sap in-house cash
DESCRIPTION
SAP In-house CashTRANSCRIPT
SAP® IN-HOUSE CASH WITH mySAP� ERP
SAP Solution in DetailmySAP ERP
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SAP In-House Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Integration of SAP In-House Cash in Your Payment Landscape. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
The In-House Cash Center. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Account Management Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Master Data of the Current Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8– Company Code and Bank Area. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8– Business Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8– Product Definition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9– Account Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9– Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Customer Payment Processes Supported by SAP In-House Cash. . . . . . . . . . . . . . . . . . . . 11Automated Intragroup Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11– Example: Automated Intragroup Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11– The Benefits of Automated Intragroup Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Automated Outgoing Central Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12– Example: Automated Outgoing Central Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12– The Benefits of Automated Outgoing Central Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Automated Outgoing Local Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13– Example: Automated Outgoing Local Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13– The Benefits of Automated Outgoing Local Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14Automated Incoming Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15– Example: Automated Incoming Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15– The Benefits of Automated Incoming Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Integration with SAP Cash and Liquidity Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Bank Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16– Bank Statements Sent to the Head Office by the House Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . 16– Bank Statements Sent to Subsidiaries from the In-House Cash Center . . . . . . . . . . . . . . . . . . . 16Using Multiple In-House Cash Centers for Posting Across Bank Areas . . . . . . . . . . . . . . . . . . . . . 17– Example: Using Multiple In-House Cash Centers for Internal Payments . . . . . . . . . . . . . . . . . . 17Account Management and Manual Post-Processing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18– Example: Central and Local Payments Using Multiple In-House Cash Centers . . . . . . . . . . . . 18
Currency Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
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CONTENTS
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Periodic Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
System Architecture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24SAP Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24Communication Between Organizational Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24– Group Companies and the In-House Cash Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24– The In-House Cash Center and the Financial Accounting System at the Head Office
and at the Executing Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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If your company is like most in today’s global economy – with a multinational customer base and a growing number of subsidiaries – you have probably experienced a sharp rise in the number of intragroup and external payments you mustprocess, the number of bank accounts you use, and the costsyou incur for cross-border payments.
Figure 1: Initial Scenario
To gain a competitive edge, you must efficiently manage theflow of payments and the related risks. The SAP® In-House Cashapplication, one of the financial supply chain managementcomponents of the mySAP™ ERP Financials solution, can helpcut the costs of processing transactions for internal payments,external payments, and international payments while reducingthe number of external bank accounts you must handle.
SAP In-House Cash was designed for corporate groups thatoperate internationally. It lets you settle the payables andreceivables of your group companies centrally using a recipro-cal clearing process. You can also use these tools to pay external
business partners on behalf of your subsidiaries and to processincoming payments from external business partners andforward those payments to subsidiaries.
Integration of SAP In-House Cash in Your Payment
Landscape
Not all companies can centralize their payment processes. Yourcompany may be decentralized with individual subsidiaries pro-cessing transactions with their own business partners indepen-dently of the parent company. Or you may use a mixture ofcentralized and decentralized models, making payments throughlocal banks and headquarters. SAP In-House Cash supports arange of organizational designs, such as decentralized, central-ized, and mixed organizations.
In a decentralized organization in which the subsidiaries andthe head office or holding company have separate accountswith their respective house banks, the payment transactions forthe head office are processed through an in-house cash center.The subsidiaries continue to make payments to external busi-ness partners with their own house banks.
In a centralized environment in which the parent companyassumes the role of head office and processes all payments forthe group through the head-office house bank, the subsidiariesand the head office keep most of their bank accounts in the in-house cash center. Other accounts with external banks playa subordinate role. Your subsidiaries can replace all their localbank accounts with the internal bank accounts of the in-housecash center. The in-house cash center itself can have one ormore accounts with the house bank. Because the in-house cashcenter and its house bank process all incoming and outgoingpayments on behalf of the subsidiaries, the subsidiaries can dispense with their local bank account relationships. Credit balances are also managed centrally by the in-house cash center.
SAP® IN-HOUSE CASH
Region 1
Subsidiary
Internal Bank Bank Bank Internal Bank
Bank Bank Bank
SubsidiarySubsidiary
U.S.
Region 2
Bank
Bank Bank
Subsidiary
Subsidiary
Bank
Bank
Subsidiary
HEADOFFICE
(EUROPE)
ASIA
6
Most corporate groups today operate in the mixed organizationform. In this environment, each subsidiary has one or moreaccounts with its house bank, as well as one or more accountswith the in-house cash center. The in-house cash center keepsaccounts for the head office and the subsidiaries. As a result,you can process payments using either external house banks orthe in-house cash center. Given this open model, the corporategroup can process outgoing and incoming payments withinternal groups and external business partners in any way thatmakes sense for the corporate group. For example, you canprocess all internal group payments using the in-house cashcenter and process only external payments to business partnersusing your external banks. You can centralize outgoing pay-ment processes by using the in-house cash center to handlepayments made between group companies and to externalbusiness partners, while keeping incoming payments fromexternal partners decentralized.
Figure 2: Mixed Organization
The in-house cash center supported by the application isdesigned to integrate easily with a corporate group’s paymentprocesses, enabling the standard bank account statement pro-cessing and payment program execution to remain unchanged.The key is to replace the external house bank account with the
in-house cash center account in the configuration. If youexpect internal payment clearing and central payments to playa more significant role in the future, SAP In-House Cash offersideal support for these tasks. SAP In-House Cash makes it easyto centralize your payment processes and to take advantage ofall the associated cost savings. For the corporate group, creatingan in-house cash center may require changes in the distributionof tasks among the organizational units.
The following organizational entities can be involved in theindividual payment transaction processes:
� Subsidiaries and affiliated companies
� The head office (in-house cash center and the financialaccounting functions of mySAP ERP Financials)
� House banks used by the head office
� External business partners and their house banks (partnerbanks)
Figure 3: Organizational Entities
For a subsidiary, the in-house cash center is a virtual bank that serves as a house bank. The subsidiary keeps an accountwith the in-house cash center as if it were a house bank. Thehead office manages the financial accounting system and thein-house cash center.
House bankof head office
Head office ofgroup/holding, incl.
in-house cash center
House bank of subsidiary A
House bank of subsidiary B
House bank of subsidiary C
Subsidiary BSubsidiary A Subsidiary C
Group
Subsidiary A
Subsidiary B
Subsidiary C
Head Office
Account management
In-House Cash Center Financialaccounting
system
External businesspartner
Partner bank House bank ofhead office
You draw up balance sheets for the in-house cash center usingthe standard mySAP ERP Financials accounting functions. Thein-house cash center is located and maintained centrally by theparent company or an organizational unit assigned to the headoffice. Therefore, this organizational unit manages the currentaccounts. In the financial accounting system, the receivablesand payables of the subsidiaries are displayed in general ledgeraccounts in summarized form.
