Starting from S/4 Cloud 1908 and OP 1909, a new intercompany reconciliation solution was introduced, which is named Intercompany Matching & Reconciliation(ICMR). It provides both transaction level matching and aggregated level reconciliation in a real-time fashion. By leveraging HANA in-memory, it can process large volumes of data in an instant. Its flexibility and workflow-enabled auto-adjustment will make you re-think how you do intercompany activities.
What is Intercompany Reconciliation?
Entities under a group may have business transactions with each other. To prepare the group level financial reports, those intercompany transactions must be reconciled and eliminated to avoid overstate consolidated result. For example, entity A records a receivable from entity B, then entity B should records a payable to entity A. If everything works fine and in time, the amounts of the receivable and payable can be safely eliminated during consolidation. However, in reality, things may not be always smooth. Sometimes, entity B just forgot to record the payable. Thus we need first do intercompany reconciliation to find out the discrepancies, and if possible, resolve them. This always means lots of tedious manual work.
Intercompany Reconciliation in SAP ERP
If you are SAP ERP customers, you may know there is a built-in intercompany reconciliation functionality(ICR). With ERP ICR, one can do G/L open items reconciliation(process 001), G/L account reconciliation(process 002), and Customer/vendor open items reconciliation(process 003). It is designed for use in Financial Accounting, and can select documents across SAP systems. However, once discrepancies are identified, accountants need to figure out the reasons and solutions manually.
Why We Need a New ICR in SAP S/4HANA?
Within SAP S/4HANA, the universal journal table(ACDOCA) is introduced. It is not just simplifying the financial tables, but also providing more possibilities that we haven't achieved before. Among them, the most attractive one is Real-time analytics. Yes, ICMR supports real-time reconciliation on non-stop changing data sources. Meanwhile, it allows snapshot, meaning, when you want a stable data state, you just record a timestamp. Data is like a flow and is continuous. You don't have to wait until the period close to see the reconciliation balances, you check them anytime.
When you find out the big differences at aggregated level, you want to know more in detail. You then drill-through to document line item level. You can check the unassigned items from both parties, as well as those automatically assigned by matching rules. Document line items which belong to the same business transaction are grouped under an assignment number. The amazing part is you can attach workflow and auto-adjustment logic to an assignment so that discrepancies can be automatically resolved in an controllable and traceable way.
Not to mention some small but useful features, like fuzzy search, sending emails, changing layouts etc, The most noticeable feature of ICMR is that it provides a very flexible and powerful matching engine. It allows business users to freely define matching rules and run matching in an instant. You can use multiple fields with various functions to compose your matching expressions. One more thing, you can assign a reason code to do auto-adjustments for items that hit the rule.
Architecture of ICMR
ICMR is an out-of-box solution that is built-in SAP S/4HANA(core). There is no additional license required. Just follow the quick-start steps (Cloud / OP) and you can experience by yourselves. The overall architecture is not complicated as you may find from the diagram below.
It contains 2 modules: Matching Engine and Reconciliation. The latter is built upon the former. The Matching Engine is designed for generic, that is to say, it is not boundary to financial use. Actually, you can define your own data sources on any tables/views. Just image you have a powerful "vlookup" function which can help you to match huge volumes of data in instant. And its auto-adjustment capability can form a closed-loop that helps to improve your data quality.
You may already notice that ICMR requires the data in SAP S/4HANA. That's true. ICMR expects that a large portion of your companies' data is already in SAP S/4HANA. This can be achieved either by Central Finance for real-time document replication, or by setting up your companies' accounting directly in SAP S/4HANA. This is usually the most appealed setup in SAP S/4HANA. For the rest of companies outside SAP S/4HANA, ICMR provides file upload and API.
Unlike ERP ICR, ICMR doesn't provide remote access to satellite ERP systems. If you have a landscape with multiple ERP systems, and haven't planned to use Central Finance, then using SLT to real-time replicate documents to ICMR is also a good option. However, by its built-in nature, ICMR encourages you have SAP S/4HANA as the central accounting system. You don't need anymore central repositories for different purposes. It is always the tremendous replica through interfaces causing the high TCO. If technology permits, we should have one, and always one single source of truth.
For details on the diagram description, please read the online help page.
It is still ICMR's first release, and we are trying to make it more intelligent and automatic. Accompanied with machine learning, the matching engine can match items based on texts written in natural languages. You can also expect reasons and solutions will be inferred based on historic results.
We already delivered some standard contents covering accounting and consolidation. We will continuously improve the contents to support more use cases. And we also see a lot of areas that ICMR can extend its capabilities. For example, we can integrate with group reporting for elimination.
The list keeps on update.