Best Practices for Financial KPI Design - Wellesley Information ...
Best Practices for Financial KPI Design - Wellesley Information ...
Best Practices for Financial KPI Design - Wellesley Information ...
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<strong>Best</strong> <strong>Practices</strong> <strong>for</strong><br />
<strong>Financial</strong> <strong>KPI</strong> <strong>Design</strong><br />
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Anand Jha<br />
Deloitte<br />
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© 2012 <strong>Wellesley</strong> In<strong>for</strong>mation Services. All rights reserved.<br />
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In This Session …<br />
• Understand the changing business environment and the need <strong>for</strong><br />
<strong>KPI</strong>-driven decision making<br />
• Approach on identifying and defining business <strong>KPI</strong>s<br />
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Guiding principles<br />
i • <strong>Best</strong> practices <strong>for</strong> <strong>KPI</strong> design in SAP BI<br />
Pros and cons<br />
Step-by-step <strong>KPI</strong> design creation in SAP NetWeaver ® BW<br />
Using hierarchies in SAP to define reusable <strong>KPI</strong> definition<br />
across the organization<br />
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1<br />
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What We’ll Cover …<br />
• Business requirements and challenges in financial reporting<br />
• Approach <strong>for</strong> defining financial <strong>KPI</strong>s<br />
• <strong>Design</strong>ing financial <strong>KPI</strong>s in an SAP BI environment<br />
• Wrap-up<br />
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2<br />
Keys to Success in Today’s Business Environment<br />
Marketing<br />
Strategy<br />
Operational<br />
Improvement<br />
Profit<br />
Maximization<br />
• Which markets should we be focusing on?<br />
• With growing complexity in channels-to-market, which are my best<br />
ones?<br />
• How can we rationalize our product range?<br />
• Which customers are most profitable?<br />
Cost<br />
Optimization<br />
• How can I make my planning more responsive to workload?<br />
• Do we have resources in the right place?<br />
• What is the difference if I outsource or offshore my processes?<br />
• How can I gain a better understanding of my shared service centers?<br />
• How can we increase profits?<br />
• Are products making the right margins?<br />
• Should the current operating model be changed to improve<br />
efficiencies (including costs)?<br />
• What do we have to do to manage cost better?<br />
• What is driving cost in the business?<br />
• If we have to cut costs, how can we be sure we have done it<br />
without damaging the business?<br />
• Are products correctly costed to bear accurate materials and<br />
activity costs?<br />
3<br />
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Need <strong>for</strong> Insightful In<strong>for</strong>mation: Business Intelligence and<br />
Analytics Is the Key<br />
• Today’s business pains underscore the importance of consistent,<br />
reliable, and timely in<strong>for</strong>mation <strong>for</strong> sound decision making<br />
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As market pressures increase,<br />
businesses across industries are<br />
realizing they need to leverage<br />
in<strong>for</strong>mation to drive the direction of<br />
their business and gain a<br />
competitive edge<br />
• Enabling them to capture and rationalize disparate data into an<br />
organization-wide view of in<strong>for</strong>mation<br />
• Measuring per<strong>for</strong>mance where business strategy is linked to<br />
goals and objectives, which are then monitored via <strong>KPI</strong>s<br />
• Slicing and dicing in<strong>for</strong>mation in many ways to provide a<br />
deeper understanding of future competitive implications<br />
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Analytics (Business Intelligence)<br />
• Delivers the right in<strong>for</strong>mation to the right person at the right time<br />
• Provides data consumers with interactive tools to drill into measures by various attributes,<br />
resulting in visibility into retention and attrition trends<br />
• Incorporates external in<strong>for</strong>mation <strong>for</strong> a more complete view of customers and competition<br />
• Provides the ability to measure agent contact rates, cycle times, and policy conversion rates<br />
• Increases transparency to the financial data, which allows <strong>for</strong> better regulatory and compliance<br />
reporting, resulting in better analysis and an accelerated close process<br />
4<br />
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What We’ll Cover …<br />
• Business requirements and challenges in financial reporting<br />
• Approach <strong>for</strong> defining financial <strong>KPI</strong>s<br />
• <strong>Design</strong>ing financial <strong>KPI</strong>s in an SAP BI environment<br />
• Wrap-up<br />
5<br />
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What Defines <strong>KPI</strong>s?<br />
• Key Per<strong>for</strong>mance Indicators (<strong>KPI</strong>s) are used to assess the present state of business and to prescribe<br />
