2015 SAP Financials Conference - Meet HPC America

We're pleased to announce that HPC America will exhibit at the SAP Financials conference in Las Vegas, from March 17-19, 2015.

During this event. we'll give live demonstrations of our cost adjustment solution for SAP, the HPC Journal Entry Transfer Solution (JETS), which enables any company running SAP Financials to correct mischarged orders, cost centers, and other cost objects directly within the ERP. HPC JETS increases the data integrity of cost adjustments, and eliminates reliance on lump-sum journal entries and Excel-based solutions outside the SAP book of record. Watch a video demo of JETS.

For any utility companies attending 2015 SAP Financials conference, we'll also be available to discuss modern utility finance configuration and regulatory accounting best practices. Bring your SAP FERC and FICO questions, and we'll give you our take on how to address any challenges or opportunities you're currently facing. Learn more about HPC's FERC accounting expertise.

Contact us to get a $200 discount code for the conference registration.

Five SAP FICO/FERC Take-Aways from Our Customers

While 2014 isn't quite over, we thought it would be useful to share a few things we've learned from our utility company customers this year.

1. Cost flow models are the real culprits.
When we're engaged to audit SAP FERC processes, we sometimes find that a utility's core challenge is not regulatory accounting itself, but rather its larger cost flow model. Utilities that have been on SAP Financials for a decade or more often have cost flows that are too complex, too long, or otherwise ill-suited to support both the fine details required for rate cases, and the high-level summarization required for effective budgeting. Simplifying those legacy cost flow models to support modern internal and external reporting is usually Step One for these customers.

2. Payroll burdens aren't as transparent as they could be.
Utilities that charge "bundled" labor rates to orders — i.e., fully loaded with labor, allocated costs of employee benefits, and the employer portion of payroll taxes — lose the identity of the burdens when combined with long and complex cost flows. This makes compliance with FERC accounting regulations far more difficult, because the more secondary cost movements in a cost flow model, the less transparent the labor burdens become. The traditional FI-centric FERC solution and its flow of costs trace program attempts to keep track of those burdens as they move from senders to receivers, but this approach has a price: FERC and CO results of operations don't match. And that leads us to take-away #3...

3. FERC and CO don't match, and that's a problem.
We've talked about this many times before, and it's worth repeating: FI-based FERC models just don't work as well as CO-centric approaches in today's environment. Twenty years ago, when we thought that regulation would be phased out, it was entirely reasonable for FERC accounts to be based on FI documents alone. But in today's world, in which CO has such rich cost detail, there is no reason to tolerate painful FERC-CO reconciling differences any longer. More utilities are recognizing that "one version of the truth" can be more than just a marketing catch-phrase by adopting a CO-centric model in which both primary and secondary costs support FERC balances.

4. Regulatory accounting is under-appreciated.
This is a sensitive topic, but we've got to call it out: few people within utilities truly understand how important regulatory accounting is to their own business. Compliance with FERC, cost recovery, and rate case support are the ways in which regulated utilities make money, but this fact is often lost on staff outside the Rates department. We are starting to see more of the Finance and IT professionals who support Rates reevaluate their perspectives, recognizing that a modern FICO/FERC design must be prioritized in order to gain efficiencies, reduce costs, and take full advantage of their SAP ERP.

5. Few see value in high-speed databases — yet.
For all of the recent hoopla about in-memory databases, we're not seeing that much interest from utility Finance teams. We believe that will change in the coming year or three, when management recognizes the benefits of line item-level reporting. The sheer volume of detail that will continue to grow will mandate adoption of high-speed infrastructure. We predict that Finance won't pursue speed itself, but rather the granularity that enables "closing every day" — which will require speed.

Four Reasons Not to Charge Cost Centers

Back in the mid-1990s, when utilities expected regulation would be phased out and compliance with Title 18 would no longer be necessary, we saw charging cost centers as highly convenient. This was how non-regulated companies ran, and the practice was fully embraced by utilities.

Fast forward 20 years, and the situation is quite different: regulation is actually more stringent, and utilities spanning multiple jurisdictions face even greater scrutiny. Today, while cost centers are useful on the back end for summarizing orders, comparing budget to actual, and establishing a framework for accountability, they are decidedly not effective on the front end for at least four reasons:

1. Poor transparency. Charges to cost centers are less transparent than charges to work orders, and therefore make understanding, explaining, and justifying FERC-relevant costs far more difficult.

2. Increased processing time. In our experience, tracing costs from cost centers to work orders to FERC accounts doubles the processing time for the regulatory accounting close. Charging work orders directly speeds up the trace and simplifies the close.