You set up the in-house cash center as a bank for the wholegroup to manage the current accounts of the head office andthe subsidiaries that are maintained as subledger accounts inSAP In-House Cash. The in-house cash center can handle oneor more current accounts for group companies and regularlydispatch the bank statements that correspond to those accounts.Individual account items represent payables or receivablesbetween the in-house cash center and a subsidiary. A receivableof the head office represents an obligation of the subsidiary tothe head office.
Like a house bank, the in-house cash center creates and dis-patches bank statements to the subsidiaries. This reduces thefloat or transfer time it takes for a payment from the orderingparty to reach the recipient, eliminating value-date differencesrelated to payments between subsidiaries.
With this application, the house banks of the head office processall incoming and outgoing external payments for the in-housecash center. External business partners use their own housebanks to process transactions with the group and its subsidiaries.
Account Management Functions
The in-house cash center is the heart of the SAP In-House Cashapplication. It serves as a virtual bank for group companies andlooks after their financial interests.
The in-house cash center manages one or several currentaccounts for each of the group’s subsidiaries. It represents anadditional bank that can process both internal and external pay-ments and can keep accounts in any currency. The in-housecash center also provides account management functions, suchas calculating and debiting interest and charges, grantingcurrent account overdrafts, and generating bank statements for the subsidiaries. You can flexibly configure the features andconditions of each account.
The in-house cash center controls the automated processes forpayment transactions such as internal payments within thegroup, payments made by subsidiaries to external partners, andincoming payments for subsidiaries from external partners,which are initially credited to the house bank accounts at thehead office (central incoming payments).
During the payment process, the in-house cash center supportsautomatic creation as well as direct manual entry of paymentorders. Automated and manual payment orders can have thefollowing statuses:
� Parked, meaning no posting has taken place yet on anycurrent account
� Provisionally posted, which means posting has taken place onthe current accounts, but the exchange rate can be changedbefore the final posting takes place, for example
� Finally posted, which means the final posting has taken placeon the involved current accounts and the account holder isinformed by statement about the posting
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THE IN-HOUSE CASH CENTER
Provisionally and finally posted payment orders are included inlimit checks. You can reverse provisionally posted paymentorders to parked payment orders and change data in the orders.Parked payment orders can be deleted, while provisionally posted and finally posted payment orders can be reversed. Post-processing options are available for the provisionalpayment order created either by the automatic or the manualpayment process.
Other functions of the in-house cash center let you monitorpayment orders and aggregate current account balances, as wellas plan and forecast the incoming and outgoing payments ofyour group companies over the medium term. This makes theprocess of controlling payment flows far more efficient.
Master Data of the Current Account
Company Code and Bank Area
In SAP solutions, a company code is a legal unit within a groupfor which you draw up a complete self-contained set ofaccounts, including a balance sheet and income statement. Thecompany code represents the financial accounting system at the head office, which is responsible for managing the generalledger accounts that are reconciled with the subledger accountsin SAP In-House Cash. A bank area is a central, self-containedorganizational unit that manages and processes all the accountsfor an in-house cash center. There is a bank area for each in-house cash center. If you want to use several in-house cashcenters, you must set up several bank areas.
Figure 4: Account Components
Business Partners
Master data for the in-house cash center includes informationon the various business partners related to accounts in the center. A business partner can be an affiliated company, anexternal business partner, another bank, the head office, anoth-er in-house cash center, or an internal organizational entity.When you maintain accounts, you enter key business partnerdata, including the partner’s name and address and related bank details (such as the account number and sort code). Youcan map relationships between business partners to suit your particular needs.
Each business partner can have more than one role. The appli-cation recognizes standard roles, such as account holder,authorized drawer, bank statement recipient, contact person,and account maintenance officer. A subsidiary, for example,could have several roles and act as account holder, bank state-ment recipient, and contact person. You can create your ownroles if the standard roles do not cover all your requirements.Business partner data is stored centrally, so if a particular busi-ness partner already exists, you can just create the partner in anew role. Instead of entering all the business partner data eachtime, you merely add any role-specific data that is missing.
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Conditions
AccountSubsidiary A
Bankstatements Limits
Businesspartners
Currencyconversion
+ 100- 120
...
Reporting
Blocks
In-HouseCash
Center
Financialaccounting
systemGL
General-ledger (GL) transfer
No. Post. date Val. date Curr. Amount1
1 12/30/00 12/31/00 USD 100.00 C
2 12/31/00 12/31/00 USD 9.58 D
Turnovers
Product Definition
The nature of an account in the in-house cash center dependson the characteristics of the product that is assigned to it. Youenter the product details once using a product configurator andassign a predefined product each time you create a newaccount. This greatly simplifies the process of account creation.For example, you could set up a product for subsidiaries named“account for subsidiaries” and specify that accounts created forthis product are managed only on the credit side, with interestcalculated on the balance. If you want slightly different condi-tions for a particular account, you merely change the defaultsettings for the product in the account itself.
Account Data
Each subsidiary participating in the in-house cash process mustkeep at least one account with the in-house cash center. Basicdata for the account is stored in the account master record. This information includes the date the account was opened, the currency used for the account, the account holder, and anynotes related to the account. Accounts are always assigned to an account holder. For account settlement (account balancing),you enter the conditions, the account balancing periods, andthe settings for cash concentration. The account balance is dis-played directly in the account, along with withdrawal limitsthat have been defined for the account and the bank statementfrequency.
The account master record is where you maintain control data,such as information about the general ledger transfer. The pay-ment transaction view of account data provides informationabout any account blocks that prevent certain functions frombeing used. If, for example, a subsidiary ceases to be part of thegroup, an account block can prevent further processing of pay-ment items.
Conditions
You can configure account features and conditions according to your individual requirements. This allows you to map profit-oriented in-house cash centers, for example. The flexible condition model lets you define standard conditions, individualconditions, and markup conditions based on the conditiongroups for interest, charges, and value dates.
Interest
You can calculate credit and debit interest based on value-datebalances. The interest calculation can reflect absolute interestrates or reference rates with markups or markdowns. You canalso specify minimum and maximum rates. When you createinterest rate conditions, you can choose from a range of interestcalculation methods and opt for either an interval or scaledinterest calculation. In addition, you can apply interest rateconditions for a given period or account balance.
Extra-credit interest that you earn from the external moneymarket as a larger group can be passed on to your subsidiaries.You can opt to charge debit interest at a lower rate than thehouse bank, thereby improving the net interest income of thesubsidiaries, and apply an overdraft interest rate if the balance inan account exceeds the internal overdraft limit. You can chooseto charge such overdraft interest in addition to or instead of thedebit interest.
