SAP In-house Cash

SAP Solution in Detail mySAP ERP

SAP® IN-HOUSE CASH WITH mySAP™ ERP

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CONTENTS SAP In-House Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Integration of SAP In-House Cash in Your Payment Landscape. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 The In-House Cash Center. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Account Management Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Master 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. . . . . . . . . . . . . . . . . . . . 11 Automated Intragroup Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 – Example: Automated Intragroup Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 – The Benefits of Automated Intragroup Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Automated Outgoing Central Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 – Example: Automated Outgoing Central Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 – The Benefits of Automated Outgoing Central Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Automated Outgoing Local Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 – Example: Automated Outgoing Local Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 – The Benefits of Automated Outgoing Local Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Automated Incoming Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 – Example: Automated Incoming Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 – The Benefits of Automated Incoming Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Integration with SAP Cash and Liquidity Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Bank 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 . . . . . . . . . . . . . . . . . . . 16 Using Multiple In-House Cash Centers for Posting Across Bank Areas . . . . . . . . . . . . . . . . . . . . . 17 – Example: Using Multiple In-House Cash Centers for Internal Payments . . . . . . . . . . . . . . . . . . 17 Account 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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Periodic Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 System Architecture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 SAP Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Communication 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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SAP® IN-HOUSE CASH 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 must process, the number of bank accounts you use, and the costs you incur for cross-border payments. Internal Bank

Bank

Bank

Internal Bank

HEAD OFFICE (EUROPE)

Subsidiary

U.S.

Subsidiary

Subsidiary

Bank

Bank

Bank

ASIA

Subsidiary

Subsidiary

Bank

Integration of SAP In-House Cash in Your Payment Landscape

Not all companies can centralize their payment processes. Your company may be decentralized with individual subsidiaries processing transactions with their own business partners independently of the parent company. Or you may use a mixture of centralized and decentralized models, making payments through local banks and headquarters. SAP In-House Cash supports a range of organizational designs, such as decentralized, centralized, and mixed organizations. In a decentralized organization in which the subsidiaries and the head office or holding company have separate accounts with their respective house banks, the payment transactions for the head office are processed through an in-house cash center. The subsidiaries continue to make payments to external business partners with their own house banks.

Subsidiary

Bank Bank

Bank Region 1

business partners on behalf of your subsidiaries and to process incoming payments from external business partners and forward those payments to subsidiaries.

Bank

Region 2

Figure 1: Initial Scenario

To gain a competitive edge, you must efficiently manage the flow of payments and the related risks. The SAP® In-House Cash application, one of the financial supply chain management components of the mySAP™ ERP Financials solution, can help cut the costs of processing transactions for internal payments, external payments, and international payments while reducing the number of external bank accounts you must handle.

In a centralized environment in which the parent company assumes the role of head office and processes all payments for the group through the head-office house bank, the subsidiaries and the head office keep most of their bank accounts in the in-house cash center. Other accounts with external banks play a subordinate role. Your subsidiaries can replace all their local bank accounts with the internal bank accounts of the in-house cash center. The in-house cash center itself can have one or more accounts with the house bank. Because the in-house cash center and its house bank process all incoming and outgoing payments 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 was designed for corporate groups that operate internationally. It lets you settle the payables and receivables of your group companies centrally using a reciprocal clearing process. You can also use these tools to pay external

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Most corporate groups today operate in the mixed organization form. In this environment, each subsidiary has one or more accounts with its house bank, as well as one or more accounts with the in-house cash center. The in-house cash center keeps accounts for the head office and the subsidiaries. As a result, you can process payments using either external house banks or the in-house cash center. Given this open model, the corporate group can process outgoing and incoming payments with internal groups and external business partners in any way that makes sense for the corporate group. For example, you can process all internal group payments using the in-house cash center and process only external payments to business partners using your external banks. You can centralize outgoing payment processes by using the in-house cash center to handle payments made between group companies and to external business partners, while keeping incoming payments from external partners decentralized.

House bank of head office

in-house cash center account in the configuration. If you expect internal payment clearing and central payments to play a more significant role in the future, SAP In-House Cash offers ideal support for these tasks. SAP In-House Cash makes it easy to centralize your payment processes and to take advantage of all the associated cost savings. For the corporate group, creating an in-house cash center may require changes in the distribution of tasks among the organizational units. The following organizational entities can be involved in the individual payment transaction processes: • Subsidiaries and affiliated companies • The head office (in-house cash center and the financial accounting functions of mySAP ERP Financials) • House banks used by the head office • External business partners and their house banks (partner banks)

Group

Head Office

Subsidiary A

Head office of group/holding, incl. in-house cash center

Subsidiary B

In-House Cash Center

Financial accounting system

Account management

Subsidiary C

Subsidiary A

Subsidiary B

Subsidiary C External business partner

House bank of subsidiary A

House bank of subsidiary B

Partner bank

House bank of head office

House bank of subsidiary C

Figure 3: Organizational Entities Figure 2: Mixed Organization

The in-house cash center supported by the application is designed to integrate easily with a corporate group’s payment processes, enabling the standard bank account statement processing and payment program execution to remain unchanged. The key is to replace the external house bank account with the

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For a subsidiary, the in-house cash center is a virtual bank that serves as a house bank. The subsidiary keeps an account with the in-house cash center as if it were a house bank. The head office manages the financial accounting system and the in-house cash center.

