactions on the accounts, a volume that grows by an additional 20-40 thousand monthly transactions.

Optimization initiatives are always underway and focus on increasing efficiencies and reducing costs related to administrative processes. On the other hand, securing higher visibility and transparency in this compliance-related process was challenging. Visibility is required to enable everyone to be on track to produce complete, accurate and timely financials.

What is SAP Account Substantiation and Automation? It's a purpose-built SaaS application that automates and streamlines some of the most labor-intensive financial close processes. The solution addresses the risks associated with and time spent on traditionally manual month-end processes, including transaction matching, reconciliations and balance sheet substantiation, and journal entry capabilities.

Specifically, the transaction matching function highlights differences between any two data sets. In addition, the balance sheet substantiation and reconciliation function supports the completeness and accuracy of financial statement balances by preparing them for review and sign-offs by accountants. Finally, the journal entry processing function prepares financial postings, including validations and approvals, before posting to SAP S/4HANA.

In summary, SAP Account Substantiation and Automation eliminates or reduces routine, manual tasks while increasing visibility and standardization.

Given the specifics of the SAP use case, it was decided to use three modules together – matching, journal entry and accounts reconciliation - in a connected process. In addition, the cloud-based system is linked to SAP S/4HANA which is the source for the transactions, account balances and exchange rates. To illustrate the process, the team will start by matching, then use automated journal definitions for particular types of balances, and lastly, the team will work on account reconciliations.

Time savings: Highly reduced processing time with better control

With SAP Account Substantiation and Automation, teams can save time as the solution enables a more efficient close process. They can achieve operational excellence and reduce processing time without losing compliance control. It takes just minutes to process high volumes of transactions. The finance team can easily configure their personalized pass rules without involving any IT resources. This capability facilitates fast set-up time, enabling the team to immediately set up most of what is needed.

Accuracy: Advanced risk management minimizes errors

The solution eliminates spreadsheet errors, improving the quality and accuracy of the financial close. As a result, accountants can gain greater control over the complex, manual process while dramatically lowering this particular compliance risk associated with the financial close. In addition, by ensuring balance sheet integrity, the team can be confident that the numbers are correct.

Better visibility with reduced cost

By standardizing and automating manual reconciliations, teams can eliminate those costly, tedious processes. At the same time, dashboards and reports provide an oversight of the activities in real-time. This higher visibility function will enable teams to reduce risk and close with control.

In conclusion, by utilizing this solution, the SAP team is expected to gain greater efficiency in their finance processes, reduce audit costs, and obtain better control and visibility – while dramatically lowering the risks associated with financial closing.