the course of action<br />
Must reflect the organization’s mid- to long-term goals; they must be key to its success<br />
Must have a target – Have clear goals/per<strong>for</strong>mance requirements <strong>for</strong> the business processes<br />
Must be measurable – Have a quantitative/qualitative measurement of the results and compare<br />
with set goals<br />
Must have long-term considerations<br />
The goals <strong>for</strong> a particular <strong>KPI</strong> may change as the organization’s goals change, or as it gets closer<br />
to achieving a goal<br />
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Aligning <strong>KPI</strong>s with organization goals using Enterprise Value Map<br />
6<br />
Reporting Areas <strong>for</strong> Finance Data<br />
Core <strong>Financial</strong> Reporting<br />
• Income statement<br />
• Balance sheet<br />
• Cash flow<br />
• Realized/unrealized gains/losses<br />
• Fixed asset roll-<strong>for</strong>ward<br />
• Comprehensive income<br />
• Net investment income<br />
Regulatory Reporting<br />
• Industry-specific regulatory reports<br />
• Sample insurance sector reports<br />
Net investment income<br />
Premium and losses by states<br />
Medical malpractice premiums<br />
Non-admitted assets<br />
Management Reporting<br />
• P&L by profit centers<br />
• Management P&L<br />
• Cost studies on general operating<br />
expenses<br />
• Internal order analysis<br />
• Cost analysis <strong>for</strong> sending and<br />
receiving cost centers<br />
• Plan vs. Actual variance reporting<br />
Key Stakeholders Key Stakeholders Key Stakeholders<br />
• Regulators<br />
• Shareholders<br />
• Analysts<br />
• Regulators<br />
• CFO<br />
• Head of Functions<br />
• Analysts<br />
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<strong>KPI</strong> Guiding Principles (Leading Practice)<br />
• Define major business <strong>KPI</strong>s and identify supporting metrics<br />
• Key difference between a <strong>KPI</strong> and a metric:<br />
A metric is a data point (i.e., revenue amount) – It does not<br />
inherently have meaning<br />
A <strong>KPI</strong> applies meaning to the metric (i.e., revenue growth<br />
year over year)<br />
It immediately provides a measure which can be assessed<br />
(positive revenue growth is good; negative growth is bad)<br />
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<strong>KPI</strong> Guiding Principles (Leading Practice) (cont.)<br />
• Keep the number of <strong>KPI</strong>s small so as to focus everyone on<br />
achieving the same <strong>KPI</strong>s<br />
Have three to five enterprise-wide <strong>KPI</strong>s<br />
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Have three to five <strong>for</strong> each department/process t/ area that<br />
t<br />
can be “rolled up” into overall <strong>KPI</strong>s<br />
• Consistent measurement of <strong>KPI</strong>s will be required to have correct<br />
results<br />
• <strong>Design</strong> SAP NetWeaver Business Warehouse (SAP NetWeaver<br />
BW) to allow slice-and-dice analysis of <strong>KPI</strong>s and associated<br />
metrics<br />
9<br />
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Executive <strong>KPI</strong>s — Strategic (Top-Down) Approach<br />
Top-Down<br />
Approach<br />
Strategic<br />
Goals/<br />
Drivers<br />
Define/Map <strong>KPI</strong>s and<br />
supporting metrics<br />
<strong>Design</strong> SAP NetWeaver BW to allow<br />
slice-and-dice analysis of <strong>KPI</strong>s<br />
Develop reports, metrics, and dashboards<br />
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Top-Down <strong>KPI</strong> Requirements Gathering<br />
• Focus on strategic approach and reflect executives’ vision<br />
• Aligns with organizational visions and goals<br />
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Pros<br />
Effective when strategic goals change<br />
Allows organization to explore its capabilities<br />
Takes organization to the next level financially and<br />
to the next level of maturity<br />
Helps company to emerge into new era<br />
Cons<br />
Getting buy-in from lower levels in the organization<br />
More implementation ef<strong>for</strong>t<br />
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Operational <strong>KPI</strong>s — Tactical (Bottom-Up) Approach<br />
Bottom-Up<br />
Approach<br />
Strategic<br />
Goals/<br />
Drivers<br />
Define/Map <strong>KPI</strong>s and<br />
supporting metrics<br />
<strong>Design</strong> SAP NetWeaver ® BW to allow<br />
slice-and-dice analysis of <strong>KPI</strong>s<br />
Develop reports, metrics, and dashboards<br />
Executive<br />
<strong>KPI</strong>s<br />
Define<br />
operational<br />
<strong>KPI</strong>s,<br />
metrics, and<br />
reports<br />
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Bottom-Up <strong>KPI</strong> Requirements Gathering<br />
• Focus on tactical and operational activities<br />
• Not necessarily aligned with strategic goals and vision<br />
• Assist organization to improve operations<br />
• Improve on what the organization does best<br />
• Pros<br />
Effective with great business model<br />
Allows organization to have a controlled growth<br />
Takes organization to the next level of operations<br />
• Cons<br />
Business is slow to react to ever-changing market<br />
Might become less competitive<br />
