Jim Hunt: Why do companies need multi-code transactions and revenue accounting? What’s the benefit to them?
Haroon Mohammad: Well I think there are very specific sets of companies who are looking for some kind of solution to do the multi-company, and I would add multi-currency transactions, because the companies are globally present and when they do the transaction with each other as sister companies. Right now there is no way to capture the result very accurately when it comes to, revenue accounting. And that’s why there is a need to do the intercompany transaction between the two companies, which are called sister companies and to capture those results accurately as if they are doing the transactions seamlessly for the revenue accounting.
Jim Hunt: So instead of just putting numbers together from the sister companies, you actually are able to drill down and have the richness of the revenue accounting solution.
Haroon Mohammad: Yes, absolutely. I think that in order to get to the advantages of the multi-company code and multi-currency solution currently, if you think about how the companies who need these kinds of transactions will be doing it, usually there is a manual reconciliation, manual reporting, and there is a lot of manual journal entries involved to figure out these kind of transactions. So the benefit of having multi-company code and a multi-currency solution for revenue accounting is to make it seamlessly possible so that these transactions can be automated. The two companies who will be doing the transactions can be automated in terms of reporting. The fundamental thing which we have to understand is that when I want to serve a customer and that service comes across the globe between two sister companies, there is no automated way to capture these transactions.
Haroon Mohammad: So, if I’m a customer and I’m taking services from a UK company and India company and US company, all three together, there has to be intercompany transactions. And that is when this solution is very helpful to automate these kinds of transactions where you can run the report automatically. That way you don’t have to really scramble for a manual solution and doing the manual journal entries and spend a lot of time for these kinds of manual entries. So the multi-company code and multi-currency solution is really what can make the companies automated if they want to do the transaction across the globe in order to serve a customer who is taking services from the multiple companies overall.
Jim Hunt: Got it. And so a couple of main benefits then are automation and better ease of reporting. I would assume that there’s a more robust audit trail too, for supporting those disclosures and reporting.
Haroon Mohammad: Yes, of course. I think disclosure is reporting is one part. Secondly, you have an audit trail of what is going on in those transactions. You have a fairly well laid out the performance obligations for these, um, multi-company code or multi-currency, which are involved in transactions and which are involved in serving, serving a particular customers. You have to the revenue across the company code, which is fairly challenging, uh, in today’s world. And this solution gives a very seamless approach to allocate the revenue across the company code, and then do the revenue recognition across the company code. And those are the main advantages of having a multi-company code and multi-currency solution for the companies.
Jim Hunt: That’s very helpful. I know that we can’t show the code in a podcast, since we’re audio only, but can you kind of provide a high level discussion of how companies can achieve multi-company code and specifically within SAP RAR?
Haroon Mohammad: Yes, absolutely. At very high level if you think about functionality, because obviously the code is sometimes very customer specific if we go that way. But at a very high level, if you have a customer and if we want to serve that customer with two sister companies, we will have to create two contracts, which will be in two different company codes. And these two contracts should be combined through the ABAP code or SAP code in order to do the allocation behind the scenes, so that they can be treated as one revenue contract. And once you have one revenue contract spanning through these multiple company code and multiple currency, that is when you can achieve this seamless solution to do the allocation across the board between these two company codes. And then you recognize the revenue, across these two companies. That is when we say that solution becomes seamless and then reporting becomes seamless and you avoid lot of manual work arounds for this solution.
Jim Hunt: So essentially, not to be too simplistic, but you’re using ABAP code to kind of create a pseudo consolidated company that you’re then able to use as the reporting and revenue management model.
Haroon Mohammad: Yes, that is right. So since this solution does not exist in SAP RAR today, this will be a purely a custom solution to make the companies work automatically. And there will be some nuances to what a company really wants to achieve , depending on the characteristics of those companies. And these will be more specific to those companies too, but at high-level, this solution is going to work for all the companies who are trying to look for a solution to do the transaction between the two companies to serve a particular customer and do the transaction between multi-currency. So this custom solution will achieve these objectives of providing the solution reporting and avoiding manual work arounds.
Jim Hunt: That’s a great overview. Can you expand just a little bit more on multicurrency, what sort of additional aspects multicurrency puts into the mix and how the solution helps?
Haroon Mohammad: So, I think when it comes to multi-currency, even if your contract is in one legal entity, you could be transacting in two different currencies, for different customers. And if you want to combine these two contracts, which are in the same legal entity, but they have a different currency, then also this solution is going to be applicable because in the multi-currency scenario also RAR does not provide a solution to take care of it. So this multi-currency, multi-company code solution has the same concept at a very high level, and it works fine in these two scenarios.
Jim Hunt: And so it’s one of the advantages that you’re able to keep the behind the scenes combination of currencies transparent from the customer so that you’re able to bill a customer in one currency.
Haroon Mohammad: Yeah. So, on the invoicing part, it is a very good question. The invoicing part is a very different ballgame when it comes to the revenue accounting contract. Invoicing will be done according to the currency the contract is created in. So if there are two contracts, the invoicing will be done according to those two contracts and they are separately done. And there is no issue with that because we have been doing these kinds of transactions for a long time. The issue comes when you want to combine the contracts. So the issue is only in the combination of the contracts, but not in the invoicing. Invoicing is just working fine and there is no issue with that.
Jim Hunt: So you’re able to invoice the customer as they prefer, and as we’ve always done, but you’re able to gain the advantages of automated aggregation for dealing with multicurrency differences behind the scenes.
Haroon Mohammad: Yes, you are absolutely right. The invoices will be done in the document currency that the contact was created in. We are just talking about combining these two contracts with the custom solution in order to give a seamless integration, without any manual workarounds.
Jim Hunt: This has been a great overview. For people who’ve been listening and would like to get started and understand better how they would implement a multi- company code solution, How should they get started? What sort of timeframe can they expect and we talked about simplifying, so do you have any rule of thumb about staff savings and so on that they can accrue?
Haroon Mohammad: Yes, great question. I think, as we stated, this solution at high level is going to be applicable for most of the companies who want to do automated solutions for multi-company and multi-currency. But there are some specific nuances, which are very characteristic to each company. What are the results and what are the scenarios they want to achieve? For these kinds of solutions, it involves a lot of brainstorming to start with. But I think, you know, in terms of manpower savings and the nuisances when it comes to really manual journal entry and manual reconciliation, it is helpful to smooth out the process quite a bit. And it gives peace of mind because you have a good audit trail, you have good documentation and a good system of record in SAP, and most of the things are housed in SAP rather than in the spreadsheets.
Jim Hunt: Sounds like there’s a good ROI and that it’s a tailored implementation process, depending on the specific unique wrinkles of any particular customer. So they would be able to reach out to Bramasol to get more information and to get started on the process.
Haroon Mohammad: It is dependent on the uniqueness and specific characteristics of what customer wants to achieve that can be assessed when we engage.
Jim Hunt: Okay. And, I assume, is the starting point that they have a SAP RAR environment already set up?
Haroon Mohammad: Yes. That is what is the assumption is that if they have the RAR solution installed already, then this custom solution will work.
Jim Hunt: That’s excellent. Any final words or wrap up for our listeners?
Haroon Mohammad: This solution is really great where the companies are struggling with multi-company and multi-currency, and sometimes the transaction volume is so much that it’s mainly painful, and companies have to reassess their position. If they’re struggling with the volume and they want to achieve this automated solution, they should definitely think about doing this multi-currency multi-company code solution to make it customized so that it can work for their advantage.
Jim Hunt: Very good. Thank you. I, I learned a lot from this and I’m sure that our listeners will too, and I really appreciate your time, Haroon.