Incoming Invoice Processing with SAP S/4HANA Public Cloud and Private Cloud

In today’s business world, efficient processing of incoming invoices is crucial to a company’s success. SAP S/4HANA offers comprehensive solutions for this purpose, whose technical processes, integration options, and extension approaches vary greatly depending on the deployment model— On-Premise, in the Private Cloud, or in the Public Cloud.

That’s why today we want to take a closer look at incoming invoice processing with SAP S/4HANA: What exactly do the workflows look like in the different deployment models? What technologies are used? What are the special features? And what are their advantages and disadvantages?

SAP S/4HANA: An Overview

SAP S/4HANA is the latest generation of SAP Business Suite and was developed to support business processes in real time. It is based on the SAP HANA in-memory database and offers simplified data modeling and a user-friendly interface.

SAP S/4HANA deployment models in detail

Depending on your company’s strategy and IT infrastructure, you can choose from different deployment models:

• On-Premise: The software is installed and operated in the company’s own data center. This allows for maximum control and adaptability, but requires significant investment in hardware and IT resources.​

• Public Cloud: A standardized cloud solution hosted by SAP. Companies benefit from fast implementation times and regular updates, but have less scope for individual customization.​

• Private Cloud: A mixture of both approaches, where the software is operated in a dedicated cloud environment. This offers greater flexibility than the Public Cloud while reducing the administrative effort compared to the on-premise solution.

Note: In our glossary article SAP S/4HANA Public & Private Cloud we take a detailed look at the different SAP deployment models, how they work, and their advantages.

Basics of Digital Invoice Processing with SAP S/4HANA

Digital invoice processing with SAP S/4HANA enables companies to automate the entire process from invoice entry to payment. This reduces manual intervention, minimizes errors, and speeds up the entire process. The central components of this process are:

SAP S/4HANA On Premise: Integrated Invoice Processing in Your Own SAP System

In the on-premise model, incoming invoice processing runs entirely within your own SAP system landscape (e.g., SAP ECC or SAP S/4HANA On Premise). A typical process begins with the initial reception of the invoice: paper invoices are scanned and read using OCR, email invoices (PDF) are imported automatically, and electronic formats (e.g., XRechnung, ZUGFeRD, EDI/XML) are transferred directly. The captured invoice data is then transferred to the SAP system and initially pre-recorded there as a document (e.g., as a parked invoice or a verification document). The original documents (scan/PDF) are attached to the document via SAP ArchiveLink or a DMS integration and archived in an audit-proof manner. In many on-premise scenarios, a separate content server system is used for this purpose, which is directly connected to SAP.

For automated document processing, on-premise solutions often rely on locally installed OCR software and machine learning components. The fields scanned (supplier, invoice date, amount, order numbers, etc.) are transferred to SAP via RFC/BAPI or web service, where they trigger an invoice document. Alternatively, e-invoices can also be integrated directly into SAP via IDoc or web service. Overall, integration in the on-premise model is deep and direct: all components (ERP, workflow, OCR, archive) can be closely interlinked within your own IT infrastructure.

Workflow control for invoice verification and approval is typically performed on-premise using SAP Business Workflow in the ERP system. As soon as an invoice document is pre-entered (e.g., as a parked vendor invoice or as an MIRO document with quantity or price deviations), a workflow is started to check the content and approve it.

With Flexible Workflow, S/4HANA provides a configurable workflow engine that can be used to define approval processes based on conditions. This is based on the classic workflow engine, but does not require any coding – rules and approvers can be configured via the Fiori app. This means that extensive workflow design options are available on-premise.

In purely SAP-integrated scenarios (=Inbox Standard), authorization checks, business logic, and user master data are also centrally located in the SAP system. This has the advantage that no external reconciliation is necessary – all rules (e.g., who is authorized to approve up to what amount?) access existing organizational structures and master data in SAP. Nevertheless, on-premise also offers the option of an upstream (external) workflow system (=Inbox Light) – for example, if several ERP systems are involved or a uniform tool is to be used for different platforms. In this case, the invoice is first entered and checked in a separate system and only posted to SAP after approval.

Invoice Processing with SAP S/4HANA Private Cloud

The Private Cloud model is functionally very similar to an on-premise installation, but is hosted by SAP or a hyperscaler. The main difference is that SAP is responsible for operations (infrastructure, updates, etc.), while the customer can configure the system and expand it within certain limits. Unlike the Public Cloud, the S/4HANA Private Cloud allows the use of classic extensions and add-ons, provided they are approved by SAP. Technically, incoming invoice processing also takes place in the S/4HANA system itself, including SAP Business Workflow or Flexible Workflow for invoice approval. From the user’s point of view, everything can be designed as in the on-premise case – including the use of the Fiori Inbox for approvals within SAP.