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<strong>KPI</strong>s: Three-Dimensional Alignment<br />
Goal 1<br />
Goal 2<br />
Goal 3<br />
Goal 4<br />
Market to<br />
Sales<br />
Strategic goals<br />
Post to<br />
Close<br />
Revenue<br />
growth<br />
<strong>KPI</strong> groupings<br />
and categories<br />
Quote to<br />
Cash<br />
Shareholder value<br />
Operating<br />
Margin<br />
Asset<br />
Efficiency<br />
Enterprise Value Maps<br />
Request<br />
to Service<br />
Expectations<br />
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<strong>KPI</strong>s Alignment to Goals and Categories<br />
Market to<br />
Sales<br />
Post to<br />
Close<br />
Quote to<br />
Cash<br />
Request<br />
to Service<br />
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Goal 1<br />
Rev venue<br />
gr rowth<br />
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Goal 2<br />
Goal 3<br />
Goal 4<br />
Communication Channels<br />
<strong>KPI</strong>s<br />
Operating<br />
Margin<br />
Asset<br />
Effi ciency<br />
Expectations<br />
Shareholder valu ue<br />
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Additional <strong>KPI</strong> Selection Considerations<br />
• The <strong>KPI</strong>s should meet the needs of the key stakeholders by<br />
ensuring progress in a number of key areas<br />
Available<br />
How complete is the dataset t behind your key metrics?<br />
How accessible are all needed data sources?<br />
How easily can you create customized reports <strong>for</strong> ad hoc<br />
analysis?<br />
What additional in<strong>for</strong>mation would you like/need to see<br />
including in<strong>for</strong>mation from other functions?<br />
Timely<br />
Are metrics/<strong>KPI</strong>s delivered with appropriate frequency?<br />
Do the metrics/<strong>KPI</strong>s cover the right amount of time? (i.e., Is<br />
weekly rather than monthly data needed?)<br />
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Additional <strong>KPI</strong> Selection Considerations (cont.)<br />
• The <strong>KPI</strong>s should meet the needs of the key stakeholders by<br />
ensuring progress in a number of key areas (cont.)<br />
Consistent<br />
Do metrics/<strong>KPI</strong>s have universally understood d meaning<br />
across the organization? (i.e., Does everyone understand<br />
what “gross margin” means on all reports?)<br />
How confident are you in the calculated metrics/<strong>KPI</strong>s? What<br />
reporting metrics tend to be the most controversial or least<br />
trusted?<br />
Are metrics/<strong>KPI</strong>s consistently calculated across the<br />
organization?<br />
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Additional <strong>KPI</strong> Selection Considerations (cont.)<br />
• The <strong>KPI</strong>s should meet the needs of the key stakeholders by<br />
ensuring progress in a number of key areas (cont.)<br />
Actionable<br />
Is enough context t provided d with <strong>KPI</strong>s so that t you fully<br />
understand the situation? (i.e., To review results, what else, if<br />
anything, is needed besides a comparison to LY, Plan, and<br />
Forecast?)<br />
Is each key metric/<strong>KPI</strong> clearly assigned to a function that is<br />
accountable <strong>for</strong> its per<strong>for</strong>mance? (i.e., Is there a group where<br />
“the buck ultimately t l stops” <strong>for</strong> each metric?)<br />
If all reports arrived simultaneously, which report/<strong>KPI</strong> would<br />
you look at first? Why?<br />
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<strong>KPI</strong> Profile — Sample<br />
<strong>KPI</strong> Title – Revenue Growth Trend<br />
<strong>KPI</strong> ID: <strong>KPI</strong>_PTC_T001 Owner: XYZ<br />
Department: Executives<br />
Type: Strategic<br />
<strong>KPI</strong> Definition/Calculation:<br />
Net Revenue (Rev less Discounts) growth trend, $, # of Units<br />
Usage/Benefit:<br />
• Provides revenue growth trend over a period of time<br />
• Compare actual revenue growth to <strong>for</strong>ecast and Planning<br />
Refresh<br />
Frequency:<br />
Daily<br />
Supporting<br />
<strong>KPI</strong>/Metrics:<br />
$ Revenue posted,<br />
Forecast, Plan<br />
# Qty Billed<br />
Dimensions:<br />
Division, Business Unit, Product Line,<br />
Revenue category hierarchy, and<br />
Territory (Sales Organization)<br />
Data Source(s):<br />
SAP FI<br />
Baseline:<br />
200 million<br />
Goal/Objectives: Consistently achieve<br />
revenue growth and<br />
operating income<br />
History:<br />
3 years<br />
Target:<br />
500 million<br />
Comparison:<br />
MTD<br />
YTD<br />
Actual, Forecast,<br />
Plan<br />
Security:<br />
Executive<br />
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<strong>KPI</strong> Definition Approach Summary<br />
Inputs Working Sessions Outputs<br />
Meeting Minutes<br />
• Summary of<br />
interview<br />
meeting<br />
• Requirements<br />
• Related strategic<br />
goals<br />
SAP <strong>KPI</strong>s<br />
• Documents<br />
created by SAP<br />
relevant to<br />
specific industry<br />
• Reporting list<br />
from standard<br />
business content<br />
• Enterprise Value<br />
Map (EVM)<br />
• <strong>KPI</strong> <strong>for</strong> specific<br />
industry<br />
<strong>KPI</strong> Alignment<br />
Dashboard Mockup<br />
• Dashboard floor plan with<br />
mock-up samples<br />