THE IN-HOUSE CASH CENTER You draw up balance sheets for the in-house cash center using the standard mySAP ERP Financials accounting functions. The in-house cash center is located and maintained centrally by the parent company or an organizational unit assigned to the head office. Therefore, this organizational unit manages the current accounts. In the financial accounting system, the receivables and payables of the subsidiaries are displayed in general ledger accounts in summarized form. You set up the in-house cash center as a bank for the whole group to manage the current accounts of the head office and the subsidiaries that are maintained as subledger accounts in SAP In-House Cash. The in-house cash center can handle one or more current accounts for group companies and regularly dispatch the bank statements that correspond to those accounts. Individual account items represent payables or receivables between the in-house cash center and a subsidiary. A receivable of the head office represents an obligation of the subsidiary to the head office. Like a house bank, the in-house cash center creates and dispatches bank statements to the subsidiaries. This reduces the float or transfer time it takes for a payment from the ordering party to reach the recipient, eliminating value-date differences related to payments between subsidiaries. With this application, the house banks of the head office process all incoming and outgoing external payments for the in-house cash center. External business partners use their own house banks 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 Cash application. It serves as a virtual bank for group companies and looks after their financial interests. The in-house cash center manages one or several current accounts for each of the group’s subsidiaries. It represents an additional bank that can process both internal and external payments and can keep accounts in any currency. The in-house cash center also provides account management functions, such as calculating and debiting interest and charges, granting current account overdrafts, and generating bank statements for the subsidiaries. You can flexibly configure the features and conditions of each account. The in-house cash center controls the automated processes for payment transactions such as internal payments within the group, payments made by subsidiaries to external partners, and incoming payments for subsidiaries from external partners, which are initially credited to the house bank accounts at the head office (central incoming payments). During the payment process, the in-house cash center supports automatic creation as well as direct manual entry of payment orders. Automated and manual payment orders can have the following statuses: • Parked, meaning no posting has taken place yet on any current account • Provisionally posted, which means posting has taken place on the current accounts, but the exchange rate can be changed before the final posting takes place, for example • Finally posted, which means the final posting has taken place on the involved current accounts and the account holder is informed by statement about the posting

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Provisionally and finally posted payment orders are included in limit checks. You can reverse provisionally posted payment orders 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 provisional payment order created either by the automatic or the manual payment process. Other functions of the in-house cash center let you monitor payment orders and aggregate current account balances, as well as plan and forecast the incoming and outgoing payments of your group companies over the medium term. This makes the process of controlling payment flows far more efficient.

Conditions

Bank statements

Limits

In-House Cash Center

Account Subsidiary A Business partners

Financial accounting system GL

General-ledger (GL) transfer

Blocks

+ 100 - 120 ...

Turnovers Currency conversion

Reporting

No.

Post. date Val. date

1

12/30/00 12/31/00 USD 100.00 C

Curr. Amount1

2

12/31/00 12/31/00 USD

9.58 D

Figure 4: Account Components Business Partners

Master Data of the Current Account Company Code and Bank Area

In SAP solutions, a company code is a legal unit within a group for which you draw up a complete self-contained set of accounts, including a balance sheet and income statement. The company code represents the financial accounting system at the head office, which is responsible for managing the general ledger accounts that are reconciled with the subledger accounts in SAP In-House Cash. A bank area is a central, self-contained organizational unit that manages and processes all the accounts for an in-house cash center. There is a bank area for each in-house cash center. If you want to use several in-house cash centers, you must set up several bank areas.

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Master data for the in-house cash center includes information on the various business partners related to accounts in the center. A business partner can be an affiliated company, an external business partner, another bank, the head office, another in-house cash center, or an internal organizational entity. When you maintain accounts, you enter key business partner data, including the partner’s name and address and related bank details (such as the account number and sort code). You can map relationships between business partners to suit your particular needs. Each business partner can have more than one role. The application 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 statement recipient, and contact person. You can create your own roles if the standard roles do not cover all your requirements. Business partner data is stored centrally, so if a particular business partner already exists, you can just create the partner in a new role. Instead of entering all the business partner data each time, you merely add any role-specific data that is missing.

Product Definition

Conditions

The nature of an account in the in-house cash center depends on the characteristics of the product that is assigned to it. You enter the product details once using a product configurator and assign a predefined product each time you create a new account. 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 for this product are managed only on the credit side, with interest calculated on the balance. If you want slightly different conditions for a particular account, you merely change the default settings for the product in the account itself.

You can configure account features and conditions according to your individual requirements. This allows you to map profitoriented in-house cash centers, for example. The flexible condition model lets you define standard conditions, individual conditions, and markup conditions based on the condition groups for interest, charges, and value dates.

Account Data

Each subsidiary participating in the in-house cash process must keep at least one account with the in-house cash center. Basic data 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 any notes 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, and the settings for cash concentration. The account balance is displayed directly in the account, along with withdrawal limits that have been defined for the account and the bank statement frequency. The account master record is where you maintain control data, such as information about the general ledger transfer. The payment transaction view of account data provides information about any account blocks that prevent certain functions from being used. If, for example, a subsidiary ceases to be part of the group, an account block can prevent further processing of payment items.

Interest

You can calculate credit and debit interest based on value-date balances. The interest calculation can reflect absolute interest rates or reference rates with markups or markdowns. You can also specify minimum and maximum rates. When you create interest rate conditions, you can choose from a range of interest calculation methods and opt for either an interval or scaled interest calculation. In addition, you can apply interest rate conditions for a given period or account balance. Extra-credit interest that you earn from the external money market as a larger group can be passed on to your subsidiaries. You can opt to charge debit interest at a lower rate than the house bank, thereby improving the net interest income of the subsidiaries, and apply an overdraft interest rate if the balance in an account exceeds the internal overdraft limit. You can choose to charge such overdraft interest in addition to or instead of the debit 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 recoup costs for services that do not automatically lead to item postings in the account. All charges are subject to a validity period.