However, SAP is promoting the principle of “clean core” in the S/4HANA Cloud environment. This means that customer-specific adaptations in the SAP core should be avoided as far as possible in order to ensure easier ability to update. In the Private Cloud model, it is therefore recommended to use side-by-side extensions (e.g., via the SAP Business Technology Platform) wherever possible, rather than modifying the SAP core through modifications or deeply integrated add-ons. This strategy also has an impact on invoice processing: In addition to the classic “SAP-only” solution (all steps within S/4HANA), hybrid approaches in which certain components are outsourced are gaining in importance. In particular, the approval workflow can be implemented externally (=Inbox Light).

Workflow Options “Inbox Standard” vs. “Inbox Light” in Private Cloud and On-Premise

Inbox Standard (SAP only): This option corresponds to the integrated workflow described above. The entire process logic is located in the SAP system – from invoice entry/pre-entry to approval and final posting. The workflow engine is SAP Business Workflow (or Flexible Workflow) within S/4HANA. Users work through their tasks in SAP Fiori My Inbox, which accesses the work items in SAP directly.

Advantage: Deep integration and use of all SAP functionalities – for example, SAP automatically checks purchase order references, received goods, account assignments, etc. in real time, and authorizations/approval limits refer to SAP Organizational Management. However, this approach requires that you remain within SAP; external systems may need to be connected via interfaces, which means additional effort if, for example, a group-wide uniform solution is desired.

Inbox Light (external/hybrid): Here, the approval workflow is outsourced to an upstream system, while SAP serves as the processing system in the background. Specifically, this can mean that the invoice is entered or stored in the SAP S/4 system, but the approval steps take place in an external workflow tool. SAP provides public APIs for this purpose to exchange data. In a hybrid scenario of this kind, Fiori My Inbox is often still used as the central task board for the user, but external workflow tasks are also integrated there. The SAP system remains lean (clean core) because it only handles document posting and archiving, while complex logic is implemented in the external tool. Overall, the hybrid solution offers more freedom in UI and process design outside of SAP, but requires initial integration work (e.g., providing public APIs and synchronizing master data such as suppliers, if these are required in the workflow).

Invoice Processing with SAP S/4HANA Public Cloud

In the Public Cloud – i.e., the pure software-as-a-service version of SAP S/4HANA – the framework conditions for incoming invoice processing are changing fundamentally. SAP S/4HANA Public Cloud is a standardized cloud ERP system with limited functionality and expandability compared to on-premise solutions. Customers receive quarterly updates, and their own ABAP developments or the installation of add-ons are not permitted. Instead, public interfaces (APIs), predefined extension points, and SAP BTP are available as a side-by-side platform to map additional processes. In this context, digital invoice processing must be carried out predominantly outside the actual S/4 cloud system or using the tools provided by the cloud.

• Invoice reception: S/4HANA Public Cloud offers native functions for manually entering supplier invoices (Fiori apps such as “Create Supplier Invoice”) and also for processing electronic invoices. Electronic incoming invoices can arrive via the SAP Business Network or SAP Document Compliance, for example. EDI/XML invoices can be imported into the system via web service, or suppliers can use a portal. For paper and PDF invoices, however, there is no integrated OCR tool in the Public Cloud standard that would be delivered with the SaaS system. This inevitably requires a second system: an external service that scans and reads the invoice and then transfers the data to SAP. Intuitive partner solutions are available for this purpose, which take care of document recognition and validation and then post the data to S/4HANA Cloud via public API.

• Verification and approval: In the S/4HANA Public Cloud, the flexible workflow is also available for vendor invoices (similar to on-premise). The verification departments process their tasks in the My Inbox app within S/4HANA Cloud. This approach does not require external systems, but is limited to the workflows provided by SAP – truly flexible custom workflows beyond the configurable scenarios are not possible in Public Cloud. Many cloud customers use the standard workflow, especially for purchase order invoices that require a price/quantity deviation workflow, or for cost invoices that require manual review.
  
  In more complex cases – e.g., multi-level approvals by cost center – the standard workflows of the Public Edition may not be sufficient. Here, too, the approval process can be carried out in external solutions so that it can be finally posted in S/4HANA Cloud via API once approval has been granted. The S/4HANA system would then receive a completed, approved invoice that is payable without further human intervention. This architecture has the advantage that S/4HANA Cloud remains “untouched” – it ultimately only sees the final postings – while all individual logic is located in the external module. The disadvantage is that two systems have to be operated and orchestrated; however, SAP makes this easier in practice by allowing BTP and S/4HANA Cloud to be closely integrated (same identity management, predefined APIs, etc.).