Development & Test<br />
<strong>KPI</strong> Profile<br />
• List of executive<br />
and operational<br />
<strong>KPI</strong> profiles<br />
<strong>KPI</strong> List<br />
• List of Executive<br />
<strong>KPI</strong>s<br />
• List of<br />
Operational <strong>KPI</strong>s<br />
Functional/Tech<br />
Specifications<br />
• Specifications<br />
Reports/<br />
Dashboard<br />
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What We’ll Cover …<br />
• Business requirements and challenges in financial reporting<br />
• Approach <strong>for</strong> defining financial <strong>KPI</strong>s<br />
• <strong>Design</strong>ing financial <strong>KPI</strong>s in an SAP BI environment<br />
• Wrap-up<br />
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<strong>Design</strong>ing <strong>Financial</strong> <strong>KPI</strong>s in an SAP BI Environment<br />
• Components of a <strong>KPI</strong> definition<br />
Traditional/Shortest route<br />
• <strong>Best</strong> practice approach to <strong>KPI</strong> design<br />
Reporting data dimensions<br />
Code block definition<br />
<strong>KPI</strong> matrix<br />
• <strong>Design</strong> of <strong>KPI</strong> using hierarchies – Flexibility, types, pros, and<br />
cons<br />
<strong>Financial</strong> statement version<br />
BI reporting hierarchies<br />
Hierarchy sets<br />
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Components of a <strong>KPI</strong> Definition in BI<br />
• Key components <strong>for</strong> a <strong>KPI</strong> include<br />
Metric/Measures<br />
Characteristics/Data Dimensions<br />
Restrictions/Filters<br />
• Traditional <strong>KPI</strong> design/development approach<br />
Hard code the <strong>KPI</strong>’s restrictions through front-end queries – value type,<br />
company code, G/L accounts, profit centers, etc.<br />
Restrictions on individual/multiple/range of G/L account is being done<br />
through restriction on hierarchy nodes<br />
• Typical pain points<br />
Changes impact multiple localized <strong>KPI</strong>s in multiple reports as filters were<br />
localized to the reports<br />
Tracking the where used list and updating changes required is manual and a<br />
considerable ef<strong>for</strong>t and some time may be spent<br />
Transport in upstream systems (QA, Prod) in the landscape may be needed<br />
<strong>for</strong> the <strong>KPI</strong> realignment after the changes<br />
Longer time to deploy changed <strong>KPI</strong>s in production<br />
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<strong>Design</strong>ing <strong>Financial</strong> <strong>KPI</strong>s in an SAP BI Environment<br />
• Components of a <strong>KPI</strong> definition<br />
Traditional/Shortest route<br />
• <strong>Best</strong> practice approach to <strong>KPI</strong> design<br />
Reporting data dimensions<br />
Code block definition<br />
<strong>KPI</strong> matrix<br />
• <strong>Design</strong> of <strong>KPI</strong> using hierarchies – Flexibility, types, pros, and<br />
cons<br />
<strong>Financial</strong> statement version<br />
BI reporting hierarchies<br />
Hierarchy sets<br />
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<strong>Best</strong> Practice Approach to <strong>KPI</strong> <strong>Design</strong><br />
• Reporting data dimension<br />
Identify reporting dimensions involved<br />
• Code block elements<br />
Ascertain reporting/summarizing elements/dimensions<br />
• <strong>KPI</strong> matrix<br />
Log all <strong>KPI</strong>s needed across all reports and define them using<br />
the code block elements<br />
• Key figure development strategy<br />
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Globalize designs, apt use of hierarchies Road to flexibility,<br />
sustainability, and manageability<br />
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<strong>Design</strong>ing <strong>Financial</strong> <strong>KPI</strong>s in an SAP BI Environment<br />
• Components of a <strong>KPI</strong> definition<br />
Traditional/Shortest route<br />
• <strong>Best</strong> practice approach to <strong>KPI</strong> design<br />
Reporting data dimensions<br />
Code block definition<br />
<strong>KPI</strong> matrix<br />
• <strong>Design</strong> of <strong>KPI</strong> using hierarchies – Flexibility, types, pros, and<br />
cons<br />
<strong>Financial</strong> statement version<br />
BI reporting hierarchies<br />
Hierarchy sets<br />
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26<br />
Reporting Data Dimensions and <strong>KPI</strong> Definition<br />
• Maps BI reporting data requirements against various dimensions,<br />
including <strong>KPI</strong>s and characteristics<br />
• Benefits<br />
<br />
The RDD document eliminates i all redundant d dimension i and key<br />
figures across reports and presents a consolidated view<br />
Extent of impact on existing BI reports <strong>for</strong> any change in<br />
dimension of KF can be easily tracked<br />
New dimension or Key Figure can be easily added and mapped<br />
against an existing or a new report<br />
• Limitations<br />
A process flow should be in place to continuously update the<br />
document as further changes are missed after initial finalization<br />
of the RDD document<br />
27<br />
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Sample Reporting Data Dimensions<br />
