Issue

In Syensqo's current ECC systems, many companies are created as company codes in the system irrespective of whether the company code is fully operational or not. This added to the complexity of configuring and maintaining the system for IT resources with additional month-end/year-end activities performed by business users which may have lead to inefficient use of resources across the organization.

Recommendation

Based on the analysis performed, it is recommended to go with 'Option B: Create Company for all the entities and company code only for the operational entities'. This will keep the core SAP system cleaner and allows the teams involved in the period-end process to focus on core entities and value-creating activities throughout and especially towards the end of each financial period. For entities out-of-scope from S/4 HANA, direct uploads of the required Financial data into the consolidation systems will be the direction with a streamlined, intuitive and optimized process to realize further time-savings at period-end. Efforts will also be made to prevent the creation of reporting entities in the operational S/4 HANA system wherever technically possible. 

Company codes and companies will be set up such that there is sufficient room to grow for Syensqo as a dynamic organization operating in a rapidly changing business environment. Companies can also be converted easily from non-operational entities into operational entities in the future without a need for re-numberings while still retaining their identification as former out-of-scope entity which may be required for historic reporting. At the same time, the immediate setup of each entity as a 'Company' in S/4 HANA paves the way for future consolidated, single-system group reporting out of the new consolidation system introduced as part of the transformation program.

Background & Context

A company is a structure within S/4 HANA used to facilitate legal and management consolidation within the consolidations system. In SAP source systems, it is also used to differentiate intercompany transactions from external transactions with the aim of facilitating typical month-end consolidation activities such as I/C eliminations. 

A company code is an organizational unit used in Financial Accounting representing a reporting entity at which fully compliant and complete Financial Statements can be generated out of the system.

In Syensqo's current ECC systems, many companies are created as company codes in the system irrespective of whether the company code is operational or not.  The presence of non-operational company codes adds unnecessary layers of design and configurations to financial processes, complicating the overall system management and potentially leading to business inefficiencies during critical financial reporting periods such as period-ends.

Furthermore, technical entities such as reporting entities exist in the current ECC systems which is not in line with SAP's best practice recommendation to keep the company codes in the operational SAP system aligned with the legal entity structure of the organization. 

No clear governance rules are currently documented on company code and company setup in the existing ECC systems.

Assumptions

• New consolidation system deployed as part of transformation program provides ability for direct Financial data uploads from non-SAP systems into the consolidation engine.
• Current non-SAP ERP systems remain in place for managing day-to-day Financial operations in less complex entities.

Constraints

• None identified at the time of writing.

Impacts

The following impacts are expected:

• Data Conversion and Migration: Data from the As-Is systems need to be mapped based on the proposed to-be company code structure and logics.
• Integrated Systems (Upstream/Downstream): There will be an impact on all integrated systems and applications that use the company code for identification purposes. There needs to be a one-time remediation or mapping exercise undertaken to identify all impacted systems and respective mitigation strategies need to be worked out during detailed design.

Business Rules

Please refer to the Business Rules in the below section.

Options considered

The following two options were considered:

Option A:  Create Company and Company Code for all entities in S/4 HANA as per as-is practice

As a part of this option the company and company code is created for all the entities that are in scope for consolidation in S/4 HANA.

Option B: Create Company for all the entities and Company code only for selected entities

As part of this option, company codes in S/4 HANA are created based on the governance and business rules shown in the below matrix table:

Evaluation

Outline why you selected a position. The best format could be a pro/con table (sample below), but is up to you as the author. You must consider complexity, feasibility, cost/effort to implement, but also ongoing operational impact and cost. You must consider the program principles and explain any deviations in detail. This is probably as important as the decision itself.

	Option A: Follow the As-Is Structure i.e. Create company and company code for all the entities	Option B: Create Company for all the entities and company code only for the operational entities
System Complexity	Con: System configuration is complex. Any new entity even non-operational will have to configured as a company code.	Pro: Cleaner system as only the operational entities are in the system
Period end closure	Con: Multiple entities are considered in the PEC activities though not required	Pro: Only the required entities are considered for PEC
Future compatibility	Con: Once the company code is created and needs to be converted into an operational entity, the company code attributes ex: currency etc.. cannot be changed once any transaction is posted	Pro: The company code will be created as an operational entity only when required and therefore the attributes also can be configured at that point in time

See also

Insert links and references to other documents which are relevant when trying to understand this decision and its implications. Other decisions are often impacted, so it's good to list them here with links. Attachments are also possible but dangerous as they are static documents and not updated by their authors.

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