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Limits on Drawing from Accounts Interest

Debit interest

Credit interest

Overdraft interest

Transaction interest

Subsidiary A Account charge: US$5

Item charges

-5.00 +100.00

Mailing charges

Account charges

Credit interest 0.5%

Periodic charges

Value Date

Direct charges

Charges

Figure 5: Conditions Value Dates

Process automation in the in-house cash center allows same-day accounting of payments without the losses that can be incurred through delayed value dates. However, you can still use valuedate conditions for the respective turnover type to determine the value date based on the account, a time limit, and the public holiday calendar entered in the account. The value date is calculated from the posting date and the number of value-date days, which can extend into the future or the past. When you specify the value date, the application checks the tolerance days.

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The application lets you define drawing limits on accounts for specific periods and subject those limits to a release procedure requiring that changes are checked by another employee. When the specified amount is exceeded – due to a liquidity bottleneck at 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 overdraft condition is applied to the account. • The external credit limit is for reference only. The external limit must be lower than or equal to the internal account limit.

CUSTOMER PAYMENT PROCESSES SUPPORTED BY SAP IN-HOUSE CASH The following scenarios provide an overview of classic payment transaction processes supported by SAP In-House Cash using the organizational units described in the previous section.

Group

Head Office In-House Cash Center

Automated Intragroup Payments

The process of clearing payables and receivables between subsidiaries is referred to as internal (intragroup) payment clearing.

2b

Subsidiary A

Account management

2a

Subsidiary B

1

Example: Automated Intragroup Payments

Bank statement

In this example, subsidiary B delivers goods to subsidiary A. After receiving and posting the invoice, subsidiary A starts the payment program in mySAP ERP Financials to settle the invoice. The solution determines the open items, taking into account the payment terms and the specified bank details, and proposes a payment run. Because the in-house cash center has been identified as the vendor’s house bank, it is instructed to make the payment to subsidiary B. During the payment run, the payment program posts the payment documents and simultaneously creates an intermediate document, known as an IDoc (which is a type of data interface), that contains all the relevant payment information. This IDoc is then sent to the in-house cash center (step 1 in Figure 6).

Payment

In the in-house cash center, the incoming IDoc triggers provisional or final postings to the respective current accounts. Whether postings should be executed provisionally or finally depends on the configuration settings. The payment is debited from the account of the ordering party, subsidiary A, and credited to the account of the beneficiary, subsidiary B. The inhouse cash center has a receivable position owed from subsidiary A and a payable position due to subsidiary B. This clears payables between group companies without the need for physical payments (such as checks or bank transfers) by an external bank. The in-house cash center then generates and sends bank statements to subsidiaries A and B using IDocs (step 2 in Figure 6). The IDocs are imported automatically by each of the subsidiaries. This triggers corresponding postings to the clearing accounts and settles the open items.

Financial accounting system

Figure 6: Internal Payment Clearing

In-House Cash Center Subsidiary A

Subsidiary B

-200 (to B)

+200 (from A)

Financial Accounting System General Ledger Payment clearing 200 (2)

200 (1)

IHCC receivables IHCC payables 200 (2) (1) Internal outgoing payment

(debit account A)

(2) Internal incoming payment

(debit account B)

200 (1)

IHCC = in-house cash center

Figure 7: Posting Logic for Internal Payment Clearing The Benefits of Automated Intragroup Payments

The financial accounting system at the head office manages current account data in a summarized form. The end-of-day processing function in the in-house cash center summarizes the account turnovers and transfers the totals to the general ledger. The corresponding postings in financial accounting are triggered 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 are incurred due to value-dating payments.

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You also save on charges for external bank transfers. The inhouse cash center can invest the accumulated credit balance from 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 to subsidiaries that need financial assistance. By using any surplus cash for financing within the group, you save the margin between the interest rates for borrowing and lending and improve your overall interest revenue. Classical netting arrangements typically require the group companies to agree on a set credit period, after which all items are due. With in-house cash, you have broad flexibility in choosing different payment terms. Automated Outgoing Central Payments

Payments made by the in-house cash center to external business partners to settle amounts payable by subsidiaries are referred to as central payments. The in-house cash center can greatly simplify the workflow of the subsidiaries by making such payments on their behalf. Example: Automated Outgoing Central Payments

In this example, an external partner delivers goods to subsidiary A, which posts the vendor invoice as a payable item. It then runs the standard mySAP ERP Financials payment function to settle the payment. This clears the open items on the vendor account and generates a corresponding offsetting entry in the clearing account. Because the in-house cash center has been identified as subsidiary A’s house bank, it is instructed to make the payment to the external partner via the in-house cash center. During the payment run, mySAP ERP Financials automatically creates an IDoc, which transfers the payment information to the in-house cash center (step 1 in Figure 8). Having received the IDoc, the in-house cash center debits the current account of subsidiary A provisionally or finally and forwards the payment information to the financial accounting system at the head office, which is the party that executes the

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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 the information from the original payment IDoc. This triggers the actual payment. The outgoing payment is posted to a bank clearing account, and the head office’s house bank is instructed to make the payment to the external partner (step 3 in Figure 8). The in-house cash center generates the bank statement for subsidiary A and the executing party and sends it to both as an IDoc (step 4 in Figure 8). Subsidiary A and the executing party import the bank statements, which triggers a clearing posting on the clearing account. The financial accounting system at the head office (executing party) imports a bank statement from its house bank and posts the items to a bank clearing account (step 5 in Figure 8). This clears the account. Once the head office’s house bank receives the payment information, the payment is transferred to the house bank of the external partner (step 6 in Figure 8). The external business partner receives a corresponding bank statement from its own bank (step 7 in Figure 8).

