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Discover The 5 KPIs That Have The Biggest Impact On AP

You can’t change what you can’t measure.

KPIs mean a lot of things to a lot of organizations. The same way pilots monitor flight instruments or coaches track statistics, business leaders must also rely on metrics to guide their decisions and measure their success — especially when it concerns

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The New World of Tax: Your Word Against the Government’s Big Data

In the not-too-distant future, tax administrations around the world will receive authenticated data from all your – and your trading partners’ – transactional systems in real time or near-real time. Your invoices will be tracked and approved through all stages, from issuance by the supplier to approval and payment by the buyer.

The massive amount of information tax administrations receive from SAP and other business systems will likely be triangulated with data captured from associated processes, such as your transport and financial partners. In short, the tax collector will become so confident he knows your tax position that he’ll start sending you what some call your “e-assessment,” which is basically a reverse tax return that states how much you owe for transaction tax — for example, value-added tax (VAT).

As tax administrations become more certain they can determine your indirect taxes by just tapping into your data flows, they might also gracefully offer to drop the requirement that you stop archiving your own original invoices and other tax-relevant documents.

An Infinitely Complex World of Business Systems and Structures  

Sweet deal, right? Now all you need to do is require your software vendors to sync transaction data with tax administrations in every country, and you can stop worrying about those pesky transaction taxes, including the burden of maintaining auditable data for years or decades.

Think again. The world of business systems and structures is infinitely complex and subject to constant change. With every country’s e-invoicing and digital reporting data requirements also being fundamentally different and dynamic, chances are that these universes exchanging information with each other in real time doesn’t always yield a perfect result.

So you’ll need the ability to prove the tax administration wrong. Now, this burden of proof isn’t entirely unusual in the world of tax, but, in the past, the onus of providing evidence fell on businesses — where they often had a fighting chance as they were sitting on the files and the systems where traces of transactions were maintained that could together be viewed as a sufficient audit trail. With tax administrations investing billions in computer processing power and advanced analytics, their evidence will, in many cases, be based on massive amounts of objective data, which will make businesses’ audit trail-based proof quite weak.

As SAP customers start to contemplate this new reality, they realize that the trend toward continuous transaction controls and e-assessment means that they must become more — not less — serious about certain key processes.

Evidence-Enhancing Measures in Your Transaction Environment

To set themselves up for success in the new world of tax, SAP customers need to ensure their SAP system has clean master data and can produce error-free tax determinations. Let’s look at the importance of these factors:

Data quality: The challenges around maintaining a solid process, ideally including third-party validation, to establish and maintain trading partner master data has always been the Achilles heel of business automation — but in these new circumstances, it becomes mission-critical. You must know who you’re dealing with, as well as where your suppliers and buyers are established and registered for tax.

Tax determination: Making sure that the tax content of your invoices and other trading documents is accurate also takes on a much higher level of importance. First, in the transactional flows sent to them for approval or registration, tax administrations will increasingly have technological means to verify tax rates and associated notices on invoices based on invoice data points combined with master data that they maintain on your business.

When tax administrations come to a point where such controls are sufficiently reliable, errors in tax determination risk creating major supply chain interruptions. But we’re not there yet: Most tax administrations will not have such transactional tax content verification capabilities for many years to come. In the meantime, they are much more likely to use the power of modern analytics to detect anomalies in the data they collect and store afterward.

To level-set, ask yourself the following: Is your business deviating from normal invoicing flows and transaction setups? Is what you’re doing substantially different from comparable companies? Such post-transaction verifications can lead to tax administrations basing their e-assessments on their — rather than your — tax determination, which can create inconsistencies and lead to fines.

Stepping Up Your Evidence Levels to Match the Tax Administration’s

There are two ways SAP customers can improve their evidence levels to meet tax administration demands: they should focus on archiving improvements and solutions to automate the e-assessment report verification. Let’s look at each of these in turn:

Archiving: What happened in Italy earlier in 2019 is a good example of how businesses start to think about these issues. Prior to the e-invoice clearance mandate that entered into force at that moment, Italy had some of the toughest archiving requirements in the world. Since the introduction of the mandate, the Italian tax administration said it would be happy to take care of these archiving requirements for invoices on behalf of taxpayers.

Not a single SAP customer we have seen has reacted the way the Italian government anticipated: Instead of dropping their own archives, enterprises quickly figured out that they didn’t want to rely on the very administration whose records they might need to provide evidence against to also be the custodian of their audit defense data. As the tax administration gets better at proving the authenticity and integrity of transactions that it captures from your invoice flows, so should you.