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1<br />
2<br />
1<br />
Column <strong>for</strong> data<br />
dimensions<br />
2 Column <strong>for</strong> reports<br />
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3<br />
4<br />
3 Data element<br />
_________________________________<br />
4 Data element used<br />
in a report – “X”<br />
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28<br />
<strong>Design</strong>ing <strong>Financial</strong> <strong>KPI</strong>s in an SAP BI Environment<br />
• Components of a <strong>KPI</strong> definition<br />
Traditional/Shortest route<br />
• <strong>Best</strong> practice approach to <strong>KPI</strong> design<br />
Reporting data dimensions<br />
Code block definition<br />
<strong>KPI</strong> matrix<br />
• <strong>Design</strong> of <strong>KPI</strong> using hierarchies – Flexibility, types, pros, and<br />
cons<br />
<strong>Financial</strong> statement version<br />
BI reporting hierarchies<br />
Hierarchy sets<br />
29<br />
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What Defines Code Block?<br />
• Code block is an integrated set of dimensions, values, and<br />
mapping rules that provides common, consistent, and reliable<br />
views of enterprise in<strong>for</strong>mation throughout the company<br />
• Maintain code block at global/corporate level to have a common<br />
financial language throughout the company to discuss financial<br />
results across segments/BUs<br />
• The global code block will be used across the global enterprise<br />
and will set in place a common financial language that supports<br />
the standardization of master data definitions, accounting<br />
processes, and reporting processes<br />
• Facilitates the mapping of data between all relevant systems by<br />
providing standard definitions and usage, standard values and<br />
hierarchies, and standard metadata<br />
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30<br />
Guiding Principles <strong>for</strong> Code Block Elements<br />
• <strong>Financial</strong> and Regulatory Reporting<br />
Key Elements that are necessary <strong>for</strong> <strong>Financial</strong> and Regulatory<br />
Reporting out of General Ledger<br />
These elements include both the standard SAP elements, as well as<br />
any user defined “custom” fields, e.g., Company Code and G/L<br />
account<br />
• <strong>Financial</strong> data Integration<br />
Elements that are necessary to allow walk backs from one system to<br />
another, or aggregation from one level to the next<br />
This also includes key fields used <strong>for</strong> summarizing into a common<br />
financial system with other FI systems<br />
• Management Accounting and Reporting<br />
Key elements that are necessary <strong>for</strong> Management Accounting and<br />
reporting<br />
These elements include both the standard SAP elements, as well as<br />
any user defined “custom” fields, e.g., Profit Center and Cost Center<br />
31<br />
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Benefits of Code Block Approach <strong>for</strong> <strong>KPI</strong> Definition<br />
• Improve transparency in reporting, leading to ease in preparation<br />
of global consolidated financial statements<br />
• Code block contains elements such as Company code, Segment,<br />
Profit Center on which legal reporting can be done<br />
• These elements have consistent meaning across the organization<br />
that mitigates change management, retraining, mistakes, etc., <strong>for</strong><br />
end users<br />
• It creates a viable foundation <strong>for</strong> future SAP projects <strong>for</strong> the<br />
organization<br />
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32<br />
Sample Code Block Element Summary<br />
Company Code<br />
G/L Account<br />
Branch<br />
Trading Partner<br />
Document Type<br />
Profit Center<br />
Segment<br />
Cost Center<br />
Description<br />
Legally independent company that is within one country, linked to one<br />
language, uses one local currency, and uses one global chart of accounts<br />
Supports the items included on external financial statements, as well as<br />
key management reports<br />
Branch will represent the location or grouping of locations that is identified<br />
<strong>for</strong> taking credit <strong>for</strong> the revenue and product-related expenses<br />
A dimension used to consolidate individual companies and track intercompany<br />
transactions<br />
Classifies the Business transaction and is saved in the document header<br />
when a document is posted<br />
Profit Center is a management reporting dimension that can produce a<br />
financial balance sheet and income statement <strong>for</strong> internal reporting<br />
purposes<br />
Segment field is used to produce external financial statements. The values<br />
are defined based on Segment reporting requirements.<br />
Cost Center is an area of responsibility within a company where costs are<br />
measured, analyzed, allocated, planned, and reported<br />
Regulatory<br />
Reporting<br />
Criteria<br />
<strong>Financial</strong><br />
Reporting<br />
Management<br />
Reporting<br />
X X X<br />
X<br />
X<br />
X<br />
X<br />
X<br />
X X X<br />
X<br />
X X X<br />
X<br />
33<br />
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_________________________________<br />