• Integration via public APIs: An important feature of the Public Cloud is the type of integration. While on-premise solutions could sometimes access tables directly or via RFC, only published interfaces can be used in the S/4HANA Public Cloud. SAP provides several APIs for the invoicing process, e.g. an OData API for posting vendor invoices or APIs for uploading attachments. These services must be used by external applications to communicate with the cloud ERP. The documents (scans) themselves can also be stored in the Public Cloud, but typically not on a customer-owned content server, but in SAP-hosted storage.

In summary, incoming invoice processing in the Public Cloud model only works in combination with an external component. Either SAP’s own services or partner solutions in the cloud are used. These take care of data entry, OCR, preliminary checks, and, if necessary, approval, and then use public APIs to transfer the invoice to the S/4HANA Cloud system. The actual posting and archiving ultimately takes place in S/4HANA – with S/4HANA Public Cloud largely acting as a “transactional backend” here, while the process logic lies at the forefront in the extension. This keeps the SaaS system close to the standard and update-proof, as no individual workflow codes or additional modules run in it. Integration via cloud-based APIs is highly standardized and secure, including via OAuth. The result is an end-to-end process that is distributed across two platforms but can be perceived as a single entity by the user (e.g., through single sign-on and Fiori apps for the external modules).

This division means that Public Cloud solutions are generally more preconfigured and standardized than on-premise solutions, but less freely customizable. Companies must adhere to the given expansion options; there are no in-depth individual workflows in SAP. In return, they benefit from fast innovation cycles – new features in the cloud services are immediately available to all clients without upgrades in the ERP itself. The overall architecture is cloud-native and scalable, and it enables multichannel invoices to be processed centrally (paper, email, e-invoice, all in one platform). For internationally operating companies, it is also important that compliance requirements (e.g., electronic invoice formats per country) can be more easily covered by cloud services, which are regularly updated. In this respect, the Public Cloud model offers high automation potential, but requires the use of APIs and additional services to close the gaps compared to the functionality offered by on-premise solutions.

Common Challenges

Regardless of whether a company uses SAP S/4HANA On-Premise, in a Private Cloud, or in a Public Cloud, similar practical challenges repeatedly arise in incoming invoice processing, complicating daily work and slowing down efficiency.

A key problem is media discontinuity. Incoming invoices reach companies in a variety of ways: as paper invoices by mail, as PDF attachments by email, or via EDI interfaces directly from the supplier’s system. This variety of formats makes uniform and consistent processing nearly impossible—at least without the use of additional solutions for consolidating and digitizing the incoming channels. Invoices often have to be entered manually or transferred to different systems, which is not only time-consuming but also prone to errors.

Added to this is the manual post-processing that is often necessary when, for example, OCR (optical character recognition) does not work properly or master data in the system is incomplete or outdated. Unclear or missing references to orders – for example, in the case of scattered invoices without a previous order – regularly lead to queries, clarification requirements, and thus delays. In such cases, manual intervention by the accounting or purchasing department is often necessary to correctly assign and approve the invoice.

A third aspect that should not be underestimated is the lack of transparency in the overall process. Without a central monitoring tool, companies quickly lose track of what is going on: Which invoices are open? Which ones have already been checked? Where are the bottlenecks in the workflow – and why? Without suitable evaluation tools, bottlenecks, escalations, and delays are difficult to identify, let alone remedy in a targeted manner. The result: disrupted internal processes, missed discount deadlines, and, in the worst case, damage to your reputation with important suppliers.

These challenges show how important it is to take a holistic view of incoming invoice processing—not just as an IT issue, but as a critical component of efficient business processes.

Our Solution: Intelligent Invoice Processing that can be Integrated Into SAP

This is where our digital invoice processing solution for SAP comes in. It is fully integrated into SAP – regardless of whether you work with S/4HANA in the Public Cloud, Private Cloud, or On-Premise.

Our solution offers, among other things:

• Intelligent document recognition with AI
  Incoming invoices – whether by mail, email, or EDI – are automatically analyzed, structured, and reconciled with SAP data.

• Customized workflow automation
  Individual approval processes – from the dual control principle to complex corporate structures – can be flexibly configured.

• Audit security and compliance
  Seamless logging of all processing steps. In combination with our SAP document management, this creates a fully traceable invoice lifecycle.

• Monitoring and dashboards
  Real-time overviews show the processing status, open tasks, and bottlenecks – integrated into SAP Fiori Launchpads on request.

• Fast implementation – even in the cloud
  Our solution has a modular structure, can be put into productive use quickly, and can be integrated into both S/4HANA on-premise and cloud environments – including Public Edition.

Conclusion

Automated invoice processing with SAP S/4HANA is not purely an IT project – it is a lever for efficiency, transparency, and growth. It is crucial to choose the right deployment model and supplement it with an intelligent, practice-oriented solution.

Whether you prioritize maximum control (On-Premise), flexibility (Private Cloud), or scalability (Public Cloud), an SAP-integrated solution enables you to make your invoice processing future-proof, efficient, and compliant.