E-assessment matching: You’ll start getting reverse indirect tax “e-assessment” returns in a growing number of countries over the next 5-10 years. Think about what you’ll do with them. Chances are that the complexity of your business and the way you maintain your records will make manual verification of what you believe your tax position to be against what the tax administration’s data very challenging.

You’ll need tools to compare these datasets on an apples-to-apples basis. If you haven’t started automating your current indirect tax reporting function and you’re still relying on spreadsheets and manual verification when these e-assessment reports start coming in, you won’t be in a good position to figure out whether you need to challenge the government within reasonable time limits. As with all things tax, you will want to counter these statements almost instantly (if at all possible before paying), otherwise, being right won’t help you protect your cash flow.

For more information on how SAP customers can thrive in today’s new world of tax, visit sovos.com.

Christiaan Van Der Valk is vice president of strategy at Sovos. Elected a World Economic Forum Global Leader for Tomorrow in 2000, Christiaan is an internationally recognized voice on e-business strategy, law, policy, best practice, and commercial issues.




Reduce Tax Risks in Procurement with SAP Ariba and Vertex Solutions

Tax functions are hardly the only part of organizations grappling with growing complexity. A similar dynamic holds across a range of corporate functions, including procurement. Dealing with tax requirements after the fact can result in procurement either underpaying or overpaying taxes to vendors while escalating the company’s audit risk. Procurement functions are increasingly adopting SAP Ariba to accelerate their payables processes and apply strong business validations to transactional elements such as vendor data, product description, and financial invoice details. 

SAP Ariba is a powerful platform that connects millions of suppliers and customers across direct and indirect expense categories. It offers an end-to-end automated system, removing complexity and allowing buyers and suppliers to manage everything from contracts to payments, all in one place. The solution also performs the important procurement control tasks of validating transactions, such as ensuring the invoice matches the purchase order and the materials or services received.

Reduce Risk with Tax Validation Functionality

In-house tax professionals will be keen to ensure that this improved cost control is matched by a parallel investment in appropriate tax risk controls. Vertex tax solutions harness SAP Ariba’s detailed transactional information to validate vendor tax treatments. It is important that the vendor’s tax treatment is checked and understood when the invoice is recorded by the purchasing business. In an optimized tax procurement process, tax errors are captured by validation before the invoice is cleared for payment.

Integrating Vertex tax validation functionality with SAP Ariba enables the purchasing business to ensure vendors have accurately calculated tax and correctly recorded the tax treatment in their invoice transmission. Inconsistent or inaccurate vendor tax treatments are escalated for review, and validated tax calculations are approved for payment. In addition to providing a real-time validation of vendor tax treatments, integrating a tax determination solution with SAP Ariba unlocks other process enhancements, including the assurance that reverse charges and restricted deductibility requirements are identified and recorded in a compliant manner.

Partnering to Reduce Complexity

A Vertex partnership with SAP should come as welcome news to procurement and tax leaders as they work together to reduce complexity. Built on Vertex expertise and content for sales and use tax and VAT determination, our solutions support the requisition and invoice reconciliation phases of the tax life cycle. Using Vertex solutions and SAP Ariba together helps to reduce the cost and time involved in performing tax calculations while reducing risks of underpayment, overpayment, and audits.

Click here to learn more about the SAP Ariba integration with Vertex or visit us on the SAP App Center.

 




SAP and the Industrial Internet of Things (IIoT)

“I learn best by doing.”

I made this claim to our Chief Research Officer, Riz Ahmed, on my first day as the new Vice President of Research at SAPinsider last week. Ten days later, I find myself writing my first blog post after already having written a full benchmark report. Keep an eye out for that report — titled “Digital Transformation of the Supply Chain” — in the coming weeks.

I joined SAPinsider after serving as the Research Director for the Industrial Solution at ABI Research. While ABI had been covering industrial technologies for a couple of years before I arrived, I helped start its Smart Manufacturing service, which evolved into the Industrial Solution this past year. Before ABI, I started my career with the boutique Internet of Things (IoT) analyst firm Machina Research, where I covered Connected Cars and a wide variety of IoT applications. The firm was then acquired by Gartner, and I continued on with Gartner for a few months after the acquisition before the opportunity arose to join ABI.