_________________________________<br />
_________________________________
<strong>Design</strong>ing <strong>Financial</strong> <strong>KPI</strong>s in an SAP BI Environment<br />
• Components of a <strong>KPI</strong> definition<br />
Traditional/Shortest route<br />
• <strong>Best</strong> practice approach to <strong>KPI</strong> design<br />
Reporting data dimensions<br />
Code block definition<br />
<strong>KPI</strong> matrix<br />
• <strong>Design</strong> of <strong>KPI</strong> using hierarchies – Flexibility, types, pros, and<br />
cons<br />
<strong>Financial</strong> statement version<br />
BI reporting hierarchies<br />
Hierarchy sets<br />
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34<br />
<strong>KPI</strong> Matrix — Key Figure Rationalization<br />
• Document all <strong>KPI</strong>s – all <strong>KPI</strong>s are garnered per the reporting<br />
requirements – per report intended<br />
• Classify <strong>KPI</strong>s – Global vs. Local – per usage across reports<br />
• Define <strong>KPI</strong>s from a code block element with lowest granularity to<br />
the one with highest granularity (> usage of lower granular code<br />
block elements, better definition)<br />
• Globalize <strong>KPI</strong>s that can be defined with repetitive code block<br />
elements across reports, and localize <strong>KPI</strong>s that used less<br />
repetitive code block elements<br />
35<br />
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<strong>KPI</strong> Matrix<br />
1 <strong>KPI</strong> 2 3 4 5 Code Block Elements 6<br />
Report 7<br />
<strong>KPI</strong> used in a report – X<br />
1 2 3 4 5 6<br />
7<br />
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36<br />
<strong>Design</strong>ing <strong>Financial</strong> <strong>KPI</strong>s in an SAP BI Environment<br />
• Components of a <strong>KPI</strong> definition<br />
Traditional/Shortest route<br />
• <strong>Best</strong> practice approach to <strong>KPI</strong> design<br />
Reporting data dimensions<br />
Code block definition<br />
<strong>KPI</strong> matrix<br />
• <strong>Design</strong> of <strong>KPI</strong> using hierarchies – Flexibility, types, pros, and<br />
cons<br />
<strong>Financial</strong> statement version<br />
BI reporting hierarchies<br />
Hierarchy sets<br />
37<br />
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<strong>Design</strong> of <strong>KPI</strong> Using Hierarchies<br />
• Hierarchies represent a parent-child relationship within a single or multiple<br />
data dimensions<br />
• Hierarchy <strong>Design</strong> approach<br />
Global <strong>KPI</strong>s could be defined using hierarchies<br />
Hierarchies hide the changes in G/L accounts or changes in the<br />
hierarchical organization (done in the source system) from the<br />
reports, and the report nodes adjust themselves after the changed<br />
hierarchy is loaded to SAP NetWeaver BW<br />
Hierarchies – Standard or can be custom extracted from source system<br />
Flexible reporting structure minimizing maintenance ef<strong>for</strong>t<br />
Reporting hierarchy nodes can be used across multiple reporting<br />
projects if similarity il it exists<br />
• Types of Hierarchies in SAP BI<br />
Standard FSV – <strong>Financial</strong> Statement Version (G/L account only)<br />
BI Reporting hierarchies<br />
Hierarchy sets<br />
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38<br />
<strong>Design</strong>ing <strong>Financial</strong> <strong>KPI</strong>s in an SAP BI Environment<br />
• Components of a <strong>KPI</strong> definition<br />
Traditional/Shortest route<br />
• <strong>Best</strong> practice approach to <strong>KPI</strong> design<br />
Reporting data dimensions<br />
Code block definition<br />
<strong>KPI</strong> matrix<br />
• <strong>Design</strong> of <strong>KPI</strong> using hierarchies – Flexibility, types, pros, and<br />
cons<br />
<strong>Financial</strong> statement version<br />
BI reporting hierarchies<br />
Hierarchy sets<br />
39<br />
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Standard FSV Hierarchy Nodes<br />
• <strong>Financial</strong> Statement Versions <strong>for</strong>m the basis <strong>for</strong> creating financial<br />
statements. They are extracted in the BI and reports can be built<br />
on them.<br />
<br />
Standard G/L master data hierarchy and extractors: FSE3<br />
<br />
BW G/L Extractor: FSV<br />
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40<br />
Standard FSV Hierarchy Nodes (cont.)<br />
• Benefits<br />
Level of detail can be varied in the FSV. For example,<br />
consolidated view – rolled up at highest level; operational view<br />
– lowest level.<br />
Several financial statement versions can be created if financial<br />
statements use different <strong>for</strong>mats<br />
For example, different balance sheet <strong>for</strong>mats can be set up<br />
according to various criteria, such as <strong>for</strong> tax, statutory, or<br />
management reporting<br />
• Limitations<br />
A report using an FSV hierarchy cannot pick and choose<br />
accounts under a node if partial in<strong>for</strong>mation needs to be shown<br />
Order of the accounts cannot be changed within a report if user<br />
wants to view in<strong>for</strong>mation in a different way<br />
41<br />