Group

Head Office In-House Cash Center

Subsidiary A Subsidiary B Payment program

External business partner

4b 4a

Account management

2 3

1 7

Bank statement

Figure 8: Outgoing Central Payments

Financial accounting system

Partner bank

6

5

House bank of head office Payment

The Benefits of Automated Outgoing Central Payments

Automated Outgoing Local Payments

When payments are made to an external partner, payment instructions are only made by the in-house cash center to the business partner's bank, and cash only flows from the bank used by the in-house cash center to the business partner's bank. Because the subsidiaries make their payments via the central accounts of the in-house cash center, they no longer need to keep accounts abroad. As a result, you can save on currency translation charges, reduce the number of international payments, and optimize your foreign-exchange positions.

Payments made by a subsidiary to external business partners to settle amounts payable on behalf of another subsidiary are referred to as local payments.

With SAP In-House Cash, you can run a precise financial analysis within your group at any time. Functions for automatic postprocessing and automatic data transfer to the financial accounting system can significantly reduce the staff required for manual processing. Because the accounts are managed centrally in the in-house cash center, you have a direct view of all payment transactions in your group and of the liquid funds that are available in the accounts of your subsidiaries. If cash is tight for individual subsidiaries, the in-house cash center can still ensure that payment obligations are met. The center can grant generous current-account overdrafts at short notice, ensuring that the individual subsidiaries are solvent at all times.

Example: Automated Outgoing Local Payments

In-House Cash Center Subsidiary A -400 (1)

External business partner

Clearing Partner (head office) +400 (1)

Partner bank

House bank of head office

Financial Accounting System Head Office Intercomp. Subsidiary A

Clearing Partner (head office)

400 (2)

400 (2)

IHCC Clearing

Clearing Partner Bank

400 (2) 400 (2)

400 (3)

House Bank

Outg. Payment clearing

400 (4)

400 (1) 400 (3)

Bank Clearing IHCC = in-house cash center

400 (4) 400 (1)

The automated outgoing local payment scenario is similar to the outgoing central payment scenario. The only difference is that all local house banks of all in-house cash center participants can be included in this scenario to achieve local payments instead of foreign payments to avoid cross-border costs.

In this example, an external partner in the United Kingdom delivers goods to subsidiary A, which is located in Germany. Subsidiary A posts the vendor invoice as a payable item. It then runs the standard mySAP ERP Financials payment program to settle the payment. This clears the open items on the vendor account and generates a corresponding offsetting entry in the clearing account. Because the in-house cash center has been identified as subsidiary A’s house bank, it is instructed to make the payment to the external partner in the United Kingdom by the in-house cash center. During the payment run, mySAP ERP Financials automatically creates an IDoc, which transfers the payment information to the in-house cash center (step 1 in Figure 10). Having received the IDoc, the in-house cash center checks which legal entity is the executor of the payment, meaning which local house-bank account can be used to execute the foreign payment as a domestic payment. Criteria can be the transaction amount, the transaction currency, and the bank country of the recipient. The executing party can be the head office (as with automated outgoing central payments) or a subsidiary. In this example, subsidiary B in the United Kingdom is determined as the executing party.

Bank statement Payment (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

Figure 9: Posting Logic for Outgoing Central Payments 13

After the determination of the executing party, the in-house cash center debits the current account of subsidiary A, provisionally or finally, and credits the current account of subsidiary B, which executes the payment on behalf of subsidiary A either provisionally or finally. The in-house cash center forwards the payment information to the financial accounting system at subsidiary B (step 2 in Figure 10). In this system, a second payment program creates a payment order, using the information from the 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 the payment to the external partner in the United Kingdom (step 3 in 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. The financial accounting system at subsidiary B imports a bank statement from its house bank and posts the items to a bank clearing account (step 5 in Figure 10), which clears the account. Once subsidiary B’s house bank receives the payment information, the payment is transferred to the house bank of the external partner (step 6 in Figure 10). The external business partner receives a corresponding bank statement from its own bank (step 7 in Figure 10).

The Benefits of Automated Outgoing Local Payments In-House Cash Center Subsidiary A (Germany)

Subsidiary B (United Kingdom)

-400

+400

Financial Accounting System Subsidiary A (Germany) IHCC clearing

Financial Accounting System Subsidiary B (United Kingdom) IHCC receivables

Outgoing payment clearing

400 (3)

400 (2) 400 (3)

House Bank

Bank clearing

400 (4)

400 (4) 400 (2)

External business partner

400 (3) 400 (1) 400 (1) IHCC receivables 400 (3)

(1) (2) (3) (4)

External business partner (United Kingdom)

Partner bank

House bank of subsidiary B

Generate payment order to in-house cash center Generate payment request, payment order to house bank Import and post bank statement from in-house cash center Import and post bank statement from house bank

IHCC = in-house cash center Bank statement

Payment

Figure 11: Posting Logic for Outgoing Local Payments

When payments are made to an external partner, all existing banks in the corporate group, including subsidiaries and head office, can be used to make local payments. The in-house cash center offers a flexible, rule-based determination of the executing party. Because the subsidiaries are responsible only for the execution of local payments, they no longer need to keep accounts abroad.

Group In-House Cash Center Subsidiary B (Germany) (United Kingdom) Subsidiary A (Germany) Payment program

External business partner (United Kingdom)

4a

2 4b

1

7

Bank statement

Figure 10: Outgoing Local Payments

14

Account management

Financial accounting system 3

Partner bank

6

5

House bank of subsidiary B Payment

Because the subsidiaries are responsible only for the execution of local payments, they no longer need to keep accounts abroad. Consequently, all subsidiaries can keep only one local external bank account for their local currency. As a result, you can save on currency translation charges, reduce the number of international payments, and optimize your foreign-exchange positions.