I hope to leverage this experience to serve the SAPinsider membership and provide you with helpful insights and strategic advice. Therefore, with no further ado, I present you with the an introduction to and brief analysis of the Industrial IoT (IIoT) landscape.

Demand for IIoT

SAP has many customers using its enterprise software and middleware for manufacturing and throughout the industrial sector. Over the past several years, the Industry 4.0 movement has swept up many of these customers as they try to keep up with innovations in technology, and many of these innovations come down to data collection, integration, processing, and analyzing on IIoT platforms. SAP has invested heavily in IIoT technologies over the past several years and, in 2016, coalesced these capabilities under the SAP Leonardo brand. SAP built SAP Leonardo on SAP Cloud Platform to connect industrial automation equipment and other devices to SAP Cloud Platform and bring transformative technologies to IIoT.

SAP customers that bought into the Industry 4.0 movement did so because leveraging IIoT data can lead to real business benefits. Many factors, applications, and technological developments drive these business benefits and therefore demand for IIoT, including: 

  • Predictive maintenance to minimize downtime: Already, predictive maintenance has proven results when it comes to reducing downtime and increasing productivity in manufacturing. One minute of downtime can cost tens of thousands of US dollars, depending on the industry. These results clearly affect the bottom line. SAP offers predictive maintenance software that combines IIoT data with information from its ERP, customer relationship management (CRM), and enterprise asset management (EAM) systems to predict equipment malfunctions. 
  • Identifying the root causes of quality issues: Many production processes face quality issues that cut into productivity and, if they sneak through inspections, lower customer satisfaction. Edge-to-cloud closed-loop machine learning (ML) and advanced manufacturing execution systems (MES) have proven use cases in reducing quality issues. 
  • Developments in cloud computing and ML: Cloud environments offer almost unlimited compute and processing power and can provide a similar interface for work from the different points of view of different employees, engineers and senior management. Companies can assign user roles so that employees can only see and modify the details and information that they need, and engineers in different locations can work on different parts of the same project. Already, firms have started to adopt ML models and apply them to smart manufacturing data to minimize repeatable tasks capable of being performed by software, improve the accuracy and predictability of maintenance schedules, and drive first-time-right results across the organization. While these models often run and evaluate data at the edge, they often need cloud computing for training due to the large amounts of data and processing required (a shortage of ML training data puts the validity and reliability of a given model in question). 
  • New “as-a-Service” (aaS) business models: Many SAP customers have started or plan to offer maintenance-aaS or products-aaS. IoT platforms empower these business models by sending alerts if a product requires maintenance or attention. 
  • Continuous product improvement based on real-world data: An enterprise can leverage IoT usage and performance data to continuously improve its products. Right now, this requires engineers to analyze the data, but as more products get connected and companies leverage more AI techniques, generative design software could automatically create improved designs based on IoT data.
A Leader or a Follower?

Measuring by its support for IIoT apps and other new technologies and adoption to date, SAP Leonardo ranks among the leading IIoT platforms but not as the leader. Industry 4.0 started as the synergies between many emerging transformative technologies presented themselves. SAP has made conscious decisions to identify these technologies and invest. It has also recognized where it needs to acquire or partner with companies to fill any gaps.

For instance, SAP’s most exciting digital twin capabilities come from an acquisition and a partnership. First, it acquired Fedem for exact, high-performance 3D digital twins that capture motion dynamics. Fedem’s software captures sensor data for tension and movement and performs 3D simulations in near-real time. Later, SAP partnered with ANSYS and now embeds ANSYS’s simulation solutions on top of its existing digital twin capabilities. SAP brought these capabilities together for its SAP Predictive Engineering Insights enabled by ANSYS solution for structural analysis.

SAP also partners with Telit to connect to machines and robots on factory floors with native drivers and for the SAP Device Management for IoT application by Telit. This application empowers SAP customers to connect previously siloed operational technology (OT) equipment to SAP Leonardo.

SAP Leonardo Machine Learning Foundation provides ML capabilities such as image recognition, natural language processing (NLP), and custom models that adapt to use cases. The ML models can adapt to livestreamed data from the edge or batched data in the cloud. SAP provides SAP Edge Services for the streaming analytics and local storage, but most commonly, customers deploy and manage from the cloud. It does offer on-premise deployment of some IoT solutions on the SAP HANA platform for hybrid deployment or private cloud.

SAP has also launched the SAP Cloud Platform Blockchain service to empower enterprises to develop blockchain-based solutions. About 65 companies participated in its blockchain co-innovation initiative to help improve transparency and collaboration in manufacturing and supply chain. SAP also founded a blockchain consortium with six other companies including Intel and HPE.