Charges
The application distinguishes between periodic account charges(such as maintenance fees and mailing expenses), item charges,and transaction charges. You can use direct charges to recoupcosts for services that do not automatically lead to item postingsin the account. All charges are subject to a validity period.
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Figure 5: Conditions
Value Dates
Process automation in the in-house cash center allows same-dayaccounting of payments without the losses that can be incurredthrough delayed value dates. However, you can still use value-date conditions for the respective turnover type to determinethe value date based on the account, a time limit, and the publicholiday calendar entered in the account. The value date is cal-culated from the posting date and the number of value-datedays, which can extend into the future or the past. When youspecify the value date, the application checks the tolerance days.
Limits on Drawing from Accounts
The application lets you define drawing limits on accounts forspecific periods and subject those limits to a release procedurerequiring that changes are checked by another employee. Whenthe specified amount is exceeded – due to a liquidity bottleneckat a subsidiary, for example – a corresponding message appears.You can choose from the following standard categories:
� The internal account limit controls the drawing limit for payment transactions.
� The overdraft limit controls the calculation of overdraft interest. If the limit is exceeded and an overdraft condition(such as an interest rate charge) has been defined, an over-draft condition is applied to the account.
� The external credit limit is for reference only. The externallimit must be lower than or equal to the internal accountlimit.
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Subsidiary A
-5.00+100.00
Overdraftinterest
Account charge:US$5
Interest
Creditinterest
Debitinterest
Transactioninterest
Credit interest0.5%
Itemcharges
Mailingcharges
Accountcharges
Periodiccharges
Directcharges
ValueDate
Charges
The following scenarios provide an overview of classic paymenttransaction processes supported by SAP In-House Cash usingthe organizational units described in the previous section.
Automated Intragroup Payments
The process of clearing payables and receivables betweensubsidiaries is referred to as internal (intragroup) paymentclearing.
Example: Automated Intragroup Payments
In this example, subsidiary B delivers goods to subsidiary A.After receiving and posting the invoice, subsidiary A starts thepayment program in mySAP ERP Financials to settle the invoice.The solution determines the open items, taking into accountthe payment terms and the specified bank details, and proposesa payment run. Because the in-house cash center has been identified as the vendor’s house bank, it is instructed to makethe payment to subsidiary B. During the payment run, the payment program posts the payment documents and simulta-neously creates an intermediate document, known as an IDoc(which is a type of data interface), that contains all the relevantpayment information. This IDoc is then sent to the in-housecash center (step 1 in Figure 6).
In the in-house cash center, the incoming IDoc triggers provi-sional or final postings to the respective current accounts.Whether postings should be executed provisionally or finallydepends on the configuration settings. The payment is debitedfrom the account of the ordering party, subsidiary A, and credited to the account of the beneficiary, subsidiary B. The in-house cash center has a receivable position owed from subsid-iary A and a payable position due to subsidiary B. This clearspayables between group companies without the need for physi-cal payments (such as checks or bank transfers) by an externalbank. The in-house cash center then generates and sends bankstatements to subsidiaries A and B using IDocs (step 2 in Figure6). The IDocs are imported automatically by each of the subsid-iaries. This triggers corresponding postings to the clearingaccounts and settles the open items.
Figure 6: Internal Payment Clearing
Figure 7: Posting Logic for Internal Payment Clearing
The Benefits of Automated Intragroup Payments
The financial accounting system at the head office managescurrent account data in a summarized form. The end-of-dayprocessing function in the in-house cash center summarizes theaccount turnovers and transfers the totals to the general ledger.The corresponding postings in financial accounting aretriggered automatically. Because internal accounts are used to clear the payable items, no physical cash is transferred. The liquid funds remain within the group, and no losses areincurred due to value-dating payments.
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CUSTOMER PAYMENTPROCESSES SUPPORTED BY SAP IN-HOUSE CASH
Group
Subsidiary A
Subsidiary B
Head Office
Account management
In-House Cash Center Financialaccounting
system
Bank statement
Payment
2b
2a
1
In-House Cash Center
Subsidiary A Subsidiary B
-200 (to B) +200 (from A)
(1) Internal outgoing payment (debit account A)
Financial Accounting SystemGeneral Ledger
Payment clearing
200 (2) 200 (1)
IHCC receivables IHCC payables
200 (2) 200 (1)
(2) Internal incoming payment (debit account B)
IHCC = in-house cash center
You also save on charges for external bank transfers. The in-house cash center can invest the accumulated credit balancefrom the accounts for all the individual group companies,which lets you benefit from better interest rates offered for larger investments. You can also grant account overdrafts tosubsidiaries that need financial assistance. By using any surpluscash for financing within the group, you save the marginbetween the interest rates for borrowing and lending andimprove your overall interest revenue.
Classical netting arrangements typically require the group com-panies to agree on a set credit period, after which all items aredue. With in-house cash, you have broad flexibility in choosingdifferent payment terms.
Automated Outgoing Central Payments
Payments made by the in-house cash center to external businesspartners to settle amounts payable by subsidiaries are referred toas central payments. The in-house cash center can greatly sim-plify the workflow of the subsidiaries by making such paymentson their behalf.
Example: Automated Outgoing Central Payments
In this example, an external partner delivers goods to subsidiaryA, which posts the vendor invoice as a payable item. It then runsthe standard mySAP ERP Financials payment function to settlethe payment. This clears the open items on the vendor accountand generates a corresponding offsetting entry in the clearingaccount. Because the in-house cash center has been identified assubsidiary A’s house bank, it is instructed to make the paymentto the external partner via the in-house cash center. During thepayment run, mySAP ERP Financials automatically creates anIDoc, which transfers the payment information to the in-housecash center (step 1 in Figure 8).
Having received the IDoc, the in-house cash center debits thecurrent account of subsidiary A provisionally or finally and forwards the payment information to the financial accountingsystem at the head office, which is the party that executes the
payment to the external business partner (step 2 in Figure 8).The current account of the party that executes the payment on behalf of subsidiary A is credited. In this accounting system,a second payment program creates a payment order using theinformation from the original payment IDoc. This triggers theactual payment. The outgoing payment is posted to a bankclearing account, and the head office’s house bank is instructedto make the payment to the external partner (step 3 in Figure 8).
The in-house cash center generates the bank statement for sub-sidiary A and the executing party and sends it to both as an IDoc(step 4 in Figure 8). Subsidiary A and the executing party importthe bank statements, which triggers a clearing posting on theclearing account. The financial accounting system at the headoffice (executing party) imports a bank statement from itshouse bank and posts the items to a bank clearing account (step5 in Figure 8). This clears the account.
