How to Ensure Accurate and Efficient Top-Sided Journal Entries in SAP BPC & S/4HANA

Many firms operate as a parent company (or holding company) with multiple subsidiaries. In such firms, there are adjustments made by the parent company on the accounting sheets of its subsidiaries during the preparation of the consolidated financial statements. This practice is referred to as top-sided journal entry and is allowed within the scope of the Generally Accepted Accounting Principles (GAAP). It is perfectly legitimate practice to allocate some of the parent company’s income or expense to its subsidiaries to accurately reflect business activity. However, it can also be used to improperly reduce liability accounts, increase revenue or decrease expenses. Typically, companies record them after the consolidation of journals or ledgers and right before preparing the financial statements. They are also not reflected in a company’s general ledgers and sub ledgers as those may happen after period end. If you are a CFO, you should be thinking about what controls you have in place to protect your firm from such risk.

Trintech is helping many firms enhance the controls and automate manual steps around posting top-sided journal entries in consolidation or disclosure management systems to reduce material risk of misstatements in financial reporting.

The below diagram depicts the typical flow that firms may use for posting top-sided journal entries:

1. Manually reconcile general ledger and sub-ledgers and post journal entries (JE) using custom inhouse tools throughout the posting period
2. Consolidate ledgers from subsidiaries into consolidation systems such as SAP® BPC or S/4HANA (comes with in-built consolidation system)
3. Get approval for creating top-sided journal entries via email or non-standard approval process from the leadership team; Post top-sided entries manually in the consolidation system bypassing the GL and SL
4. Create financial reports

As you can see, this manual approach not only increases the operational cost but also significantly increases the risk of material misstatements due to the lack of adequate controls with top-sided JE posting. Trintech can help streamline and automate this process, reducing material risk drastically.

Now, you may wonder why you should use Trintech when you have already made investments in an expensive ERP system, consolidation system, a multitude of 3^rd party tools and home-grown custom solutions within your ERP, SAP® ECC6 or have plans to move to S/4HANA. SAP® ECC6 and S/4HANA does a great job at what they were created for but do not provide the automation or controls over the top-sided JE posting to consolidation systems, such as SAP BPC or S/4HANA. There are numerous use cases which transcends the system/tools boundaries and that is where Trintech’s Cadency solution is purpose-built to bridge the gaps via its System of Accounting Intelligence. You can solve some of these challenges by developing custom integration, but most customizations are prohibitively expensive and do not provide future proofing (for example, as firms migrate to/from SAP® ECC6 or S/4HANA). With such approach, you scramble every time you are looking to accomplish a new use case. What your organization needs is to take a deeper look into a comprehensive System of Accounting Intelligence™ (SOAI) platform that includes:

• System of Integration – Leverage purpose-built ERP and JE connectors for major ERPs and APIs
• System of Controls – Automate key Record to Report processes including Reconciliation (Balance Sheet, Intercompany and High-Volume), Journal Entry, Close and Compliance processes that are designed to provide seamless workflow from one process to another
• System of Automation – Apply innovative Risk Intelligent RPA™, such as Dynamic Account Maintenance, Dynamic Approval Routing, etc., to your processes, as well as, a suite of ERP Bots which provide native automation within leading ERPs to provide journal entry automation and close task automation
• Financial Controls AI™ (FC-AI) – Use machine learning algorithms and artificial intelligence to examine trends in your data over time, identify abnormalities, and automate workflows based on the associated risk

The breadth and depth of offerings that Cadency provides is simply unmatched in the Record to Report space. With an extensive roadmap that is continually updated based on market feedback and internal R&D, and differentiated offerings such as a SAP-Certified Connector and ERP Bots, FC-AI (AI Risk Rating for JE), etc. our customers can rest assured that they can grow with Trintech as their business needs evolve over the years.

In the posting of journal entries to SAP® BPC or S/4HANA, Cadency provides a seamless and comprehensive solution by leveraging Cadency Journal Entry Process (System of Controls), Cadency JE Connector (System of Integration) and ERP Bots (System of Automation) to enhance controls and reduce manual steps. With Cadency, customers can:

1. Use Cadency ERP connector to import GL and SL data into Cadency and reconcile them
2. Use Cadency JE Process with ERP Connectors and Bots to post real-time journal entries in your ERP with built-in validation, tax calculation, etc.
3. Consolidate all the journal and ledgers in a consolidation system such as SAP® BPC or S/4HANA.
4. Use Cadency JE process with ERP Connectors and Bots to post top-sided JE to SAP BPC or S/4HANA. This provides the desired controls, auditability and traceability reducing the risk of any irregularities.
5. Load consolidated data in Cadency using ERP Connector for auto-reconciliation
6. Post JE corresponding to top-sided entries made in step 4

This is what it looks like after implementing Cadency:

Adopting the above process would lead to material reduction in financial reporting risks and enhances traceability and auditability. Now Imagine this for hundreds of other scenarios. For more information on how Cadency can transform your Office of Finance, contact us.