Unfortunately for SAP, some of its manufacturing customers may find that deep integrations between the IIoT platform and industrial software portfolios with product lifecycle management (PLM), MES, manufacturing operations management (MOM), computer-aided design (CAD), and plant simulation software provides more value than deep integrations with the ERP, CRM, and EAM systems. Therefore, companies with a broad industrial software suite — such as Dassault Systèmes, Siemens, and PTC —have found more traction with their IIoT platforms than SAP has with SAP Leonardo. PTC likes to point out that the P in PLM (Product) represents the T in IIoT (Things). Of course, this simplifies the issue, but it also holds water to some extent. 

The integrations with the industrial software mean that companies can use the advantages of cloud computing to design a product in CAD software; simulate its production in plant simulation software; put it into production with PLM, MOM, and MES software; and then leverage the IIoT platform to train and deploy ML models, all on the same platform. They can then feed results and usage data from the IIoT platform back to the appropriate tools and users. 

The largest industrial software vendors offer all these tools as parts of large smart manufacturing platforms. For example the Dassault Systèmes 3DEXPERIENCE platform has DELMIA for production simulations and DELMIA Apriso for MOM; however, starting in the design process, engineers can use CATIA to generate virtual visualizations of any part they need to design and put it through simulations on SIMULIA to ensure it meets all functional requirements. CATIA can also incorporate and adjust for findings from BIOVIA, Dassault Systèmes’s material science brand. Again, Dassault Systèmes brings all these tools together on the 3DEXPERIENCE platform with its IIoT capabilities. Likewise, Siemens has the Simcenter with many simulation tools such as Tecnomatix on top of its own PLM software portfolio, which includes several design products and the MindSphere IIoT platform. PTC has Creo for design, Vuforia for augmented reality, Windchill for PLM, and ThingWorx for IIoT. SAP Leonardo does not come with these types of manufacturing purpose-built integrations. 

What Does This Mean for SAPinsiders? 

To make the most of IIoT data with scalable applications, SAP customers must: 

  • Create cross-functional technology transformation teams. IIoT projects cannot succeed if IT and OT do not communicate. IT professionals need to understand the operational goals of OT, and OT needs to understand the security policies and strategies of IT. These cross-functional teams should work together to identify relevant technologies, run proof of concepts (PoCs), and scale technologies in a way that provides long-term value to the company. 
  • Evaluate internal capabilities and form a strategic vision. Most industrial companies and industrial engineers still try to solve problems one by one. For instance, they try to figure out how many automated guided vehicles (AGVs) they need. Then they try to figure out what types of robots to purchase. Then they try to figure out where to place the computer numerical control (CNC) machines, and so forth. Scaling IIoT requires a more holistic and more collaborative approach with a long-term strategic vision. 
  • Choose the IIoT platform that best fits this vision. Once a company knows where it wants to go with its technology transformation, then it can decide what platform can best help it get there. For many manufacturing firms, this means choosing an IIoT platform from a vendor with a comprehensive industrial software portfolio including CAD, plant simulation software, and PLM rather than SAP Leonardo. For others, the integration with other SAP products and capabilities will provide more value than integrating with other PLM vendors — especially, of course, if they use SAP Portfolio and Project Management or other SAP products. 
  • Integrate that platform with existing SAP products. Even if SAP customers choose other vendors for their IIoT platforms, that does not diminish the importance of SAP enterprise software. As soon as they have mastered data collection and processing, SAP customers must ensure that they can deliver relevant IIoT data to wherever they need it within their SAP systems. 

Following this strategic guidance should help SAP customers implement scalable solutions.

Pierce Owen can be reached at Pierce.Owen@wispubs.com.




SAPinsider Magazine | 2019 | Issue 2

On the cover

Versum Materials Shares Lessons Learned After SAP S/4HANA Go-Live: The industrial gas and chemical company headquartered in Tempe, Arizona completed a big-bang data migration and go-live in 15 months, creating an IT landscape based on standard best practices, simple and consistent processes, and a scalable platform to support growth. Learn how they did it.

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Explore the top 5 pains facing AP teams and how an SAP-certified automated solution can help to alleviate them by:
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Many users who work in cloud-based applications remain disconnected from the vital data and content stored in their critical back-end business systems, which can have real efficiency and productivity consequences. With agility essential in todays business

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