Once the head office’s house bank receives the payment infor-mation, the payment is transferred to the house bank of theexternal partner (step 6 in Figure 8). The external business partner receives a corresponding bank statement from its ownbank (step 7 in Figure 8).
Figure 8: Outgoing Central Payments
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Group
Subsidiary A
Subsidiary B
Head Office
Account management
In-House Cash Center Financialaccounting
system
Bank statement Payment
4a
1Payment program
2
House bank ofhead office
Partner bank
Externalbusiness partner
7 6
3 5
4b
The Benefits of Automated Outgoing Central Payments
When payments are made to an external partner, paymentinstructions are only made by the in-house cash center to thebusiness partner's bank, and cash only flows from the bank usedby the in-house cash center to the business partner's bank.Because the subsidiaries make their payments via the centralaccounts of the in-house cash center, they no longer need tokeep accounts abroad. As a result, you can save on currencytranslation charges, reduce the number of internationalpayments, and optimize your foreign-exchange positions.
With SAP In-House Cash, you can run a precise financial analysiswithin your group at any time. Functions for automatic post-processing and automatic data transfer to the financial account-ing system can significantly reduce the staff required for manualprocessing. Because the accounts are managed centrally in thein-house cash center, you have a direct view of all paymenttransactions in your group and of the liquid funds that are available in the accounts of your subsidiaries. If cash is tight forindividual subsidiaries, the in-house cash center can still ensurethat payment obligations are met. The center can grant gener-ous current-account overdrafts at short notice, ensuring thatthe individual subsidiaries are solvent at all times.
Figure 9: Posting Logic for Outgoing Central Payments
Automated Outgoing Local Payments
Payments made by a subsidiary to external business partners to settle amounts payable on behalf of another subsidiary arereferred to as local payments.
The automated outgoing local payment scenario is similar tothe outgoing central payment scenario. The only difference isthat all local house banks of all in-house cash center partici-pants can be included in this scenario to achieve local paymentsinstead of foreign payments to avoid cross-border costs.
Example: Automated Outgoing Local Payments
In this example, an external partner in the United Kingdomdelivers goods to subsidiary A, which is located in Germany.Subsidiary A posts the vendor invoice as a payable item. It thenruns the standard mySAP ERP Financials payment program tosettle the payment. This clears the open items on the vendoraccount and generates a corresponding offsetting entry in theclearing account. Because the in-house cash center has beenidentified as subsidiary A’s house bank, it is instructed to makethe payment to the external partner in the United Kingdom bythe in-house cash center. During the payment run, mySAP ERPFinancials automatically creates an IDoc, which transfers thepayment information to the in-house cash center (step 1 in Figure 10).
Having received the IDoc, the in-house cash center checkswhich legal entity is the executor of the payment, meaningwhich local house-bank account can be used to execute the foreign payment as a domestic payment. Criteria can be thetransaction amount, the transaction currency, and the bankcountry of the recipient. The executing party can be the headoffice (as with automated outgoing central payments) or a sub-sidiary. In this example, subsidiary B in the United Kingdom isdetermined as the executing party.
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In-House Cash Center
Clearing PartnerSubsidiary A (head office)
-400 (1) +400 (1)
(1) Transfer payment information to financial accounting system and generate payment request (payment order to house bank)
(2) Transfer to general ledger(3) Import and post bank statement for clearing partner from in-house bank(4) Import and post bank statement from house bank
Financial Accounting SystemHead Office
Intercomp. Clearing PartnerSubsidiary A (head office)
400 (2) 400 (2)
ClearingIHCC Clearing Partner Bank
400 (2) 400 (2) 400 (3)
Outg. PaymentHouse Bank clearing
400 (4) 400 (1) 400 (3)
Bank Clearing
400 (4) 400 (1) IHCC = in-house cash center
Bank statement
Payment
Housebank of
headoffice
Partner bank
Externalbusinesspartner
After the determination of the executing party, the in-housecash center debits the current account of subsidiary A, provi-sionally or finally, and credits the current account of subsidiaryB, which executes the payment on behalf of subsidiary A eitherprovisionally or finally. The in-house cash center forwards thepayment information to the financial accounting system at sub-sidiary B (step 2 in Figure 10). In this system, a second paymentprogram creates a payment order, using the information fromthe original payment IDoc. This triggers the actual payment.The outgoing payment is posted to a bank clearing account,and subsidiary B’s local house bank is instructed to make thepayment to the external partner in the United Kingdom (step 3in Figure 10).
The in-house cash center generates the bank statement for subsidiaries A and B and sends it to them as an IDoc (step 4 in Figure 10). Subsidiaries A and B import the bank statement,which triggers clearing postings on the clearing accounts. Thefinancial accounting system at subsidiary B imports a bankstatement from its house bank and posts the items to a bankclearing account (step 5 in Figure 10), which clears the account.
Once subsidiary B’s house bank receives the payment informa-tion, the payment is transferred to the house bank of the exter-nal partner (step 6 in Figure 10). The external business partnerreceives a corresponding bank statement from its own bank(step 7 in Figure 10).
Figure 10: Outgoing Local Payments
The Benefits of Automated Outgoing Local Payments
Figure 11: Posting Logic for Outgoing Local Payments
When payments are made to an external partner, all existingbanks in the corporate group, including subsidiaries and headoffice, can be used to make local payments. The in-house cashcenter offers a flexible, rule-based determination of the execut-ing party. Because the subsidiaries are responsible only for theexecution of local payments, they no longer need to keepaccounts abroad.
Because the subsidiaries are responsible only for the executionof local payments, they no longer need to keep accountsabroad. Consequently, all subsidiaries can keep only one localexternal bank account for their local currency. As a result, youcan save on currency translation charges, reduce the number ofinternational payments, and optimize your foreign-exchangepositions.
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Subsidiary A(Germany)
Account management
In-House Cash Center(Germany)
Financialaccounting
system
Subsidiary B(United Kingdom)
Bank statement Payment
4a
1Payment program
2
House bank ofsubsidiary B
Partner bank
External business partner(United Kingdom)
7 6
3 5
Group
4b
In-House Cash Center
Subsidiary A Subsidiary B (Germany) (United Kingdom)
-400 +400
(1) Generate payment order to in-house cash center(2) Generate payment request, payment order to house bank(3) Import and post bank statement from in-house cash center(4) Import and post bank statement from house bank
Financial Accounting SystemSubsidiary B
(United Kingdom)
Outgoing IHCC receivables payment clearing
400 (3) 400 (2) 400 (3)
House Bank Bank clearing
400 (4) 400 (4) 400 (2)
IHCC = in-house cash center
Bank statement Payment
Externalbusinesspartner(United
Kingdom)
Partner bank
House bank of
subsidiaryB
Financial Accounting SystemSubsidiary A (Germany)
External IHCC clearing business partner
400 (3) 400 (1) 400 (1)
IHCC receivables
400 (3)
Automated Incoming Payments
When incoming payments are processed centrally, the in-housecash center directs payments from external business partners tosubsidiaries.
