Predictive Accounting: Overview and Configuration Steps

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Predictive Accounting
Babatunde Michael Oladunmoye

Babatunde Michael Oladunmoye

Predictive accounting is a recent functionality introduced on SAP S/4HANA. It enables financial accountants to take data from areas outside of the finance function such as sales, SAP Concur or other external systems, for use in projecting the impact of future expected income or revenues on their financial reports at the end of every period. Currently, SAP S/4HANA can pass predictive accounting journal entries for the following processes: 

  • Sales Processes in which sales orders are used as the source document and  
  • Travel and Expense Management, in which travel requests are used as the source document. 

   

Predictive accounting functionality is made possible by extension ledger functionality in SAP S/4HANA. A special extension ledger called the prediction ledger is created on the system with an underlying ledger assigned. When sales orders or travel requests from the above processes are executed, predictive journal entries are passed into the prediction ledger. As follow-on processes are carried out with actual entries in the underlying ledger, the prediction ledger is updated via reductions or reversals to the amounts initially posted.   

 

A combination of the entries in the prediction ledger and the underlying ledger enables the reporting features of predictive accounting to be realized with the possibility of forecasting future revenues. Via the flexibility provided by the Universal Journal on SAP S/4HANA, it is possible to either view reports at a high level, like in the financial statement or drill down to a line-item level to view the individual journal entries.  

Advantages of Predictive Accounting  

Some of the advantages of the predictive accounting functionality on SAP S/4HANA are listed below:  

  • Provision of proactive insights into future financial performance via the prediction of revenue, expenses and cash flow based on real-time data.  
  • It enhances data-driven decision-making for management by basing decisions on reliable data derived from reliable revenue and expense forecasts instead of dependence on historical data.  
  • Overall, the organization benefits from increased efficiency and agility, leading to a faster sales closing process and improved collaboration between the finance, sales and other teams via the sharing of predictive insights.  
  • Simulation of different business scenarios and their potential outcome can be carried out using the provided predictive data.  
  • Businesses will be able to improve resource allocation based on needs and priorities, leading to the avoidance of unnecessary expenditures and optimization of scarce resources.  
  • Increased visibility and transparency to financial results and performance.  
  • Enables a deeper understanding of the major drivers behind expected results by identifying trends.  

Configuration Steps for Predictive Accounting  

The first step is the creation of an extension ledger for Predictive Accounting. It is recommended that the underlying ledger should be the leading ledger for accurate updates of actual data from the leading ledger to the underlying ledger. Also, ensure that the accounting principle is the same as that of the leading ledger.   

Path: SPRO-Financial Accounting-Financial Accounting Global Settings-Ledgers-Ledger-Define Settings for Ledger and Currency Types 

Next, assign your company Code to your Predictive Ledger. 

Define a ledger group for the predictive ledger.  

Path: SPRO-Financial Accounting-Financial Accounting Global Settings-Ledgers-Ledger-Define Ledger Group 

Maintain the ledger for predictive Accounting.  

 

Path: SPRO-Financial Accounting-Predictive Accounting-Check Prediction Ledger  

 

Activate Predictive Accounting  

Activate Predictive Accounting for Sales Processes by selecting “Active with date of entry. 

 

Path: SPRO-Financial Accounting-Predictive Accounting-Activate Predictive Accounting. 

 

The billing types should also be maintained in table FINSV_PRED_FKART via SM30.  

Maintain SD item categories for Predictive Accounting. 

Path: SPRO-Financial Accounting-Predictive Accounting-Activate Predictive Accounting for Sales Order Item Categories.  

Map FSV to semantic tags.   

 

Path: SPRO-Financial Accounting – General Ledger Accounting – Master Data – G/L Accounts – Financial Statement Versions – Semantic Tags for Financial Statement Versions.   

The above step ensures that relevant Fiori apps (e.g. Monitor Predictive Accounting, Incoming Sales Orders) related to predictive accounting can display the generated report.  

Conclusion  

Predictive Accounting is a powerful feature of SAP S/4HANA that enables financial accountants to leverage data from various sources to forecast the impact of future events on their financial reports. By using the extension ledger and the prediction ledger, Predictive Accounting can create and update predictive journal entries based on sales orders and travel requests. This allows for more accurate and timely reporting of financial performance, as well as better decision-making and resource allocation.   

Predictive Accounting can be configured by following the steps outlined in this blog post, which include creating and assigning the prediction ledger, defining the ledger group, and activating the functionality for sales processes. Moreover, Predictive Accounting is a valuable tool for any organization that wants to gain a competitive edge in the market by harnessing the power of data and analytics.  

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