Automated Incoming Payments

When incoming payments are processed centrally, the in-house cash center directs payments from external business partners to subsidiaries. Example: Automated Incoming Payments

In this example, subsidiary A delivers goods to an external business partner. Subsidiary A instructs its external business partner to make payment to its head office. The external business partner makes the payment to subsidiary A via the in-house cash center. The external business partner instructs its bank to make the payment (step 1 in Figure 12). Once the payment amount has been debited from the business partner’s account, the business partner receives a bank statement from its house bank (step 2 in Figure 12).

Group

Head Office In-House Cash Center

Subsidiary A

5

Financial accounting system

Account management

Subsidiary B

External business partner Payment program

4 2 1

Bank statement

Partner bank

3

House bank of head office

Payment

Figure 12: Central Incoming Payments The Benefits of Automated Incoming Payments

The business partner’s house bank transfers the payment to the house bank of the head office (step 3 in Figure 12). The financial accounting system at the head office imports the bank statement from the house bank and posts the items to a bank clearing account. All the items listed in the bank statement are examined using internal algorithms to establish whether they are intended for the in-house cash center and which current account is affected. Once the items have been identified, the system automatically transfers them to the in-house cash center for posting to the relevant current accounts (step 4 in Figure 12).

The central processing of incoming payments reduces the number of bank accounts your group needs, while fully supporting international payment transactions. Incoming liquid funds are instantly available to the in-house cash center, and payments are credited automatically to the appropriate accounts.

The in-house cash center credits the current account of subsidiary A, debits the current account of the head office that has received the payment from the external business partner on behalf of subsidiary A, generates the corresponding bank statements of subsidiary A and the head office, and sends the IDocs containing the relevant information to subsidiary A and the head office. Once subsidiary A and the head office receive the bank statements from the in-house cash center (step 5 in Figure 12), their financial accounting systems automatically clear the clearing accounts and the open customer item for subsidiary A.

Incoming payments reside in the house-bank accounts of the head office under this model. By managing these funds centrally, you can optimize your liquidity planning and generate higher investment returns.

If you process incoming payments centrally, your subsidiaries no longer need to maintain accounts abroad. The in-house cash center processes payments for any foreign accounts as it would for domestic payments.

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In-House Cash Center

Subsidiary A

Clearing Partner (head Office)

+400 (2)

-400 (2)

External business partner

Partner bank

House bank of head office

Financial Accounting System Head Office Bank clearing

Subsidiary A

400 (4) 400 (1)

400 (3)

Clearing Partner (head Office)

Clearing Partner Bank

400 (3)

400 (4)

House Bank

Incoming payment clearing

400 (1)

400 (3) 400 (3)

Bank statement Payment (1) (2) (3) (4)

Import and post the bank statement from the house bank Forward the incoming payment to the in-house cash center Transfer to general ledger Import and post the bank statement for clearimg partner from in-house bank

Figure 13: Posting Logic for Central Incoming Payments

SAP In-House Cash includes numerous manual postprocessing functions for current accounts. You can post and reverse payment items or orders, reject ordering-party payment items, transfer payment items to another account, and return the posted payment items. You can also change or delete payment items or orders that have been parked pending release for further processing.

In cash management reporting of subsidiaries, the receivables and payables balances with the head office are shown in the cash position in real time. Outgoing and incoming payments in cash clearing accounts are also visible in the cash position in real time. The in-house-cash current accounts integrate into the head office’s cash management before the general ledger transfer takes place at the end of a day. The different postings on the current accounts can be grouped in the cash management view as account balances that are finally posted or as either internal or external provisional turnovers. Bank Statements Bank Statements Sent to the Head Office by the House Bank

The financial accounting system (mySAP ERP Financials) at the head office imports the bank statements sent by the house bank. Relevant items are then transferred to the in-house cash center. A search algorithm specifies how the application interprets information (such as a customer number) that appears in the payment notes accompanying the statement items. The application can also use the external bank and account numbers to determine the appropriate bank area and account number. All information included by the external business partner in the payment notes can be transferred to the subsidiaries.

Integration with SAP Cash and Liquidity Management

Bank Statements Sent to Subsidiaries from the In-House

The SAP Cash and Liquidity Management application offers the following tools, designed to give clear visibility to corporate cash flows: • The cash position, which illustrates short-term movements in bank accounts • The liquidity forecast, which illustrates medium-term movements in subledger accounts

Cash Center

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The in-house cash center can create and forward bank statements either periodically or on request by subsidiaries. You can set default values for bank statement frequency and for administrative data, such as the name of the relevant business partner, the statement format, and options for creating duplicate statements. You can define several bank statement recipients for each account. This is useful if the subsidiary has several account holders. You can generate a bank statement as part of a mass run or in a single run and then have it sent automatically to the relevant subsidiary.

Electronic bank statements created in the in-house cash center are imported and processed by the financial accounting systems of the subsidiaries using standard mySAP ERP Financials functions. The payment notes in the electronic bank statement contain the information necessary for settling open items, such as an 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 statements with SAPscript and send them to subsidiaries that do not have a secure electronic connection with the in-house cash center and who must receive bank statements in paper form. The bank statements of the accounts of these subsidiaries can be created as paper statements and then sent by fax directly from the in-house cash center application. Using Multiple In-House Cash Centers for Posting Across Bank Areas

Internal payment clearing and central payments can involve more than one in-house cash center, which helps you optimize the routing of payments and save on transaction costs.

proposes a payment run. The European in-house cash center is defined in the vendor bank details. The U.S. in-house cash center, which serves as the house bank for subsidiary A, is instructed to make the payment to subsidiary E via the European inhouse cash center. The payment program posts the payment documents and generates an IDoc, which is sent to the U.S. in-house cash center. This IDoc contains all the relevant payment information. Each in-house cash center then generates a payment order. Upon receiving the IDoc, the U.S. in-house cash center verifies whether the bank number of the ordering party differs from that of the recipient and determines the relevant payment route. The route specifies the next in-house cash center that will be instructed to make the payment (the European in-house cash center in this case), the current account of the European in-house cash center in the U.S. in-house cash center, and the current account of the U.S. in-house cash center in the European in-house cash center. Subsequently, a second IDoc will be created.

