Lesson 1 of 5
Record-to-report in context
7 min
Every business process in SAP S/4HANA eventually talks to finance. A goods receipt changes inventory value. A supplier invoice creates a payable. A billing document creates a receivable and revenue. An asset purchase creates a fixed asset. Record-to-report (R2R) is the process that receives all of those postings, adds finance's own entries, and turns the result into financial statements that management, auditors and regulators can rely on.
That makes R2R different from order-to-cash or procure-to-pay. Those processes start with a business event and end with a document. R2R starts with everyone else's documents and ends with a balance sheet and an income statement. If any upstream process posts badly, R2R inherits the problem.
- Procure-to-payGoods receipts, supplier invoices and payments post inventory, GR/IR and payables
- Order-to-cashGoods issues, billing documents and incoming payments post cost of sales, revenue and receivables
- Plan-to-produceProduction orders, confirmations and settlements post work in process and variances
- Acquire-to-retireAsset acquisitions, depreciation and retirements post fixed asset values
- Finance's own entriesAccruals, reclassifications, allocations, period-end adjustments
- Record-to-reportAll of it lands in the Universal Journal and becomes the financial statements
The sub-processes
| Sub-process | What it does | Typical owner at Contoso |
|---|---|---|
| General ledger accounting | Keeps the accounts, posts manual journal entries, runs period-end adjustments | General ledger accountant |
| Accounts payable | Records supplier invoices and credit memos, pays suppliers | AP accountant |
| Accounts receivable | Records customer invoices and payments, manages collections and disputes | AR accountant |
| Asset accounting | Records fixed assets, depreciation, transfers and retirements | Asset accountant |
| Bank and cash | Imports bank statements, clears payments, manages cash position | Treasury or cash accountant |
| Closing and reporting | Runs month-end and year-end tasks and produces statements | Controller with Dan, the finance process owner |
Record-to-report sub-processes and who usually runs them.
Subledgers and the general ledger
Three of those sub-processes keep detail by business partner or object: accounts payable by supplier, accounts receivable by customer, and asset accounting by asset. These are the subledgers. The general ledger keeps the accounts that make up the financial statements. Every subledger posting also updates the general ledger automatically, so the total of all supplier balances always equals the payables account. The next lesson shows the mechanism, called the reconciliation account.
In SAP S/4HANA, all these postings are stored in the Universal Journal, the single line-item table covered in the prerequisite course. A supplier invoice line carries the supplier number; an asset line carries the asset number; a revenue line carries the customer, product and profit center. There is one record of each posting, read by every finance report.
Closing in a nutshell
Closing is where record-to-report becomes visible to the rest of the company. Each month, finance makes sure everything that happened in the period is posted, adds what the other processes cannot know (accruals for services received but not yet invoiced, depreciation, allocations), checks that subledgers and the general ledger agree, closes the period so nothing more can be posted to it, and produces the statements. Year end adds carry-forward of balances into the new fiscal year and audit support.
- Last working daysCut-offLogistics posts all receipts, issues and billing for the period; AP posts invoices received.
- Workday 1Accruals and depreciationAccrue uninvoiced costs; run depreciation; post recurring entries.
- Workday 2Allocations and reconciliationsRun controlling allocations; check GR/IR, bank and intercompany balances.
- Workday 3Close the periodClose the posting period for normal postings; review the trial balance.
- Workday 4 to 5ReportProduce financial statements and management reporting; explain variances.
Because SAP S/4HANA keeps finance and controlling in one journal, some steps that used to take days in ECC, such as reconciling FI with CO, largely disappear. The work that remains is judgment: are accruals complete, are balances explainable, and do the numbers make sense?
What would you do?
A new AP clerk at Contoso asks why the general ledger accountant gets involved when a supplier invoice is posted to the wrong supplier. What is the best explanation?
- Record-to-report receives postings from every other process and produces the financial statements.
- Sub-processes: general ledger, AP, AR, asset accounting, bank and cash, closing and reporting.
- Subledgers keep detail by supplier, customer or asset; the general ledger keeps the statement accounts.
- In SAP S/4HANA all postings live once in the Universal Journal.
Check your understanding · not graded
Lesson check
1. What does record-to-report produce at the end?
2. Which is a subledger?
3. Which process posts revenue to finance?
4. Where are finance postings stored in SAP S/4HANA?