In the Utility industry, the Federal Energy Regulatory Commission (FERC) is the body responsible for public utility statutory authority. As a result, public utilities must be able to produce financial statements not only for GAAP, but also FERC. Meeting these regulatory requirements requires specific accounting and financial reporting that can be tedious, time consuming, and expensive.
To satisfy FERC accounting requirements, many utilities export financial data to Excel, where numerous adjustments are made to produce FERC financial statements and build rate cases. Moreover, the chief challenge continues to be complete traceability in accounting cost models.
Traceability is the tracing of a final accounting transaction all the way back to the original accounting entry. In other words, a final accounting transaction may be settled to either an asset or cost center, yet traceability provides all the cost objects and accounting entries in preceding transactions. When accounting data is massaged externally in Excel, this traceability is lost. Even within ERP systems, this traceability is difficult. End users must know each step in the process and the tables in order to manually link the chain of transactions to produce full traceability. This often results in the delay of rate cases (i.e. regulatory lag) and can result in the loss of millions of dollars.
With SAP S/4HANA, financial reporting is significantly improved via the Universal Journal, making any gap in real-time reporting a thing of the past. S/4HANA eliminates many of the sub ledgers and aggregate tables in ECC and incorporates the data elements necessary for real-time financial reporting for GAAP and FERC. In addition, complete traceability from the Universal Journal will reduce regulatory and manual effort and provide one source of the truth.
S/4HANA and the Universal Journal are making a huge impact in the Utility industry as more and more utilities see the value in enhanced real-time reporting.
For more information, check out Utegration's FINREG solution, based on SAP S/4HANA and Central Finance which provides real-time FERC accounting (aligned with Finance) and cost flow traceability with a unified journal entry, which can help reduce regulatory lag.