Example: Automated Incoming Payments
In this example, subsidiary A delivers goods to an external busi-ness partner. Subsidiary A instructs its external business partnerto make payment to its head office. The external business part-ner makes the payment to subsidiary A via the in-house cashcenter. The external business partner instructs its bank to makethe payment (step 1 in Figure 12). Once the payment amounthas been debited from the business partner’s account, the busi-ness partner receives a bank statement from its house bank(step 2 in Figure 12).
The business partner’s house bank transfers the payment to thehouse bank of the head office (step 3 in Figure 12). The financialaccounting system at the head office imports the bank statementfrom the house bank and posts the items to a bank clearingaccount. All the items listed in the bank statement are examinedusing internal algorithms to establish whether they are intend-ed for the in-house cash center and which current account isaffected. Once the items have been identified, the system auto-matically transfers them to the in-house cash center for postingto the relevant current accounts (step 4 in Figure 12).
The in-house cash center credits the current account ofsubsidiary A, debits the current account of the head office thathas received the payment from the external business partner on behalf of subsidiary A, generates the corresponding bankstatements of subsidiary A and the head office, and sends theIDocs containing the relevant information to subsidiary A andthe head office. Once subsidiary A and the head office receivethe bank statements from the in-house cash center (step 5 inFigure 12), their financial accounting systems automaticallyclear the clearing accounts and the open customer item for subsidiary A.
Figure 12: Central Incoming Payments
The Benefits of Automated Incoming Payments
The central processing of incoming payments reduces the num-ber of bank accounts your group needs, while fully supportinginternational payment transactions. Incoming liquid funds areinstantly available to the in-house cash center, and paymentsare credited automatically to the appropriate accounts.
If you process incoming payments centrally, your subsidiariesno longer need to maintain accounts abroad. The in-house cashcenter processes payments for any foreign accounts as it wouldfor domestic payments.
Incoming payments reside in the house-bank accounts of thehead office under this model. By managing these funds centrally,you can optimize your liquidity planning and generate higherinvestment returns.
15
Group
Subsidiary A
Subsidiary B
Head Office
Account management
In-House Cash Center Financialaccounting
system
Bank statement Payment
5
Externalbusiness partnerPayment program
House bank ofhead office
Partner bank
2 3
4
1
Figure 13: Posting Logic for Central Incoming Payments
SAP In-House Cash includes numerous manual postprocessingfunctions for current accounts. You can post and reversepayment items or orders, reject ordering-party payment items,transfer payment items to another account, and return theposted payment items. You can also change or delete paymentitems or orders that have been parked pending release forfurther processing.
Integration with SAP Cash and
Liquidity Management
The SAP Cash and Liquidity Management application offers the following tools, designed to give clear visibility to corporatecash flows:
� The cash position, which illustrates short-term movements in bank accounts
� The liquidity forecast, which illustrates medium-termmovements in subledger accounts
In cash management reporting of subsidiaries, the receivablesand payables balances with the head office are shown in the cashposition in real time. Outgoing and incoming payments in cashclearing accounts are also visible in the cash position in realtime.
The in-house-cash current accounts integrate into the headoffice’s cash management before the general ledger transfertakes place at the end of a day. The different postings on thecurrent accounts can be grouped in the cash management viewas account balances that are finally posted or as either internalor external provisional turnovers.
Bank Statements
Bank Statements Sent to the Head Office by the House
Bank
The financial accounting system (mySAP ERP Financials) at thehead office imports the bank statements sent by the housebank. Relevant items are then transferred to the in-house cashcenter. A search algorithm specifies how the application inter-prets information (such as a customer number) that appears inthe payment notes accompanying the statement items. Theapplication can also use the external bank and accountnumbers to determine the appropriate bank area and accountnumber. All information included by the external business part-ner in the payment notes can be transferred to the subsidiaries.
Bank Statements Sent to Subsidiaries from the In-House
Cash Center
The in-house cash center can create and forward bankstatements either periodically or on request by subsidiaries. You can set default values for bank statement frequency and foradministrative data, such as the name of the relevant businesspartner, the statement format, and options for creating dupli-cate statements. You can define several bank statement recipi-ents for each account. This is useful if the subsidiary has severalaccount holders. You can generate a bank statement as part of amass run or in a single run and then have it sent automaticallyto the relevant subsidiary.
16
In-House Cash Center
Clearing PartnerSubsidiary A (head Office)
+400 (2) -400 (2)
(1) Import and post the bank statement from the house bank(2) Forward the incoming payment to the in-house cash center(3) Transfer to general ledger(4) Import and post the bank statement for clearimg partner from in-house bank
Financial Accounting SystemHead Office
Bank clearing Subsidiary A
400 (4) 400 (1) 400 (3)
Clearing Partner Clearing Partner(head Office) Bank
400 (3) 400 (4)
Incoming House Bank payment clearing
400 (1) 400 (3) 400 (3)
Bank statement
Payment
Housebank of
headoffice
Partner bank
Externalbusinesspartner
Electronic bank statements created in the in-house cash centerare imported and processed by the financial accounting systemsof the subsidiaries using standard mySAP ERP Financials func-tions. The payment notes in the electronic bank statement con-tain the information necessary for settling open items, such asan invoice number from an external business partner.
In addition to generating an electronic bank account statement(FINSTA IDoc type), it is possible to create paper bank state-ments with SAPscript and send them to subsidiaries that do nothave a secure electronic connection with the in-house cash cen-ter and who must receive bank statements in paper form. Thebank statements of the accounts of these subsidiaries can be cre-ated as paper statements and then sent by fax directly from thein-house cash center application.
Using Multiple In-House Cash Centers for Posting
Across Bank Areas
Internal payment clearing and central payments can involvemore than one in-house cash center, which helps you optimizethe routing of payments and save on transaction costs.
Example: Using Multiple In-House Cash Centers for
Internal Payments
In this example, subsidiary E in Europe delivers goods tosubsidiary A in the United States. Subsidiary A instructs the U.S. in-house cash center to make the payment to subsidiary E.The process is depicted in Figure 14.
The following prerequisites apply to this scenario:
� The subsidiaries have defined different in-house cash centersas their respective house banks.
� The U.S. in-house cash center keeps current accounts for subsidiary A and for the European in-house cash center.
� The European in-house cash center keeps current accountsfor subsidiary E and for the U.S. in-house cash center.