Example: Using Multiple In-House Cash Centers for Internal Payments

In this example, subsidiary E in Europe delivers goods to subsidiary 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 centers as 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 accounts for subsidiary E and for the U.S. in-house cash center. To pay the invoice, subsidiary A runs the standard payment program. Based on the payment terms, the financial accounting system (mySAP ERP Financials) determines the open items and

In-House Cash Center (U.S.)

Subsidiary C Subsidiary B

Financial accounting system

Account management 2

Subsidiary A

1

In-House Cash Center (Europe)

Subsidiary G Subsidiary F Subsidiary E

Bank statement

3

Financial accounting system

Account management 4

Payment

Figure 14: Internal Payments Using Multiple In-House Cash Centers

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The first IDoc received by the U.S. in-house cash center generates postings on the following current accounts: • The U.S. in-house cash center debits the payment amount from the account of the ordering party (subsidiary A) and credits it to the account of the European in-house cash center. • Consequently, the U.S. in-house cash center has a receivable position due from subsidiary A and a payable position that is owed to the European in-house cash center.

to the payment recipient and to the mySAP ERP Financials solution at company headquarters. The in-house cash centers generate and send bank statements to subsidiary A and subsidiary E at predefined intervals. Subsidiary A and subsidiary E import 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

As a result of the second IDoc received by the European inhouse cash center, the European in-house cash center debits the payment amount from the account of the ordering in-house cash center in the U.S. and credits it to the account of subsidiary E.

In this example, an external business partner in Europe delivers goods to subsidiary A in the United States. Subsidiary A instructs the U.S. in-house cash center to make a payment to the external business partner.

Account Management and Manual Post-Processing

The prerequisites for this scenario are as follows: • Subsidiary A has defined the U.S. in-house cash center as its house bank. • 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 instructs its house bank to make the payments to external business partners in Europe.

Accounts are managed on the basis of the payment items (account turnovers), which are posted to the accounts automatically by the respective processes. Payment orders may be initiated externally or internally. Externally initiated payment orders are transferred to the in-house cash center by the subsidiaries and then posted. Internally initiated payment orders are entered manually in the in-house cash center; for example, the in-house cash center receives a telephone order from a subsidiary. You can set up a release procedure for these payment orders and items that would require approval by another employee for payments above a given amount. Continuing with the example above, the European in-house cash center has a payable position owed to subsidiary E and a receivable position due from the U.S. in-house cash center. Payables between subsidiary A and subsidiary E are thus cleared without the need for physical payments. The data for the original ordering party and recipient are stored with the payment items in the payment order. The payment notes are passed on

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To pay the invoice, subsidiary A runs the standard payment program. Based on the payment terms, mySAP ERP Financials determines the open items and proposes a payment run. The payment function posts the payment documents and automatically generates an IDoc that contains all the payment information. This IDoc is sent to the U.S. in-house cash center (subsidiary A’s house bank), instructing it to make the payment to the external business partner. The U.S. in-house cash center, serving as the house bank for subsidiary A, makes the payment to the external business partner in Europe via the European inhouse cash center. This is steered by the route determination in SAP In-House Cash.

Each in-house cash center generates a payment order. The U.S. in-house cash center first checks to see whether the bank number of the ordering party differs from that of the recipient. If this is the case, it determines the appropriate payment route. This route indicates the next in-house cash center that will be instructed to make the payment, as well as the current account of the party that finally executes the payment. Also the current account of the U.S. in-house cash center in the European inhouse cash center is determined. The IDoc received by the U.S. in-house cash center triggers the postings to the respective current accounts.

In-House Cash Center

Subsidiary C Subsidiary B

Account management 2

Subsidiary A

1

3

In-House Cash Center External business partner

Financial accounting system

House bank of head office

Partner bank 5

Bank statement

Financial accounting system

Account management 4

Payment

The U.S. in-house cash center debits the payment amount from the account of subsidiary A (the ordering party) and credits it to the account of the European in-house cash center. Consequently, the U.S. in-house cash center has a receivable position due from subsidiary A and a payable position that is owed to the European in-house cash center. The U.S. in-house cash center generates and sends the bank statement to subsidiary A. Subsidiary A imports the bank statement, and the bank statement processing functions automatically clear the open items on the clearing account. The second IDoc received by the European in-house cash center triggers postings to the respective current accounts. The European inhouse cash center recognizes that the bank number of the recipient belongs to an external partner and automatically generates a payment order for an outgoing payment. The European in-house cash center debits the payment amount from the current account of the U.S. in-house cash center and credits it to the account of the party that executes the payment to the external business partner. The European in-house cash center, therefore, has a receivable item owed from the U.S. inhouse cash center and a liability towards the executing party. The executing party makes the payment to the external partner’s bank. This can either be the European in-house cash center (comparable with the scenario for automated outgoing central payments) or another subsidiary (comparable with the scenario for automated outgoing local payments).

Figure 15: Central Payments Using Multiple In-House Cash Centers

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CURRENCY CONVERSION In the case of automated outgoing central payments, the interface for outgoing payments is in the financial accounting system of the head office (mySAP ERP Financials) or in the subsidiary’s financial accounting system (mySAP ERP Financials). Either the head office or the subsidiary runs the program for payment requests, which selects the relevant requests and generates the payment media for the house bank. The house bank makes the payment to the partner bank. The external business partner is informed of the payment in a statement from its own bank. The financial accounting system at the head office or at the subsidiary also receives a bank statement from its house bank.

