During the last 25 years of advising utilities, it was around 2013 that we started to hear customers vent about asset accounting. Some of them used quite strong language, while others were more politic. Over time, we realized that the utilities experiencing the greatest frustration were those that had moved key elements of their financial process outside of their ERP. For them, optimizing SAP Financials to meet today’s more stringent regulatory environment — for example, streamlining their cost flow to improve transparency — was much more challenging because it would entail unwinding complex integration between SAP and another solution.
Looking ahead, we see at least four best practices around asset accounting that will help utilities get the most out of their investment in SAP S/4HANA by configuring it correctly from the start:
(1) Focus PowerPlan on taxes and retirement unit calculations.
These specialized functions warrant a dedicated tool, and the utilities we’ve worked with largely acknowledge that PowerPlan is a capable one.
(2) Use SAP Controlling (CO) for allocations.
Retaining this function in SAP increases visibility into true costs for comparing job estimates to actuals. The CO module can apply overheads more efficiently than just once a month, even daily if desired. As utilities move towards continuous accounting in the coming years — enabled through mobile devices in the field that capture the cost of work performed — there will be less of need for fully loaded rates. Utilities we’ve worked with that move allocations and settlements outside the ERP often come to regret it because of the added complexity and latency between when direct costs were incurred and when overheads were applied. In contrast, in S/4HANA which brings OLAP and OLTP together, CO can provide more timely and granular data that makes Board reports more meaningful. Utilities will be able to see and correct spending variances earlier.
(3) Use SAP Project Systems and WBS elements for AFUDC.
Utilities turn on interest charges when capital work is in progress, and then turn them off when work is technically complete. Using WBS elements integrated with SAP EAM enables you to see immediately when work status has changed, therefore resulting in a more timely and accurate posting of AFUDC. Calculating AFUDC outside the ERP can often lead to adjustments that would otherwise have been unnecessary, and complicates the process of getting the right charges into the rate base.
(4) Get visibility into Plant Accounts in your Universal Journal.
Instead of summarizing Plant Account costs to one account - 101, Plant in Service — utilities on SAP S/4HANA have a tremendous opportunity to post all of the rich, line item detail in the Universal Journal. On SAP ECC, this level of detail would be invisible to the FERC module. But on S/4HANA with HPC DECIPHER, our latest add-on solution that is certified by SAP as integrated with S/4HANA, the entire contents of the fixed asset sub-ledger can be laid out as line items in the Universal Journal. DECIPHER will translate your 300-series plant accounts for each capital transaction as PIS to FERC account 101 in the same level of detail as in your fixed asset sub-ledger. DECIPHER can also split plant accounts based on predefined percentages, and then present the data in a separate FERC ledger. As a result, detailed capital costs will be in the same table (ACDOCA) as detailed plant transactions, and they can all be analyzed using the same tool, such as the SAP Analytics Cloud.
When your utility is evaluating plans for asset accounting on SAP S/4HANA, contact HPC America to talk about strategy for SAP Financials and Work Management for utilities on SAP.
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