3. Less control and flexibility. Once dollars are in a cost center, they must follow that cost center's labor. This can cause problems when below-the-line expenses are traced to above-the-line accounts. Adjustments to move non-labor from one cost center to another can inadvertently redistribute dollars to unintended FERC accounts. So while charging cost centers is convenient, it means giving up the control and flexibility inherent in charging orders directly. A utility can mitigate some of the risk by allocating cost center charges out to other receivers using assessments in Controlling. This practice, however, makes tracing costs from their origin even more complex as receivers are sometimes just other cost centers. The tracing can even become circular as the receiver may charge costs back to the original sender. This potential confusion is avoided if orders are charged directly, configured for each business transaction.

4. Unnecessary complexity. Charging cost centers makes labor rates more difficult to calculate because non-labor is also in the cost center, in amounts that vary by cost center. In contrast, excluding non-labor costs from cost centers allows labor rates to be set uniformly across cost centers for similar roles.

If you've been charging cost centers and are experiencing some or all of these challenges, contact HPC to learn how you can modernize your cost model to address today's tougher external reporting standards.

Perfect year-end gift for your SAP Accounting team: HPC JETS

As 2014's year-end close approaches, your Accounting managers will face any number of onerous tasks: making sure suppliers are paid on time; checking budget variances and finding errors dating back to the beginning of the year; tending to year-end accounting accruals that always seem to hit in the last quarter; and taking care of last minute journal entries just in time to get to the office holiday party.

You can eliminate at least one big year-end headache — correcting mischarged orders, cost centers, and other cost objects — with the HPC Journal Entry Transfer Solution (JETS). HPC JETS is a cost adjustment application for SAP that increases the speed and integrity of cost corrections directly in SAP ECC 6.0. It's ABAP-based and looks and feels just like the SAP GUI you already know and love. When your accountants see it in action, they'll nod their heads in appreciation and say, "I wish we'd had this last year." No more reliance on lump-sum journal entries that are difficult to explain to auditors.

So, give your team a gift that will not only make this year-end less stressful, but also every monthly close thereafter more efficient and accurate: HPC JETS.

Even better, as our gift to you, all HPC JETS evergreen perpetual licenses purchased before December 31, 2014, will include up to 80 hours of HPC's consulting services at no additional charge. That amount should cover most standard implementations.

Contact us to schedule a personal demonstration, or watch an online video demo of JETS v2.0.

Guest lecture at SFSU - "ERP's Changing Role in the Age of Connected Everything"

On Wednesday, November 19 from 6:30-8:00pm, HPC CEO Jerry Cavalieri will speak to San Francisco State University MBA program's BPM class about "ERP's Changing Role in the Age of Connected Everything."

Cavalieri will discuss how ERP has become foundational to the enterprise, and how businesses will adopt new BPM strategies that re-define and modernize their ERP to adapt in the social, mobile, and cloud IT architectures of today and the future. ERP is here to stay, but must adapt in ways that require more agility and flexibility than ever before. The way corporations deploy and evolve their ERP systems will determine their level of competitive advantage and profitability. The key to success is a long-range IT roadmap and careful execution to thrive and stay ahead of the competition.

The presentation will also include a demonstration of SAP ECC Financials, and time for Q&A.

How Xcel Energy could have minimized rate case risk with HPC UFA

The recent news about Xcel Energy inadvertently including $460,000 in campaign expenses in a rate increase request illustrates one of the ways that HPC Utility Financials Accelerator (UFA) helps utility companies to properly identify below-the-line costs and minimize the risk of utility commission inquiries and public relations crises.

Per FERC regulations, all shareholder-funded donations and political contributions of any kind are to be recorded to account 426:

Expenditures for certain civic, political and related activities.
(a) This account must include expenditures for the purpose of influencing public opinion with respect to the election or appointment of public officials, referenda, legislation, or ordinances (either with respect to the possible adoption of new referenda, legislation or ordinances or repeal or modification of existing referenda, legislation or ordinances) or approval, modification, or revocation of franchises; or for the purpose of influencing the decisions of public officials.

To ensure that such costs are recorded below-the-line (i.e., borne by shareholders not ratepayers), utilities must assign the correct regulatory indicator on orders used to pay vendors. The translation of the indicator also needs show the correct FERC account of 426. This is not so easily done with the legacy FERC module alone, as most users won't take the time to query a range of accounts in the standard drill-down to resemble line item views. Or, they won't use the drill-down at all because it starts at the account level.

In contrast, using HPC UFA, accounting managers can spot such mistakes earlier using UFA's interactive P&L drill-down tool. Large or unusual payments are easier to identify because UFA enables users to detect variances at the line item level (such as A&G where we suspect Xcel's campaign expenses may have been charged incorrectly). UFA then facilitates the recasting of FERC results even after a period is closed. In this way, utilities running UFA can more accurately validate their financials before any external reporting to regulatory agencies.

