Case Study: Optimizing FERC Accounting for Utilities on SAP

In anticipation of its migration to SAP S/4HANA in 2023, Salt River Project engaged HPC America to evaluate its current SAP Financials processes and results, and to identify areas for improvement that would not only deliver immediate benefits, but also streamline the utility’s eventual transition to S/4HANA.

Hear SRP speak about its FERC optimization project at the 2019 SAP for Utilities conference

One particular area for improvement the team identified was around SRP’s FERC data: it was hard to understand and tie back to participation billing, and did not fully support audit and pricing processes. The data required for external audiences did not reconcile to the operational data used to create internal financial statements, and, as experienced by many utilities running the standard FERC module, the differences were difficult, if not impossible, to explain.

After the assessment, SRP engaged HPC to optimize its FERC model with HPC Utility Financials Accelerator (UFA) add-on software. HPC UFA eliminates the FERC module’s limitations, and runs on both SAP ECC and SAP S/4HANA. Five months later, SRP was ready to go live with its new FERC design. The project achieved all intended objectives and more: SRP’s balances by FERC account now match exactly—to the penny—its reports by order number, WBS element, cost element, and cost center, thereby making functionalized data far more intuitive for users to analyze.

Download the full SRP case study, hear SRP speak at the 2019 SAP for Utilities conference, and learn more about HPC America's accounting solutions for utilities on SAP.

Continuous Accounting for Utilities on SAP S/4HANA

For too long, utilities have been beholden to batch accounting processes that delay financial analysis, obscure timely visibility into job spend, and hinder proactive mitigation of variances. The “monthly close” is such a foundational element of the business that it’s hard to imagine not relying on it. 

It doesn’t have to be this way, however, and HPC America’s vision for the future is decidedly different. When utilities move to SAP S/4HANA, they have a tremendous opportunity to get more timely, actionable financial information without waiting for period-end, by taking concrete steps towards “continuous accounting.”

Get the Continuous Accounting white paper (PDF)

Why Continuous Accounting Matters
At HPC, we think of “continuous accounting” as embedded, real-time, or otherwise automated processes that replace traditional period-end batch processes. Continuous accounting processes generate valuable financial data on a more regular and frequent basis than the monthly close alone. A utility with a continuous accounting model would enable its analysts and managers to evaluate and take action on operational performance, spend variances, and other business metrics without having to wait for a period-end report.

For example, collecting functionalized cost data in real time would allow analysts to identify and correct mischarged postings before month-end, thereby making the actual closing process less error-prone. Likewise, loading overheads more often than monthly would provide project managers with fully loaded cost views of their projects mid-month, which would in turn enable them to adjust resources proactively in the current period instead of reacting after the period has been closed.

Six Ways to Continuous Accounting on SAP S/4HANA

(1) Functionalize costs at the point of data entry instead of in a batch process at month-end.
Replace the derivation-based FERC solution that’s delivered with S/4HANA with a real time, line item design. There are a number of ways to do this, depending on how much flexibility and control your utility needs. One is to use HPC’s latest add-on software for utility financials on S/4HANA, HPC DECIPHER, which is certified by SAP as integrated with SAP S/4HANA, and eliminates the FERC module that we created 25 years ago.

(2) Minimize cost flow streams...
by reducing (or eliminating) allocations and settlements that only serve to functionalize costs. Streamlining cost flows is an underappreciated but valuable effort, and every utility moving to S/4HANA should consider it carefully. We have great experience and can help.

(3) Activate Functional Areas...
to leverage the Universal Journal’s power to record and report generation, transmission, and distribution costs right from the general ledger (not just from Controlling or the FERC module). We first did this for We Energies in 2012, then again for Cleco on S/4HANA in 2018, and we’ve just started a new Functional Area project for another utility

(4) Collect job costs daily, if not more frequently.
As mobile devices become ubiquitous throughout the enterprise, labor entry should occur in real time when technicians complete their Plant Maintenance tasks, even before they leave a job site.

(5) Run overheads after every pay period, or even more frequently.
In conjunction with more timely direct labor entry, apply your indirect labor and overheads more often, perhaps even weekly. This will fully load costs for job managers, project managers, and program managers to gain insights into total spend much earlier than waiting for the month-end close.  

(6) Modernize the availability and presentation of financial data.
Use Fiori apps to access a P&L statement at any time of the month, from any device, and use nested, real-time drill-down reports to show how job order costs roll up to the income statement. Get multi-dimensional data on the fly in S/4HANA without the need for ETL processes customary with separate OLAP servers like BW or BOBJ.

How to Get Started
To learn more about how your utility can best get closer to continuous accounting—say, starting with a functionalized income statement mid-month—contact HPC for a discussion, or meet us at the 2019 SAP for Utilities conference in San Diego on October 21-23.

2019 SAP for Utilities Conference - Meet HPC America

Meet HPC America at this October's SAP for Utilities conference to learn more about two key subjects for utility company IT, Customer Service, and Finance leaders:

1. Lessons learned from managing the first-ever—and only in-production instance of—SAP C/4HANA Service Cloud (aka, C4C) integrated with on-premises IS-U Billing.


2. FAQ about FERC reporting on SAP S/4HANA. We've got detailed pros and cons of four different options for regulatory accounting on S/4: the delivered FERC module, an optimized FERC module, a basic line item (real-time) model, and an advanced line item model.  

In addition, HPC's customer Salt River Project (SRP) will present our recent optimization of FERC on SAP Suite on HANA utilizing HPC Utility Financials Accelerator (UFA) add-on software (check out SRP's full case study, too). 

We're also going to walk conference attendees through the benefits of our latest regulatory financials solution, HPC DECIPHER, which is certified by SAP as integrated with SAP S/4HANA and helps utilities fully leverage the Universal Journal's capacity for continuous accounting.

Contact HPC America in advance to schedule an appointment with our utility industry experts and SAP solution architects.