How The Home Depot Rebuilt Its Financial Operations

⇨ The Home Depot needed a phased rollout to support its legacy.

⇨ Central Finance allowed the company to migrate to SAP S/4HANA over time.

⇨ Investing in change management at the outset has been the key to success.

As companies embark on their business transformation journeys, they have several options when adopting the SAP S/4HANA system. Enterprises must assess the needs of each facet of their operations and take input on the best way to move forward.

The Home Depot had to chart this course in 2017 when this home improvement retail giant adopted its One Home Depot initiative, a multi-billion-dollar strategy marrying the digital and physical customer journey into one seamless, interconnected shopping experience.

Challenges

The Home Depot faced many challenges on its path to transformation. One of the largest challenges was that it had over 40 legacy financial systems that were hard-wired to support older business models, as well as older programming languages that made technological applications difficult to upgrade.

The company’s need for transformation was also driven by the impending deadline to migrate to SAP S/4HANA considering the coming sunset of SAP ECC. Additionally, Home Depot sought the ability to support newer enterprise priorities, such as investing in its supply chain network and appealing to new customer types.

Financial Vision

The Home Depot had a three-pronged vision for the financial overhaul it wanted to achieve in order to support the One Home Depot initiative:

• Simplify processes and systems: Standardizing processes allows the finance team to enable business operations.
• Gain accurate and timely information: Providing decision-makers with real-time data and insights is a critical step in business transformation.
• Lower cost of service: besides falling behind the modern methods of doing business, older systems and technologies can be expensive to maintain and operate, so adopting cloud technologies is key to reducing costs.

Central Finance

Because of the unique challenges, it faced as one of the nation’s most established brands, The Home Depot opted to use Central Finance for its transformation. Central Finance is an S/4HANA system that is installed as a sidecar. It gets financial accounting transactions via real-time replication both from SAP and non-SAP ERP source systems. Here, it allowed The Home Depot to replicate general and subledger data from SAP ECC to SAP S/4HANA.

Central Finance offered The Home Depot some key benefits, including:

• Simplifying systems: This initiative will merge the number of systems needed to finish tasks while also offering interfaces that are more user-friendly.
• Standardizing processes: With more standardized processes, the company will receive more consistent data reporting.
• Saving time: Added capabilities from the Central Finance initiative will allow workflows to be more efficient.
• Increasing automation: Automating manual processes helps associates move on to other strategic opportunities.
• Informing decision-makers: Allowing decision-makers to have access to real-time data will enhance data-driven decision-making.

Finance Transformation Journey

Speed and efficiency are key in these business transformation journeys, but companies need to move at their own pace, often migrating to SAP S/4HANA in a phased approach. With so many legacy systems already in place, The Home Depot needed a solution that allowed it to gradually shift financial data and processes at its own pace while implementing SAP S/4HANA without disrupting operations. Central Finance allowed The Home Depot to do just that.

The Home Depot had a long list of legacy processes it needed to transfer from its SAP ECC system to SAP S/4HANA. They included data management, general ledger accounting, other accounting processes, financial reporting, and more.

Moving all processes at once could lead to a disruption in business processes, so the company opted for transferring legacy processes to S/4HANA in a series of four releases, giving the company valuable change over time and a chance for one phase to settle in before getting underway on the next one.

• Release one: During release one, the processes of master data management, general ledger accounting, period-end close, allocation, consolidation, and financial reporting were moved from ECC to S/4HANA.
• Release two: In the second release, The Home Depot shifted accounts payable central payment processes to S/4HANA.
• Release three: Treasury and accounts receivable processes were moved to S/4HANA in the third release.
• Release four: Finally, period-end close, project, WBS, and fixed asset accounting were all moved to SAP S/4HANA, allowing The Home Depot to retire its legacy systems.

Value Delivered

Utilizing Central Finance gave The Home Depot accelerated transformation value by providing a new enterprise structure. Some of the structural improvements included:

• One Ledger: End users can now execute general ledger transactions in S/4HANA.
• Single Source of Truth: The single source of truth with the new enterprise structure design minimizes data replication while allowing near real-time data access.
• Accounting Automation: By automating previously manual accounting functions, transaction processing is seamless and simplified.
• Improved Reporting: The user interface allows improved reporting by allowing users to navigate to other steps in the consolidation process.

Lessons Learned

Although few businesses can relate to the size and scope of The Home Depot’s transformation journey, the lessons learned along the way to apply to an array of circumstances. Using the experience of The Home Depot’s journey can help those hoping to use Central Finance avoid certain pitfalls along the way and make certain their adoption of SAP S/4HANA goes as smoothly as possible for all stakeholders and allows their enterprise to modernize and work as efficiently as possible.

• Defined vision: Before embarking on a technological transformation program, business process owners need to have strong change management and communication plan. That allows the project to begin with a clearly defined vision that can be communicated to all involved.
• Get buy-in from all stakeholders early: It is important to have business and IT sponsors to support the project from day one. Ensure that everyone has a certain level of decision-making authority so they can actively take part in the change.
• Engage with SAP: Prior to starting the build, align with SAP Product Development and SAP Max Attention Services so they can play an active role.
• Plan for testing: You should be prepared to execute at least two cycles of volume and performance testing in your project timeline. Also, make sure you can generate enough volume in the testing environments and mimic production processes.

Conclusion

No two finance transformation journeys will ever look the same. Businesses hoping to change the way their financial systems operate must thoroughly consider all options before deciding what is right for them.

Home Depot faced unique challenges as a large, established enterprise looking to modernize its financial infrastructure. Using Central Finance gave it the flexibility and timing it needed to change its systems one step at a time, all while ensuring its operations continued as needed.

Regardless of how you choose to transform your business, laying out a roadmap before starting the process is a key first step on this journey. It not only gives all business process owners a chance to weigh in on important issues but also ensures that all stakeholders agree and work toward a common goal. A strong change management team with a well-thought-out communication plan can make a world of difference in a financial transformation scenario.

Register today for Mastering SAP, to hear from The Home Depot’s Financial Reporting and Operations Director, Brad Slocumb, on how Home Deport rebuilt its financial operations.