To pay the invoice, subsidiary A runs the standard payment pro-gram. Based on the payment terms, the financial accountingsystem (mySAP ERP Financials) determines the open items and
proposes a payment run. The European in-house cash center isdefined in the vendor bank details. The U.S. in-house cash cen-ter, which serves as the house bank for subsidiary A, is instruct-ed to make the payment to subsidiary E via the European in-house cash center.
The payment program posts the payment documents and gen-erates an IDoc, which is sent to the U.S. in-house cash center.This IDoc contains all the relevant payment information. Eachin-house cash center then generates a payment order. Uponreceiving the IDoc, the U.S. in-house cash center verifieswhether the bank number of the ordering party differs fromthat of the recipient and determines the relevant paymentroute. The route specifies the next in-house cash center thatwill be instructed to make the payment (the European in-housecash center in this case), the current account of the Europeanin-house cash center in the U.S. in-house cash center, and thecurrent account of the U.S. in-house cash center in theEuropean in-house cash center. Subsequently, a second IDocwill be created.
Figure 14: Internal Payments Using Multiple In-House Cash Centers
17
Subsidiary C
Subsidiary B Account management
In-House Cash Center(U.S.)
Financialaccounting
system
Bank statement Payment
Subsidiary A 2
1
Subsidiary G
Subsidiary F Account management
In-House Cash Center(Europe)
Financialaccounting
system
Subsidiary E 4
3
The first IDoc received by the U.S. in-house cash center gener-ates postings on the following current accounts:
� The U.S. in-house cash center debits the payment amountfrom the account of the ordering party (subsidiary A) andcredits it to the account of the European in-house cash center.
� Consequently, the U.S. in-house cash center has a receivableposition due from subsidiary A and a payable position that isowed to the European in-house cash center.
As a result of the second IDoc received by the European in-house cash center, the European in-house cash center debits thepayment amount from the account of the ordering in-house cashcenter in the U.S. and credits it to the account of subsidiary E.
Account Management and Manual Post-Processing
Accounts are managed on the basis of the payment items(account turnovers), which are posted to the accountsautomatically by the respective processes. Payment orders maybe initiated externally or internally. Externally initiatedpayment orders are transferred to the in-house cash center bythe subsidiaries and then posted. Internally initiated paymentorders are entered manually in the in-house cash center; forexample, the in-house cash center receives a telephone orderfrom a subsidiary. You can set up a release procedure for thesepayment orders and items that would require approval byanother employee for payments above a given amount.
Continuing with the example above, the European in-housecash center has a payable position owed to subsidiary E and areceivable position due from the U.S. in-house cash center.Payables between subsidiary A and subsidiary E are thus clearedwithout the need for physical payments. The data for the origi-nal ordering party and recipient are stored with the paymentitems in the payment order. The payment notes are passed on
to the payment recipient and to the mySAP ERP Financials solution at company headquarters. The in-house cash centersgenerate and send bank statements to subsidiary A and subsid-iary E at predefined intervals. Subsidiary A and subsidiary Eimport the bank statements, and the functions for bank statement processing automatically identify and clear the corresponding open items.
Example: Central and Local Payments Using Multiple
In-House Cash Centers
In this example, an external business partner in Europe deliversgoods to subsidiary A in the United States. Subsidiary Ainstructs the U.S. in-house cash center to make a payment tothe external business partner.
The prerequisites for this scenario are as follows:
� Subsidiary A has defined the U.S. in-house cash center as itshouse bank.
� The U.S. in-house cash center keeps current accounts for sub-sidiary A and for the European in-house cash center.
� The European in-house cash center instructs its house bankto make the payments to external business partners inEurope.
To pay the invoice, subsidiary A runs the standard payment program. Based on the payment terms, mySAP ERP Financialsdetermines the open items and proposes a payment run. Thepayment function posts the payment documents and automati-cally generates an IDoc that contains all the payment informa-tion. This IDoc is sent to the U.S. in-house cash center(subsidiary A’s house bank), instructing it to make the paymentto the external business partner. The U.S. in-house cash center,serving as the house bank for subsidiary A, makes the paymentto the external business partner in Europe via the European in-house cash center. This is steered by the route determination inSAP In-House Cash.
18
Each in-house cash center generates a payment order. The U.S.in-house cash center first checks to see whether the bank num-ber of the ordering party differs from that of the recipient. Ifthis is the case, it determines the appropriate payment route.This route indicates the next in-house cash center that will beinstructed to make the payment, as well as the current accountof the party that finally executes the payment. Also the currentaccount of the U.S. in-house cash center in the European in-house cash center is determined. The IDoc received by the U.S.in-house cash center triggers the postings to the respective cur-rent accounts.
Figure 15: Central Payments Using Multiple In-House Cash Centers
The U.S. in-house cash center debits the payment amount fromthe account of subsidiary A (the ordering party) and credits it tothe account of the European in-house cash center. Consequent-ly, the U.S. in-house cash center has a receivable position duefrom subsidiary A and a payable position that is owed to theEuropean in-house cash center.
The U.S. in-house cash center generates and sends the bankstatement to subsidiary A. Subsidiary A imports the bank state-ment, and the bank statement processing functions automati-cally clear the open items on the clearing account. The secondIDoc received by the European in-house cash center triggerspostings to the respective current accounts. The European in-house cash center recognizes that the bank number of therecipient belongs to an external partner and automatically gen-erates a payment order for an outgoing payment.
The European in-house cash center debits the payment amountfrom the current account of the U.S. in-house cash center andcredits it to the account of the party that executes the paymentto the external business partner. The European in-house cashcenter, therefore, has a receivable item owed from the U.S. in-house cash center and a liability towards the executing party.The executing party makes the payment to the externalpartner’s bank. This can either be the European in-house cashcenter (comparable with the scenario for automated outgoingcentral payments) or another subsidiary (comparable with thescenario for automated outgoing local payments).
19
Subsidiary C
Subsidiary B Account management
In-House Cash Center Financialaccounting
system
Bank statement Payment
Subsidiary A 2
1
Account management
In-House Cash Center Financialaccounting
system
4
3
Housebank of
headoffice
Partner bank
Externalbusinesspartner
5
In the case of automated outgoing central payments, the inter-face for outgoing payments is in the financial accountingsystem of the head office (mySAP ERP Financials) or in the sub-sidiary’s financial accounting system (mySAP ERP Financials).Either the head office or the subsidiary runs the program forpayment requests, which selects the relevant requests and gen-erates the payment media for the house bank. The house bankmakes the payment to the partner bank. The external businesspartner is informed of the payment in a statement from its ownbank. The financial accounting system at the head office or atthe subsidiary also receives a bank statement from its housebank.
The in-house cash center manages accounts as subledgeraccounts. Each current account in the in-house cash center ismanaged in a particular currency that you define. The currencyof the payment orders sent to the in-house cash center is thetransaction currency. If the transaction currency of a paymentorder differs from the account currency, the applicationconverts the currency automatically through a currency swap.