The in-house cash center manages accounts as subledger accounts. Each current account in the in-house cash center is managed in a particular currency that you define. The currency of the payment orders sent to the in-house cash center is the transaction currency. If the transaction currency of a payment order differs from the account currency, the application converts the currency automatically through a currency swap. The payment order can be settled when it is posted with a final posting or with a provisional posting. As soon as the actual exchange rate is available, the payment order is finally posted using this rate. You can define spreads between the rate achieved by the inhouse cash center (primary rate) and the internal rate (secondary rate). The difference (spread) can be posted on a specific inhouse cash profit-and-loss account. The items on these profit-and-loss accounts are transferred individually to the mySAP ERP Financials general ledger.

Group

Head Office

Subsidiary C Subsidiary B Subsidiary A

In-House Cash Center Account management

Financial accounting system

Currency conversion

Local currency GBP

Transaction currency JPY

Account currency USD

Payment program

Payment order - 100 JPY Acct 1 +100 JPY Acct 2

Figure 16: Currency Conversion

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PERIODIC ACTIVITIES

The manual currency conversion function is relevant for all the payment orders entered manually in the in-house cash center (internally initiated payment transactions). If you create a manual internal payment order with a transaction currency that is different from the account currency of either the ordering party or the recipient, the application automatically displays the defined exchange rate for this currency pair and gives you the option of changing it manually. In the case of an internal payment order, both the ordering party and the recipient have current accounts with the in-house cash center. In the case of an external payment order, the recipient’s current account is held at an external bank. Therefore, when you create an external payment, you can change the exchange rate for only the ordering party since the currency in the recipient’s account, which is managed by the external bank, is unknown. With the manual currency conversion function, you have the option to post provisionally before posting finally.

SAP In-House Cash provides central account settlement functions for activities that must be executed at regular intervals. You can run the functions manually, or you can create a job chain for automatic scheduling and execution. For example, end-of-day processing can involve periodic settlement activities such as cash concentration, account balancing, interest compensation, as well as a general ledger transfer that includes updating the relevant accounts. Posting cutoff for payment transactions

Cash concentration

End-of-Day Processing

The automatic currency conversion function is relevant for all payment orders. If the transaction currency of a payment differs from the account currency, the payment amount is converted into the account currency using the current exchange rate defined in the system. The payment order can be posted provisionally to the in-house cash account in the account currency, and the transaction currency and exchange rate are stored for reference. When the final exchange rate is communicated by the external bank, the payment order is posted finally, either with or without a spread. As a result, you work with the latest exchange rates. This standard scenario is shown in Figure 16.

Account balancing

Interest compensation

Set next account balancing date

Interest accrual/deferral

Balance sheet preparations

Transfer to general ledger

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 the next posting date. This ensures that no additional postings fall into the account-balancing period. However, you can still process postings with value dates in the past.

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Cash Concentration

The cash concentration feature of the application lets you maintain 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 balance or that the remaining credit balance should be transferred to a different account at the end of each month. Payment orders for debiting or crediting accounts are generated automatically.

stored in the account master record is then set to the next period closing date. If necessary, you can correct the closing data for past periods to accommodate postings with past value dates or returns. In addition, you can execute account balancing for a single account or for a group of accounts using a mass run. You can also simulate an account-balancing run prior to executing the posting. Interest Compensation

To use the cash concentration function, you must create an account hierarchy (shown in Figure 17) in which you establish superior accounts and subaccounts to reflect account relationships. The hierarchies are configured so that a superior account can have multiple subaccounts. In these subaccounts, you can specify the minimum and maximum balances that are appropriate for current business conditions. Hierarchy Relationships Root account (Hierarchy level 1)

Settlement sequence Cash concentration

Act 1100

Act 1101

Act 1104

Act 1102

Act 1103

Hierarchy level 2

Act 1105

Hierarchy level 3

Act 1106

Hierarchy level 4

The interest compensation function lets you group accounts into a logical account pool. As a result, you can add debit and credit balances for grouped accounts to produce a fictitious total balance from which you can calculate the overall interest. This function maximizes the interest received by the account pool and minimizes the pool’s interest expenses. As with cash concentration, you create an account hierarchy to execute the interest compensation function. After the account balancing and the interest compensation run, the date for account-balancing postings is moved forward. Interest Accrual and Deferral

Interest that is accrued or deferred on an account is calculated and prepared for transfer, together with the posting date, to the mySAP ERP Financials general ledger. Balance Sheet Preparation

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, or yearly basis – or at any other point in time, depending on the specifications for the current account. The in-house cash center calculates the interest and charges for the accounts based on the defined conditions, posts them to the current accounts, and determines the closing balances. The account-balancing date

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Balance sheet preparation involves getting the balances in the current accounts of each company ready for transfer to the mySAP ERP Financials accounts for payables and receivables. You can execute balance sheet preparation for either the current date or for a posting date in the past. Transfer to General Ledger

Accounts in the in-house cash center are managed as a subledger. The corresponding general ledger is kept at the head office. Account turnovers in the current accounts are updated to the general ledger. You define to which general-ledger accounts the provisional or final turnovers should be posted.

Balance sheet preparations

• •

Determine account balances

Interest accrual/deferral

• •

Transfer to general ledger (GL)

•

Determine accrual deferral amounts Prepare for GL transfer

•

Generate financial accounting system document Post in general ledger

All reports in SAP software have a standard interface and format, and there are easy-to-use tools for creating your own display variants. You can create reports that run online and in the background. All central online functions can be modified to meet your individual requirements, and you can select various criteria (such as account numbers) to restrict the scope of your reports.