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_________________________________
<strong>Design</strong>ing <strong>Financial</strong> <strong>KPI</strong>s in an SAP BI Environment<br />
• Components of a <strong>KPI</strong> definition<br />
Traditional/Shortest route<br />
• <strong>Best</strong> practice approach to <strong>KPI</strong> design<br />
Reporting data dimensions<br />
Code block definition<br />
<strong>KPI</strong> matrix<br />
• <strong>Design</strong> of <strong>KPI</strong> using hierarchies – Flexibility, types, pros, and<br />
cons<br />
<strong>Financial</strong> statement version<br />
BI reporting hierarchies<br />
Hierarchy sets<br />
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42<br />
BI Reporting Hierarchies<br />
• Reporting through hierarchy is a BI functionality through which reports<br />
are built flexibly using any <strong>Financial</strong> Statement Version hierarchy. It also<br />
helps to minimize the maintenance ef<strong>for</strong>t. In this scenario, BI reporting<br />
hierarchies, nodes, or accounts will be mapped to lines of each report.<br />
• As individual id BI reporting hierarchy h nodes are linked to the <strong>Financial</strong> i Statement Version nodes, any changes in the grouping of G/L accounts<br />
under a node will be automatically reflected on the report. This approach<br />
will prevent changes on individual reports.<br />
• There are two types of BI reporting, one is FSV linked and one is a<br />
completely independent custom hierarchy directly maintained in SAP<br />
NetWeaver BW<br />
43<br />
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BI Reporting Hierarchies (cont.)<br />
• Benefits<br />
This approach eliminates the inflexibility of the FSV by providing an<br />
option to select and group nodes and accounts as per reporting<br />
requirements<br />
Duplicate dimensional values can be used on the reporting hierarchy<br />
on multiple nodes; FSV can’t have duplicate value<br />
Reporting hierarchy nodes can be used across multiple reporting<br />
projects if similarity exists<br />
Unit testing ef<strong>for</strong>t of the reports can be accelerated, as developers can<br />
create reporting nodes in the hierarchy, and need not wait <strong>for</strong> <strong>Financial</strong><br />
Statement Version (FSV) <strong>for</strong> testing<br />
• Limitationsit ti<br />
Hierarchy maintenance is not automated and may result in<br />
discrepancies between source and BI systems<br />
Needs an additional ef<strong>for</strong>t in BI to map reporting requirements to<br />
reporting hierarchy. If a report needs additional node or value<br />
restriction, then reporting hierarchy also needs to be changed.<br />
44<br />
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BI Reporting Hierarchy Creation<br />
Step 1: First, the standard ECC G/L account-based hierarchy <strong>for</strong> a <strong>Financial</strong><br />
Statement Version will be extracted into BI<br />
Step 2: Next, BI report-specific sections are appended in the standard G/L<br />
hierarchy<br />
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BI Reporting Hierarchy Creation (cont.)<br />
Step 3: BI report-specific section nodes are linked to standard G/L hierarchy nodes<br />
Hierarchy node<br />
USGP64 in reporting<br />
section is linked to<br />
USGP64 node in ECC<br />
standard G/L<br />
hierarchy<br />
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46<br />
G/L Accounts <strong>for</strong> Reporting<br />
Step 4: Individual report lines can be mapped directly to BI report-specific<br />
section node in the hierarchy<br />
Multiple G/L<br />
accounts are<br />
rolled up to the<br />
hierarchy node<br />
USGP64<br />
47<br />
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Account with Report Position Mapping<br />
ECC<br />
Journal<br />
G/L Account Amount<br />
1600300100 26738 USD<br />
…<br />
BI Reporting Hierarchy<br />
BI Report<br />
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48<br />
<strong>Design</strong>ing <strong>Financial</strong> <strong>KPI</strong>s in an SAP BI Environment<br />
• Components of a <strong>KPI</strong> definition<br />
Traditional/Shortest route<br />
• <strong>Best</strong> practice approach to <strong>KPI</strong> design<br />
Reporting data dimensions<br />
Code block definition<br />
<strong>KPI</strong> matrix<br />
• <strong>Design</strong> of <strong>KPI</strong> using hierarchies – Flexibility, types, pros, and<br />
cons<br />
<strong>Financial</strong> statement version<br />
BI reporting hierarchies<br />
Hierarchy sets<br />
49<br />
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Hierarchy Sets<br />
• Reporting through hierarchy sets is a functionality where reports<br />
are built using hierarchies created on various characteristics,<br />
such as G/L account, Trading Partner, Transaction Type, etc.<br />
<br />
These hierarchy sets are built in ECC and extracted into BI<br />
through customized extractors<br />
• The nodes on the hierarchies can be mapped to various lines of<br />
a report<br />
• Benefits<br />
It inherits all the benefits of the “Reporting Hierarchies;”<br />
moreover, it eliminates any maintenance ef<strong>for</strong>t in BI, as<br />
hierarchies are maintained in ECC<br />
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50<br />
Hierarchy Sets (cont.)<br />