The payment order can be settled when it is posted with a finalposting or with a provisional posting. As soon as the actualexchange rate is available, the payment order is finally postedusing this rate.
You can define spreads between the rate achieved by the in-house cash center (primary rate) and the internal rate (second-ary rate). The difference (spread) can be posted on a specific in-house cash profit-and-loss account. The items on theseprofit-and-loss accounts are transferred individually to themySAP ERP Financials general ledger.
Figure 16: Currency Conversion
20
CURRENCY CONVERSION
Group
Subsidiary C
Subsidiary B
Head Office
Account management
Currencyconversion
In-House Cash Center Financialaccounting
system
Payment order
- 100 JPY Acct 1+100 JPY Acct 2
Accountcurrency
USD
Transactioncurrency
JPY
Subsidiary A
Payment program
Localcurrency
GBP
The automatic currency conversion function is relevant for allpayment orders. If the transaction currency of a payment differsfrom the account currency, the payment amount is convertedinto the account currency using the current exchange ratedefined in the system. The payment order can be posted provi-sionally to the in-house cash account in the account currency,and the transaction currency and exchange rate are stored forreference. When the final exchange rate is communicated bythe external bank, the payment order is posted finally, eitherwith or without a spread. As a result, you work with the latestexchange rates. This standard scenario is shown in Figure 16.
The manual currency conversion function is relevant for all thepayment orders entered manually in the in-house cash center(internally initiated payment transactions). If you create a manual internal payment order with a transaction currencythat is different from the account currency of either the order-ing party or the recipient, the application automatically displaysthe defined exchange rate for this currency pair and gives youthe option of changing it manually. In the case of an internalpayment order, both the ordering party and the recipient havecurrent accounts with the in-house cash center. In the case ofan external payment order, the recipient’s current account isheld at an external bank. Therefore, when you create an exter-nal payment, you can change the exchange rate for only theordering party since the currency in the recipient’s account,which is managed by the external bank, is unknown. With themanual currency conversion function, you have the option topost provisionally before posting finally.
SAP In-House Cash provides central account settlement func-tions for activities that must be executed at regular intervals.You can run the functions manually, or you can create a jobchain for automatic scheduling and execution. For example,end-of-day processing can involve periodic settlement activitiessuch as cash concentration, account balancing, interestcompensation, as well as a general ledger transfer that includesupdating the relevant accounts.
Figure 17: End-of-Day Processing
Posting Cutoffs For Payment Transactions
Before you settle the accounts, you set the posting cutoff time.Any payment transactions after the cutoff time will have thenext posting date. This ensures that no additional postings fallinto the account-balancing period. However, you can stillprocess postings with value dates in the past.
21
PERIODIC ACTIVITIES
Transfer to general ledger
Balance sheetpreparations
Interest accrual/deferral
Set next accountbalancing date
Interest compensation
Account balancing
Cash concentration
Posting cutoff for payment transactions
End-o
f-D
ay P
rocessin
g
Cash Concentration
The cash concentration feature of the application lets youmaintain or clear balances for accounts within an account hierarchy that you have defined. You can specify, for example,that an account should always have a certain minimum balanceor that the remaining credit balance should be transferred to adifferent account at the end of each month. Payment orders fordebiting or crediting accounts are generated automatically.
To use the cash concentration function, you must create anaccount hierarchy (shown in Figure 17) in which you establishsuperior accounts and subaccounts to reflect account relation-ships. The hierarchies are configured so that a superior accountcan have multiple subaccounts. In these subaccounts, you canspecify the minimum and maximum balances that areappropriate for current business conditions.
Figure 18: Account Hierarchy
Account Balancing
Accounts are balanced when you close the accounting period.This may occur on a daily, monthly, quarterly, half-yearly, oryearly basis – or at any other point in time, depending on thespecifications for the current account. The in-house cash centercalculates the interest and charges for the accounts based on thedefined conditions, posts them to the current accounts, anddetermines the closing balances. The account-balancing date
stored in the account master record is then set to the next period closing date. If necessary, you can correct the closingdata for past periods to accommodate postings with past valuedates or returns. In addition, you can execute account balancingfor a single account or for a group of accounts using a mass run.You can also simulate an account-balancing run prior toexecuting the posting.
Interest Compensation
The interest compensation function lets you group accountsinto a logical account pool. As a result, you can add debit andcredit balances for grouped accounts to produce a fictitioustotal balance from which you can calculate the overall interest.This function maximizes the interest received by the accountpool and minimizes the pool’s interest expenses.
As with cash concentration, you create an account hierarchy to execute the interest compensation function. After theaccount balancing and the interest compensation run, the datefor account-balancing postings is moved forward.
Interest Accrual and Deferral
Interest that is accrued or deferred on an account is calculatedand prepared for transfer, together with the posting date, to themySAP ERP Financials general ledger.
Balance Sheet Preparation
Balance sheet preparation involves getting the balances in thecurrent accounts of each company ready for transfer to themySAP ERP Financials accounts for payables and receivables.You can execute balance sheet preparation for either thecurrent date or for a posting date in the past.
Transfer to General Ledger
Accounts in the in-house cash center are managed as asubledger. The corresponding general ledger is kept at the headoffice. Account turnovers in the current accounts are updatedto the general ledger. You define to which general-ledgeraccounts the provisional or final turnovers should be posted.
22
Hierarchy Relationships
Hierarchy level 3
Hierarchy level 2
Root account(Hierarchy level 1)
Act 1100
Hierarchy level 4
Act 1101 Act 1102 Act 1103
Act 1104 Act 1105
Act 1106
Set
tlem
ent
sequ
ence
Cas
h co
ncen
trat
ion
Figure 19: Process Flow for General-Ledger Transfer
During the general-ledger transfer, mySAP ERP Financials documents are created from records of totals prepared in previous steps and posted to the mySAP ERP Financials generalledger of the head office.
Figure 20: General-Ledger Transfer
Reporting
You can access numerous in-house cash reports, includingoverdraft lists, balance lists, and a list of account turnovers. Youcan generate a list of account blocks and display payment items(through the posting documents in mySAP ERP Financials) aswell as payment orders. In addition, a variety of reconciliationreports can be created, such as comparison of payment itemswith posting amounts or comparison of posting amounts in in-house cash accounts with posting amounts in mySAP ERPFinancials. The reporting function also includes overviews ofaccount limits and individual conditions.
All reports in SAP software have a standard interface andformat, and there are easy-to-use tools for creating your owndisplay variants. You can create reports that run online and inthe background. All central online functions can be modified tomeet your individual requirements, and you can select variouscriteria (such as account numbers) to restrict the scope of yourreports.
