Webinar on SAP Controlling Best Practices for Utilities

Don't forget: Two weeks from today, on Friday, February 20, 2015 at 10:00am PST / 1:00pm EST, HPC and ERP Corp. will present a Webinar on SAP Controlling Best Practices for Utilities. You can register online.

Five SAP Controlling Best Practices for Utilities

When utility companies first started to use the SAP ERP in the mid-nineties, cost flows were meant to be simple and system designs were largely FI-centric. 

Much has changed in the last 20 years: cost models have grown more complex; CO documents contain valuable, often untapped, information; and assessments are increasingly used. As a result, good visibility into costs is harder to achieve and defensible regulatory reporting requires more work. Fortunately, this trend can be reversed. 

In this Webinar, you'll learn five SAP Controlling best practices from HPC America to increase reporting clarity and efficiency, eliminate reconciliation issues between CO and FERC, and ultimately strengthen the utility's position in regulatory inquiries and rate cases.

HPC America CEO Jerry Cavalieri will present the Webinar, sharing his 25 years of utility industry experience and most recent expertise in assisting utilities to modernize their SAP Financials. 

Register for the Webinar online.

2015 SAP Controlling Conference: Utility-Centric Sessions

Looking ahead to late-September 2015, HPC America will return to the SAP Controlling conference in San Diego. This year, we'll also be moderating two sessions at the event. The first will be a Customer Panel Discussion on modern cost accounting and FERC strategies for utilities on SAP. Key topics will include:

• Best practices for using assessments with overheads to capitalize indirect labor and expenses
• Improving defensibility of FERC accounts through CO documents
• Benefits of using CO for pricing fleet units and applying pricing to work orders

This discussion will include Controllers from RPU and NTUA, both of whom have a extensive real-world experience with SAP Financials for utilities. 

We'll also be hosting an Expert-Led Networking session for utilities and public sector organizations, which will provide attendees an opportunity to discuss budget preparation and experience with SAP and third-party solutions; infrastructure and support sharing across organizations, districts, or governments; meeting internal and external reporting requirements; improving visibility into costs; and other topics unique to utility companies, municipalities, and other public sector entities.

To learn more about HPC's plans for the 2015 SAP Controlling conference, or to request a discounted conference pass, please contact us.

Multi-state electric utility to optimize SAP FERC with HPC America

We're starting 2015 with a terrific long-term project to modernize the SAP Regulatory Reporting (FERC) design of a multi-jurisdictional utility company, including SAP FICO and FERC consulting and the implementation of HPC Utility Financials Accelerator software, which extends the capability of the original FERC module and is certified by SAP as powered by the NetWeaver® technology platform.

Our client is one of the largest electric distribution utilities in the United States, serving six million customers across five states. After having revamped its SAP Financials system in recent years, the utility determined that optimizing SAP Regulatory Reporting is the next step in modernizing its SAP ERP.

Late last year, a joint team of HPC's SAP consultants and the client's subject matter experts identified a number of key regulatory reporting challenges the utility faces. The Rates Department does not have easy, independent access to complete SAP FERC data; cost flows are unusually long and complex; the allocation model is not currently visible to the SAP FERC process; and SAP FERC run times are unusually long and error-prone.

To address these issues, HPC will replace the utility's legacy FI-centric (GL-based) cost model with a modern CO-centric model that traces all primary and secondary costs, eliminates reconciling differences between SAP FI, CO, and FERC, and simplifies cost flow complexity with little disruption to current business processes. Through HPC's system design and Utility Financials Accelerator software, the utility will benefit from a faster monthly FERC close, improved rate case support, and greater end-user self-sufficiency for regulatory reporting activities. The new system is slated to go live in January 2016.

Webinar: Five SAP Controlling Best Practices for Utilities

Please join HPC America and ERP Corp, hosts of the SAP Controlling conference, for a Webinar on Friday, February 20, 2015 from 10:00-11:00am PST. Register online.

Five SAP Controlling Best Practices for Utilities

When utility companies first started to use the SAP ERP in the mid-nineties, cost flows were meant to be simple and system designs were largely FI-centric. 

Much has changed in the last 20 years: cost models have grown more complex; CO documents contain valuable, often untapped, information; and assessments are increasingly used. As a result, good visibility into costs is harder to achieve and defensible regulatory reporting requires more work. Fortunately, this trend can be reversed. 

In this Webinar, you'll learn five SAP Controlling best practices from HPC America to increase reporting clarity and efficiency, eliminate reconciliation issues between CO and FERC, and ultimately strengthen the utility's position in regulatory inquiries and rate cases.

HPC America CEO Jerry Cavalieri will present the Webinar, sharing his 25 years of utility industry experience and most recent expertise in assisting utilities to modernize their SAP Financials. 

Register for the Webinar online.

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.