Record to Report SAP or SAP R2R, also known as account to report, is a financial and accounting management process in which all business transactions (including sales, purchases, payments, etc.) and financial information are accurately collected, processed, analyzed, validated, organized, documented, and presented within the accounting system, i.e., journal entry, the general or nominal ledger, and its sub-ledgers. Thus, the SAP RTR business process essentially consists of all activities related to recording financial transactions, preparing, and computing financial statements, and also adhering to compliance, regulatory and statutory requirements. The record to report process in SAP provides strategic, financial, and operational feedback on organizational performance for relevant stakeholders.
Basic stages in the SAP RTR cycle:
At a basic level, the record to report SAP cycle involves the following stages:
- Extract Data: Financial or business data could come from different sources and could be present in multiple formats, sometimes requiring specific extraction tools. Normally, data extraction is done on a quarterly and annual basis.
- Collect Data: After the extraction of all relevant business or financial data is completed, it is assimilated into a single system for review. This facilitates easy analysis, creating a snapshot or ringside view of information gathered from different sources.
- Validate Data: The extracted and assimilated financial or business data must then be verified to ensure its accuracy and compliance with accounting standards.
- Convert data into KPIs: After the data has been authenticated and confirmed as accurate, it is transformed into meaningful key performance indicators (KPIs). These KPIs are used to measure organizational efficiency, productivity, progress, and success.
- Information sharing: Finally, the finance and accounting team shares the information in the report with internal and external stakeholders. The report structure can vary based on data complexity, information needs, and grammatical and formatting requirements, and is then used to make key strategic business decisions going forward.
How does the record to report process in SAP work?
The record to report process flow in SAP can be explained through the following core, detailed steps below:
1) General Ledger Accounting – Master Data Management: The first step is to set up and record and maintain the master data in the SAP system, including the general ledger accounts, cost, and profit centers, as well as other relevant financial organizations, on a management GAAP and statutory accounting basis.
For this step to be completed, the sub-ledgers also have to be maintained, recorded, and closed in time. Financial transaction documentation includes revenues (by invoices or sales receipts), purchases (in the account payables account), and expenditures (in the accounting register). This step can also consist of accounting tasks at a broader level, such as documenting sales orders, tracking prospective customers, and sales projections and cash flow.
2)Financial Closing: At the end of each financial period (i.e., a month, quarter, or year), a closing process ritual for the SAP RTR module is performed, and this consists of sub-steps like:
- Accruals and Deferrals: Adjustments in accounts have to be made to consider revenues or expenses that have been incurred but have not yet been recorded.
- Reconciliation: Reconciliations of various types (i.e., bank, intercompany, sub-ledger with the general ledger, etc.) are done to ensure the accuracy and completeness of financial data.
- Allocation and Settlement: Costs and revenues are allocated or settled between different cost centers, profit centers, and business units.
- Financial Statement Preparation: Financial statements like the balance sheet, income statement, and cash flow statement, are prepared based on the recorded data. This involves creating and running predefined or customized reports using SAP’s reporting tools.
3) Financial Reporting & Analysis: Once the financial statements are created, they are used for internal and external reporting purposes. The RTR process in SAP has reporting functionality, including the ability to analyze financial data, create real-time interactive dashboards, and perform financial consolidation for various legal entities.
4) Compliance and Consolidation: The SAP RTR module enables compliance with financial regulations and statutory internal and external controls. This includes maintaining an audit record of financial transactions, demarcation of duties, and documentation for internal and external audits. The RTR process in SAP also allows for archiving financial data and managing related documents. Thus, the reporting cycle concludes the formal process of data gathering, assimilation, scrutiny and analysis, and distribution of the results.
The four core steps of SAP RTR can also be visualized through the diagram below:
What BPX is all about – a brief background:
Headquartered in Pune India, Business Process Experts (BPX) is one of India’s premier process management consultants, focused on delivering customized solutions to businesses looking to streamline and optimize their record to report processes in SAP. BPX was established more than a decade back in 2012, and since then, it has not looked back. The company has quickly grown to become a trailblazer in the SAP financial and accounting solutions space. BPX currently provides innovative SAP process frameworks for diverse industries and sectors, like engineering, automobiles, banks, finance, insurance, chemicals, garments and apparel, retail, manufacturing, hospitality, labs, pharmaceuticals, mining, food processing, ITeS, and others.
Helmed by an experienced team of seasoned finance and management professionals and SAP process consultants, BPX and illustrious sister organizations like YRC have continued to be strategic and transformational partners for top-rung clients for several years running now. As your reliable SAP RTR business process consultant, BPX will follow the industry’s best practices to ensure a successful SAP R2R implementation for your business, in keeping with your specific record to report SAP requirements, configuration, and compliance obligations.
If you are an ambitious business owner or leader looking to successfully implement and maintain the record to report process in SAP, look no further, and connect with BPX now. We will first understand your exact business needs and strategic vision, and then suitably customize your transformation roadmap, helping you to harness the advantages of SAP R2R, maximize your true business potential, scale up and grow exponentially and firmly entrench yourself on the road to success!
Record to report (R2R), also referred to as Account to Report, is a financial and accounting management process that consists of extracting, collecting, processing, validating, and presenting accurate business data, which could be financial, accounts or business-related in nature. Thus, the record to report process in SAP provides strategic, financial, accounting, and operational feedback and direction on the organizational and business performance to inform the management and other internal and external stakeholders.
The three stages in the R2R life cycle are:
- Data Extraction: in multiple formats from a variety of sources, requiring specialized extraction tools. Normally, data extraction is done quarterly or annually.
- Data Collection: After data is extracted, it is combined and assimilated in a single platform for review, and easy analysis.
3. Data Validation: The extracted and collected financial data must then be checked and validated to ensure its accuracy and compliance with accounting requirements.
R2R, O2C, and P2P are similar processes but have different objectives and process drivers. While record to report helps to extract, collect, and validate data for accounting compliance needs and to make strategic financial decisions, the order to cash process is used to manage sales orders from customers. The goal of procure to pay, on the other hand, is to source and procure goods and services from suppliers. Thus, while R2R is driven primarily by the financial and account teams, O2C is driven by customers, sales teams, fulfillment, and shipping teams, and also the financial and accounting teams. In comparison, P2P is driven by the procurement teams who manage the organization’s vendors and suppliers.
The main advantages or benefits of the R2R (Record to Report) process is as follows:
- Financial visibility, compliance, and governance
- Strategic planning and decision making
- Efficient tax management
- Automated processes free resource time, improve accuracy, and lower costs
- Data integrity and accuracy
- Overall cost savings
- Enhanced reporting and analytics
- Integration, and scalability through standardized processes
- Efficiency and transparency in the audit trail
The Record to Report process in SAP, also known as Account to Report, is in simple terms, a general ledger process. This consists of general ledger maintenance, right from the recording of financial transactions to the preparation and reporting of the company’s consolidated financial results and accounts.