23
Balance sheet preparations
Interestaccrual/deferral
Transfer to generalledger (GL)
� Determine accountbalances
� Determine accrualdeferral amounts
� Prepare for GLtransfer
� Generate financialaccounting systemdocument
� Post in generalledger
� The results of each step are displayed in corresponding application logs
In-House Cash Center
Subsidiary A Subsidiary B
-50 +200
Financial Accounting SystemGeneral Ledger
Payment clearing
50 (1) 200 (2)
Receivables Payables
200 (2) 50 (1)
SAP Technology
SAP In-House Cash is an integrated e-business application thatis supported by the SAP NetWeaver® platform.
Application Link Enabling
Application link enabling (ALE) is the SAP integration technol-ogy for setting up and operating distributed applications. It pro-vides the infrastructure for message exchange, and it ensuresthat the data is stored consistently in SAP solutions that arelinked together. ALE supports both synchronous and asynchro-nous message exchanges and uses IDocs as the standard formatfor electronic data interchange (EDI).
BAPI® Programming Interface
The BAPI® programming interface in mySAP ERP is currentlyimplemented as a function module. The software processesBAPI function modules without sending back screen dialogs tothe calling application.
Remote Function Call
A remote function call (RFC) is a communications protocolthat enables synchronous communication between twosystems.
Communication Between Organizational Units
Group Companies and the In-House Cash Center
The in-house cash center is part of the SAP Financial SupplyChain Management set of applications, which is part of themySAP ERP Financials solution. A participating group companycan use any software (such as applications from SAP partners,an external system, or other non-SAP solutions) without theneed for external EDI converters by using the SAP NetWeaverExchange Infrastructure component.
Communication with the in-house cash center is based onIDocs, which are supported by SAP R/3® software 4.0B and higher. Earlier releases of SAP software and all other configura-tions require the use of an IDoc converter. The PEXR2002 andFINSTA01 IDoc message types are used for communication
between group companies and the in-house cash center.PAYEXT (message type PEXR2002) contains information formaking payments. It is sent to the in-house cash centerautomatically when subsidiaries run the payment program.DIRDEB (message type PEXR2002) contains information for col-lecting payments. It is sent to the in-house cash centerautomatically when subsidiaries run the payment program forcollection. The IDoc type FINSTA (message type FINSTA01)contains information for the bank statement and is sent by thein-house cash center as it generates internal statements for sub-sidiaries at the predefined intervals.
The In-House Cash Center and the Financial Accounting
System at the Head Office and at the Executing Party
For outgoing payments, the in-house cash center uses an IDocto communicate with the mySAP ERP Financials solution of theparty that executes the external payment. This can either be thehead office or another subsidiary (local payment scenario). TheIDoc automatically transfers the payment items relevant for thepayment program for payment requests to mySAP ERP Finan-cials of the executing party, where the items are entered in thepayment request table.
If the head office’s financial accounting program is located inthe same system as the in-house cash center, end-of-day pro-cessing takes place via BAPI. If financial accounting runs on adifferent system from the in-house cash center, an IDoc can be used in end-of-day processing for communication betweenthe in-house cash center and financial accounting. The IDocFIDCC2 (message type FIDCCP02) contains all the balances thathave been grouped together during balance sheet preparation sothat the balances can be posted at a later time to the generalledger.
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SYSTEM ARCHITECTURE
Figure 21: System Architecture: Interfaces
SAP In-House Cash is a flexible solution that internationalenterprises can use across national boundaries. It has all theprerequisites for centralized processing of worldwide paymenttransactions.
The automated in-house cash functions make it easier to stan-dardize, integrate, and control business processes for the groupas a whole. Managing your accounts in the in-house cash centergives you a clearer and more immediate overview of the liquidfunds available in the individual accounts of your subsidiaries.This helps prevent you from simultaneously borrowing moneyfor one subsidiary and investing money for another, and it eliminates related interest-rate gaps and markups. By concen-trating your activities in the in-house cash center, you gaindirect access to group-wide payment transaction informationand have optimum liquidity control.
By centralizing your external transactions, such as those relatedto foreign exchange, you minimize the number of externaltransactions required. You also increase the deal size, whichhelps reduce the volume of foreign exchange transactions, aswell as the currency risks and administration charges associatedwith those transactions. As a result, you increase your annualreturn or the interest you receive on invested capital and reducethe interest you pay on short-term loans. In addition, you cantrim the number of bank accounts you need and minimize losses due to exchange-rate fluctuations.
Eliminating the physical transfer of cash normally associatedwith intercompany payments significantly reduces transactioncosts. You can avoid the value-date losses and bank chargesrelated to internal netting, particularly in settling residual payment amounts, and keep the cash in the accounts of the in-house cash center. With links to all group entities, the in-housecash center leads to far greater efficiency in international pay-ment transactions. Because payments to external transactionpartners are bundled through external netting, bank chargesare minimized – particularly for foreign transactions.
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SUMMARY
Subsidiary A
Subsidiary B
IHCCaccountmanagement
Subsidiary C
IHCC
Electronic bank statement F110 payment program
IDocFINSTA
EDI
IDocPAYEXT
EDI
Incoming payments
Bank statement
End-of-dayprocessing
Bank statementOutgoing payments
BAPI
IDocFIDCC1
RFC
Financialaccountingsystem at
head office
General ledger
Electronic bankstatement
Paymentrequest
F111payment program
House bankof headoffice
BAPI® programming
interface
In contrast to the rigidity of classical netting procedures, processautomation gives internal trading partners more flexibility insetting terms of payment during invoicing. Group companiesno longer have to agree on a fixed credit period.
By carrying out payment orders when individual subsidiariesexperience financial bottlenecks, the in-house cash center helpsassure continued solvency for group companies. At the sametime, the greater efficiency gained through central cashmanagement reduces costs and gives you a size advantage in theexternal money market. With larger credit amounts in theaccounts of the in-house cash center, you can tap investmentstrategies that make the most of more attractive interest rates,which can have a very positive impact on net interest income.
Greater efficiency can also improve your financial ratios andpositively influence your external credit ratings. The lean bankaccount structure helps reduce charges and cuts down on over-head costs related to liquidity analyses, posting transactions,sweeping, cash concentration, account reconciliation, andaccount management. You need fewer banks to process transac-tions with numerous business partners, which can significantlyreduce your annual charges. In addition, the capability greatlysimplifies netting processes – a major bonus for users. As theprimary bank for your enterprise, the in-house cash center alsohandles the group’s internal financial transactions, furtherreducing your processing costs. In today’s increasinglyglobalized, highly competitive economy, SAP In-House Cashcan provide a clear advantage in your bottom line.
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