SAP for Utilities 2014

It's that time of year again, and HPC is looking forward to learning and sharing at the annual SAP for Utilities conference in Hollywood, Florida. While our own HANA-based regulatory accounting solution for FERC reporting is in development, we'll be interested to see how others are leveraging in-memory to deliver tangible, practical benefits. In this regard, Vikki Pope and Dave Campbell's presentation for National Grid is definitely on our short list of speaking engagements to attend. And since we do quite a bit of work optimizing the integration of Financials and Work Management, we're also keen to listen to SCE's talk about fleet management, and SAP's Rory Shafer's thoughts on EAM solutions.

If you're roaming the show and want to chat about SAP FERC for the modern utility, as well as broader Financials and Asset Lifecycle Accounting issues, let us know at (510) 542-9558.

SAP Controlling Conference countdown

It's just one month before the 2014 Controlling conference in San Diego (Sept. 22-23) where HPC will demonstrate our NetWeaver-based cost adjustment solution for SAP ECC, the HPC Journal Entry Transfer Solution (JETS).

JETS enables authorized users to adjust primary and secondary costs directly in the ERP, improving data integrity, financial controls, and audit trails. Watch a demo video of HPC JETS that shows how to correct mischarged internal orders easily from the SAP GUI you already know and love.

Please contact us if you'd like to meet at Controlling 2014. We look forward to seeing you in San Diego!

SAP Financials Conference - HPC to demo cost adjustment solution

HPC will exhibit at the SAP Financials Conference in Orlando, Florida on March 18-20, 2014.

Meet us in Booth #940 to talk about your own pressing SAP FICO issues with our veteran SAP Financials consultants, and to see a live demo of HPC's cost adjustment application for SAP, the HPC Journal Entry Transfer Solution (JETS). HPC JETS is NetWeaver-based software that increases the speed and integrity of cost adjustments in SAP ECC 6.0, including corrections to mischarged orders, cost centers, and other cost objects.

Schedule an appointment with HPC at the 2014 SAP Financials Conference, and learn more about adjusting costs in SAP with HPC JETS.

Meet us at the 2014 SAP Controlling Conference

For the second year in a row, HPC will sponsor ERP Corp's SAP Controlling conference. We'll be in San Diego on September 22-23 for the event, which we found to offer 100% substance and 0% fluff last year.

HPC will exhibit our NetWeaver-based cost adjustment solution for SAP, the HPC Journal Entry Transfer Solution (JETS). JETS enables authorized users to adjust primary and secondary costs directly in the ERP, improving data integrity, financial controls, and audit trails. Watch a demo video of HPC JETS that shows how to correct mischarged internal orders easily from the SAP GUI you know and love.

ERP Corp has lined up a number of customers to speak about real-world SAP controlling scenarios, including case studies from McCormick, Deere & Co., Eli Lilly, Rockwell Automation, Woodward, and SPX Genfare. Learn more about what's new at Controlling 2014.

We'll update this space as our plans for Controlling 2014 develop over the year. In the meantime, please contact us if you'd like to meet at the event. We look forward to seeing you in San Diego!

New Overhead Cost Model in SAP Delivers 99.9% Faster Monthly Close

We recently wrapped up a project for a customer that was dissatisfied with its process for assessments (allocations) in SAP, which was slow, complicated, and, to put it bluntly, a real computing resource hog. In fact, the legacy assessment cycles took about 36 hours to run, so there was great room for improvement.

HPC proposed to implement a more efficient overhead-centric process that would bring the customer's accounting into line with best practices. Our model was designed to meet all reporting requirements by utilizing costing sheets instead of assessments, thereby simplifying current processes and speeding up the month-end close.

During the course of the project, we advised the customer on substitute forms of CO allocations such as overheads for PTO, benefits, payroll taxes, supervision and engineering, corporate A&G, and stores expenses. We also implemented the conversions necessary to change master data, such as order numbers, to include new costing sheets.

The customer now has fixed overhead rates in place for 2014, and overhead cost pools for supervision, customer services and administration. A new Stores Expense burden is applied to material issues from stock.

Overhead applied to PM orders is based on a composite rate of direct labor, and the customer's job estimating software uses that rate to calculate overhead on capital work orders. All orders now get a fair and equitable proportion of overhead, and overhead is applied in a far more timely manner to work orders. Accounting can run overheads after each payroll process is completed in CATS, to give project managers the most up-to-date view of job costs.

What about the impact on the month-end close? Running January showed a dramatic improvement: the assessment process that used to take 36 hours now finishes in just 30 seconds. And the new overheads run for only 10 minutes. Both human and computing resources are freed up considerably.

Stay tuned for a complete case study next month.