Notes Series : Order to Cash And Simple Finance

Finance Basics:

Basic Accounting:

Accounting is the economic information meant for informed judgement

Basic equation

Asset = Liability +Equity +Revenue -Expenditure -Dividend

Where Asset->generates future revenue Liability ->Obligations Equity->Owner’s claim Revenue->Increase in ownership claim Expenditure->Decrease in ownership claim

Debit Entry (Left hand side)->Increase in Asset/Expense Or Decrease in liability/equity

Credit Entry(Right hand side)->Increase in liability/Equity Or Decrease in Asset/Expense

General rule of debit & credit (No logic behind)

A	=	L	E
Dr(+)        Cr(-)		Dr(-)        Cr(+)	Dr(-)        Cr(+)

Examples:

Sale for cash: Cash(Dr)|Revenue(Cr)

Sale on credit: Account Receivable(Dr)|Revenue(Cr)

Balance sheet  :  financial position on a certain date (Liability & Equity)

P&L : Income statement for a particular period(Revenue & Expense)

Financial Accounting is meant for people out side the organization to evaluate.

Management Accounting is meant for management for investment decisions.

Retained Earnings: Undisputed profit excluding owner’s capital

Cash Flow : Operating activities, Investing activities, Financing activities

Account Receivables : Amount due from customers

Account Payable: Amount owed to vendors

Order to cash process: Finance perspective

1.       Sales Team coordinates with customer to finalize a deal.

(Sales enquiry by customer(VA11), legally binding offer-sales quotation(VA21),Formal request to vendor-Purchase order(ME21),Order issued to customer-Sales order(VA01))

Sales order creation-Material check(not available->MM, Available->PP), tables VBAK, VBAP

2.       Out Bound delivery(VL01N) Tables LIKP, LIPS

a.       Picking from company ware house

b.       Packing in container

c.       Loading for transport, ready for delivery

d.       Logistics for shipment

3.       Dispatch Goods (move out of company premise)

a.       Physical inventory reduced

b.       Inventory credited and COGS debited

4.       Bill sent to customers (VBRK, VBRP)

a.       Finance department records sales & increases accounts receivables

Billing document(VBRK,VBRP)VF01	Invoice Document(BKPF,BSEG) VF21
Created with reference to delivery document. It’s a sales document not a account document It’s the document which requests for payment for the goods supplied	When billing document is released automatically an accounting document gets created. It’s a commercial document with details like product, quantity , agreed price etc.

5.       After customer makes payment

a.       Finance department reduces account payable, increase in bank balance

b.       No payment received->Dunning & write-off

Simple Finance

Earlier accounting transactions were getting stored in different finance tables. Therefore reconciliation needed for all components. One must check 2 set of records to check if transaction is correct or not. Reporting used to be difficult.

GL reconciliation from following 4 groups

Balance Sheet                                                                                                        Profit & Loss

Asset Accounting		Controlling
	G/L Accounting
Material Ledger		Profitability

1.       GL Accounting Master data used to gets stored in SKA1 & SKB1.

2.       GL Accounting transaction data gets stored in BSIS & BSAS

3.       Account receivable information stored in BSIS & BSAD

4.       Account payable information stored in BSIK & BSAK

All these data linked to Accounting tables BKPF & BSEG through document number , year etc.

Submodules include

1.       G/L Acc

2.       Account Receivables

3.       Account Payables

4.       Asset Accounting

5.       Management Accounting

6.       Cash management

7.       Integrated business planning

With SFIN, there is emergence of Universal journal entry with one line item in table with full details of all components. No reconciliation needed as data stored only once. Only one document number for related components.

Universal Journal (ACDOCA)
G/L	Asset Accounting	Material Ledger	Controlling	COPA

Index tables such as BSAD, BSID, BSIK, BSAK, BSIS, BSAS removed and changed to views for support.

Aggregate tables removed.

GAAP standard 23 character currency field support & 6 digit document line item support.

Journal entry header exists in BKPF and item in ACDOCA for new transactions and in BSEG for old transactions.

Modules include:

1.       Universal journal

2.       Central finance

3.       New Asset accounting

4.       Cash management

5.       Controlling & Profitability Analysis COPA

6.       IBPF for finance

 (Similarly with new S4HANA paradigm the usual customer and Vendor creation tcodes(XK01 & XD01) are redirected to transaction for business partner (BP). New MATDOC table which holds data from around 26 tables. MATNR length changed from 18 to 40)