• Benefits (cont.)<br />
A combination of hierarchy sets on multiple dimensions can be<br />
used to build structures that are necessary <strong>for</strong> some regulatory<br />
reporting requirements<br />
There is no requirement of slice-and-dice or drill-down<br />
capability on such reports<br />
Reports in both ECC and SAP NetWeaver BW can use same<br />
hierarchy sets<br />
• Limitations<br />
A customized extractor needs to be built to extract hierarchy<br />
sets, as standard extractors are not available<br />
Sign flipping needs to be consistent <strong>for</strong> an account across all<br />
hierarchy sets<br />
51<br />
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Hierarchy Set Creation<br />
• Create Hierarchy sets in GS03 and custom extractors<br />
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52<br />
Hierarchy Set Creation (cont.)<br />
53<br />
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Hierarchy Set Creation (cont.)<br />
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54<br />
Hierarchy Set Use: Report<br />
55<br />
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Hierarchy Set Extractor — Custom (Function Module)<br />
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56<br />
The Right Fit<br />
Features FSV Hierarchy BI Reporting<br />
Hierarchy<br />
Usage<br />
Standard FSV nodes Multiple FSV nodes<br />
can be used<br />
are needed repeatedly<br />
in single/multiple <strong>KPI</strong>s<br />
across multiple reports<br />
Hierarchy Sets<br />
Same leaf nodes are<br />
needed across<br />
multiple parents<br />
Code block element On G/L account only On any BW object On any characteristic<br />
in source system<br />
Extractor Standard extract Manual maintenance Custom extract<br />
Time dependency Time-dependent Time-dependent Time-independent<br />
hierarchy possible hierarchy possible (history lost unless is<br />
manually fed in<br />
different hierarchies in<br />
SAP NetWeaver BW)<br />
Flexibility and<br />
automation<br />
High flexibility and fully<br />
automated<br />
High flexibility and<br />
semi-automated<br />
Very high flexibility and<br />
automated<br />
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Reporting and Hierarchy Usage in SAP BusinessObjects<br />
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*Source SAP<br />
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Reporting and Hierarchy Usage in SAP BusinessObjects<br />
(cont.)<br />
* Metadata Support <strong>for</strong> BEx Queries<br />
*Source SAP<br />
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What We’ll Cover …<br />
• Business requirements and challenges in financial reporting<br />
• Approach <strong>for</strong> defining financial <strong>KPI</strong>s<br />
• <strong>Design</strong>ing financial <strong>KPI</strong>s in an SAP BI environment<br />
• Wrap-up<br />
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Additional Resources<br />
• Sample Enterprise Value Map<br />
http://public.deloitte.com/media/0268/enterprise_value_map_2_<br />
0.pdf<br />
• Seng Kee Tan, “Practical Advice <strong>for</strong> Planning a Successful SAP<br />
CRM Executive Dashboard Implementation” (SAPinsider CRM<br />
Conference, Orlando, 2009).<br />
• <strong>Best</strong> <strong>Practices</strong> <strong>for</strong> SAP BusinessObjects 4.0 in combination with<br />
SAP NetWeaver<br />
www.sdn.sap.com/irj/boc/bi-solution-architecture<br />
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7 Key Points to Take Home<br />
• <strong>Best</strong> practice approach to defining <strong>KPI</strong>s includes strategy, data,<br />
and technology aspects<br />
• <strong>KPI</strong> definitions are measurable, have a target, and are meaningful<br />
• Top-down <strong>KPI</strong> requirements collection focuses on strategic<br />
t approach and reflects executives’ vision<br />
• Bottom-up <strong>KPI</strong> requirements collection focuses on tactical and<br />
operational goals<br />
• Code block elements – Improve transparency in reporting, leading<br />
to ease in preparation of global consolidated reports<br />
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7 Key Points to Take Home (cont.)<br />
• Hierarchies hide the changes in G/L accounts or changes in the<br />
hierarchical organization (done in the source system) from the<br />
reports and the report nodes adjust themselves after the changed<br />
hierarchy is loaded to SAP NetWeaver BW<br />
• Reporting through hierarchy sets is a functionality where reports<br />
are built using hierarchies created on various characteristics<br />
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Your Turn!<br />
How to contact me:<br />
Anand Jha<br />
ajha@deloitte.com<br />
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Disclaimer<br />
SAP, R/3, mySAP, mySAP.com, SAP NetWeaver ® , Duet ® , PartnerEdge, and other SAP products and services mentioned herein as well as their<br />
respective logos are trademarks or registered trademarks of SAP AG in Germany and in several other countries all over the world. All other product<br />
and service names mentioned are the trademarks of their respective companies. <strong>Wellesley</strong> In<strong>for</strong>mation Services is neither owned nor controlled by<br />
SAP.<br />
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