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Digital Finance as a concept is probably best explained by paraphrasing a famous quote from E.B White:

“Explaining Digital Finance is like dissecting a frog. You understand it better, but the frog dies in the process.”

The case for Digital Finance is compelling, given the benefits of enabling effective, data-driven decision making that originate from the finance function. The case is further strengthened, given the range of technological advances in recent times. That said, digital finance initiatives often ‘die during dissection,’ normally culled by the enormity of the task, the lack of case studies and best practices, and perhaps more significantly, the disparity of solutions used across the Finance function. It is the latter point that often sounds the death knell for digital finance initiatives, and so, it is useful to understand its origins.

The History

Integrated Reporting-Digital Finance

1970 - 1990

ERP applications to record accounting transactions
Focused on capturing transactional data to reflect the economic condition of the organization
Expanded from accounting to supply chain & manufacturing
Deficiencies became evident with insufficient functionality to meet the demands of the enterprise

1990 - 2000

Emergence of EPM to cater for reporting expansion & GAAP
Focus on improving planning and forecasting processes
EPM expansion to cover business challenges like strategic planning, trade promotion & transfer pricing, profitability and KPI reporting

2000 - 2010

ERP & EPM solutions operating as silos with variable levels of integration
Widening chasm between ERP & EPM offerings

The gulf between EPM offerings and ERP continued to widen, unabated by the difficulties faced by an evolving Office of the CFO, which was swiftly moving from a support function to a business partner that needed to be more responsive to business challenges.

Key Challenges

The key challenges of the ERP – EPM chasm may be summarised as follows:

Integrated Reporting-Digital Finance Data: Accuracy and Synchronicity
Historical data in multiple systems and spreadsheets
Critical hierarchies & dimensions in disparate systems
Integrated Reporting-Digital Finance Process: Efficiency and Standardisation
Limited integration with source systems
Divergence of governance & standardisation within the Office of the CFO
Integrated Reporting-Digital Finance Execution: Usability and Adaptability
Finance reluctant to move from legacy and lose ownership of reporting solutions (Infor, BPC, Hyperion, Cognos)
Too much reliance on IT for data integration processes

The need for evolution seemed secondary to the preference for familiar technology that Finance could operate independently (read Microsoft Excel). This requirement to ‘keep things as they are’ led to an unhealthy reliance on legacy solutions that were well entrenched and fiercely protected by finance stakeholders, leading to solutions that are older than most finance professionals who use them.

There are numerous issues with legacy finance solutions, and I don’t propose to bore you with listing them out here. Nevertheless, there are key issues stemming from the ERP-EPM chasm that should be highlighted:

  • Limited audit trail from source data to published results posing an audit risk
  • Process of collating and consolidating information can be difficult, with complex data cleansing or mapping processes preventing a clear path from source to reported data
  • Un-harmonised, disparate data requiring manual intervention before consolidation
  • Challenges in alignment between group reporting and local reporting
  • Inability to amend reporting systems swiftly to keep up with business change

Redefining the role of Finance: Digital Finance

The evolution of the finance function has resulted in the need for simplification and seamless interoperation between ERP & EPM. The evolution has given rise to a new definition, commonly known as Digital Finance:

Integrated Reporting-Digital Finance

The highlighted text summarises the key components that are fundamental to any digital finance initiative; Automation, Speed, Transparency, and Innovation.

What does Digital Finance look like?

This is difficult to define, as the term Digital Finance may apply to all or any of the processes involved in the record to report process. I have elected to focus on Enterprise Performance Management, with emphasis on a platform that encompasses the full breadth of planning, consolidation & reporting. Digital Finance would dictate that the separate reporting processes should be modelled from a common source and intrinsically linked, bringing the disparate processes of month-end close, consolidation, and planning closer together. Data integration should be assured using shared master and transactional data, thus minimising data replication.

If we were to focus on Financial Reporting, our expectations for a Digital Finance-enabled solution should include the following:

  • Real-time reporting on transactional data
  • Ability to drill through from consolidated statements directly to core transactions
  • Ability to conduct month-end activities at any time during the month
  • Improved posting and reporting accuracy
  • Fully auditable from recorded transaction to reported value
  • Shortened month, quarter, and year-end reporting cycles
  • Deployed on a fully integrated finance framework, removing the final layers of replication

The requirements above can be achieved using SAP S/4HANA Group Reporting.

S/4HANA Group Reporting

What is it?

  • S/4 HANA Group Reporting is the latest consolidation application from SAP, incorporating the best from BCS, BPC, and FC
  • SAP S/4HANA Group Reporting can execute local and group closing processes in the same unified environment
  • Ability to consolidate data from SAP and non-SAP source systems
  • Provides alignment the close and disclosure functions with transactional processing
  • Available in the Cloud and on-premise
  • SAP recommended consolidation product

Integrated Reporting-Digital Finance

Why should you consider it?

  • Embedded within S/4 HANA
  • Shared master data, central validation rules improve data quality
  • Postings can be checked continuously against central validation rules
  • Drill through to transactions, source adjustments available in consolidation tool
  • Accelerated delivery with a starter kit and preconfigured rules
  • Improved user experience, Fiori apps and in-built collaboration within the reporting process

Integrated Reporting-Digital Finance

I’m not ready for S/4?

  • Customers may not be ready to implement S/4 HANA but may like to take advantage of the functionality available for reporting or consolidation purposes
  • Central Finance and Group Reporting enable the harmonization of data in one landscape with the availability of real-time data
  • Central Finance can integrate single or multiple ECC instances and leverage the power of S/4 HANA
  • Central Finance can also be used to harmonise disparate data from various sources using a combination of Master Data Creation and Mapping
  • Users will benefit from the embedded analytics in Central Finance and will be able to leverage Fiori for reporting
  • Users will benefit from transparency into data via drill-through

Integrated Reporting-Digital Finance

Things to think about

  • Analyse your current state to determine complexities and the scope of replacement
  • Analyse your digital strategy, in terms of investment in S/4 HANA
  • Group Reporting is a relatively new tool and you should focus on the product roadmap to understand how you might be impacted by future product innovation
  • Analyse the impact of a fully integrated financial reporting solution on the processes – are you ready for the change?


It is imperative that any Digital Finance initiative starts with an exploratory and discovery phase that helps clients understand the options available to them. It also allows advisors to understand the current challenges as well as the aspirations of the Finance function. The exploratory phase should be an open forum for discussion and challenge, culminating with a business case and plan of action for enabling Digital Finance for senior stakeholders to review and action.

Good luck with your adventures in the Digital world!


About the Author

Raj Thapar
Program Director

The overriding theme of Raj’s career has been helping clients overcome reporting, consolidation and budgeting complexities using effective EPM solutions. As a result, they can accurately report and analyse data and make more informed business decisions. He is a qualified accountant, with over 20 years of experience in the EPM market. Raj has led engagements for clients such as Reckitt Benckiser, AIA Group, Tata Global Beverages, ACE Insurance Europe, Sumitomo Corporation and Old Mutual Plc, focusing on Finance Transformation, Record to Report and Integrated Business Planning.

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