The results of each step are displayed in corresponding application logs

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 general ledger of the head office. In-House Cash Center Subsidiary A

Subsidiary B

-50

+200

Financial Accounting System General Ledger Payment clearing 50 (1) Receivables 200 (2)

200 (2) Payables 50 (1)

Figure 20: General-Ledger Transfer Reporting

You can access numerous in-house cash reports, including overdraft lists, balance lists, and a list of account turnovers. You can generate a list of account blocks and display payment items (through the posting documents in mySAP ERP Financials) as well as payment orders. In addition, a variety of reconciliation reports can be created, such as comparison of payment items with posting amounts or comparison of posting amounts in in-house cash accounts with posting amounts in mySAP ERP Financials. The reporting function also includes overviews of account limits and individual conditions.

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SYSTEM ARCHITECTURE SAP Technology

SAP In-House Cash is an integrated e-business application that is supported by the SAP NetWeaver® platform. Application Link Enabling

Application link enabling (ALE) is the SAP integration technology for setting up and operating distributed applications. It provides the infrastructure for message exchange, and it ensures that the data is stored consistently in SAP solutions that are linked together. ALE supports both synchronous and asynchronous message exchanges and uses IDocs as the standard format for electronic data interchange (EDI).

between group companies and the in-house cash center. PAYEXT (message type PEXR2002) contains information for making payments. It is sent to the in-house cash center automatically when subsidiaries run the payment program. DIRDEB (message type PEXR2002) contains information for collecting payments. It is sent to the in-house cash center automatically when subsidiaries run the payment program for collection. The IDoc type FINSTA (message type FINSTA01) contains information for the bank statement and is sent by the in-house cash center as it generates internal statements for subsidiaries at the predefined intervals. The In-House Cash Center and the Financial Accounting

BAPI® Programming Interface

System at the Head Office and at the Executing Party

The BAPI® programming interface in mySAP ERP is currently implemented as a function module. The software processes BAPI function modules without sending back screen dialogs to the calling application.

For outgoing payments, the in-house cash center uses an IDoc to communicate with the mySAP ERP Financials solution of the party that executes the external payment. This can either be the head office or another subsidiary (local payment scenario). The IDoc automatically transfers the payment items relevant for the payment program for payment requests to mySAP ERP Financials of the executing party, where the items are entered in the payment request table.

Remote Function Call

A remote function call (RFC) is a communications protocol that enables synchronous communication between two systems. Communication Between Organizational Units Group Companies and the In-House Cash Center

The in-house cash center is part of the SAP Financial Supply Chain Management set of applications, which is part of the mySAP ERP Financials solution. A participating group company can use any software (such as applications from SAP partners, an external system, or other non-SAP solutions) without the need for external EDI converters by using the SAP NetWeaver Exchange Infrastructure component. Communication with the in-house cash center is based on IDocs, which are supported by SAP R/3® software 4.0B and higher. Earlier releases of SAP software and all other configurations require the use of an IDoc converter. The PEXR2002 and FINSTA01 IDoc message types are used for communication

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If the head office’s financial accounting program is located in the same system as the in-house cash center, end-of-day processing takes place via BAPI. If financial accounting runs on a different system from the in-house cash center, an IDoc can be used in end-of-day processing for communication between the in-house cash center and financial accounting. The IDoc FIDCC2 (message type FIDCCP02) contains all the balances that have been grouped together during balance sheet preparation so that the balances can be posted at a later time to the general ledger.

SUMMARY SAP In-House Cash is a flexible solution that international enterprises can use across national boundaries. It has all the prerequisites for centralized processing of worldwide payment transactions.

Subsidiary A Subsidiary B Subsidiary C Electronic bank statement

F110 payment program

IDoc FINSTA

EDI

EDI IHCC

IDoc PAYEXT Incoming payments BAPI

Bank statement IHCC account management Outgoing payments

Financial accounting system at head office

End-of-day processing

Bank statement BAPI® programming interface

House bank of head office

Figure 21: System Architecture: Interfaces

IDoc FIDCC1

RFC

General ledger

Electronic bank statement

Payment request F111 payment program

The automated in-house cash functions make it easier to standardize, integrate, and control business processes for the group as a whole. Managing your accounts in the in-house cash center gives you a clearer and more immediate overview of the liquid funds available in the individual accounts of your subsidiaries. This helps prevent you from simultaneously borrowing money for one subsidiary and investing money for another, and it eliminates related interest-rate gaps and markups. By concentrating your activities in the in-house cash center, you gain direct access to group-wide payment transaction information and have optimum liquidity control. By centralizing your external transactions, such as those related to foreign exchange, you minimize the number of external transactions required. You also increase the deal size, which helps reduce the volume of foreign exchange transactions, as well as the currency risks and administration charges associated with those transactions. As a result, you increase your annual return or the interest you receive on invested capital and reduce the interest you pay on short-term loans. In addition, you can trim the number of bank accounts you need and minimize losses due to exchange-rate fluctuations. Eliminating the physical transfer of cash normally associated with intercompany payments significantly reduces transaction costs. You can avoid the value-date losses and bank charges related to internal netting, particularly in settling residual payment amounts, and keep the cash in the accounts of the inhouse cash center. With links to all group entities, the in-house cash center leads to far greater efficiency in international payment transactions. Because payments to external transaction partners are bundled through external netting, bank charges are minimized – particularly for foreign transactions.

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In contrast to the rigidity of classical netting procedures, process automation gives internal trading partners more flexibility in setting terms of payment during invoicing. Group companies no longer have to agree on a fixed credit period. By carrying out payment orders when individual subsidiaries experience financial bottlenecks, the in-house cash center helps assure continued solvency for group companies. At the same time, the greater efficiency gained through central cash management reduces costs and gives you a size advantage in the external money market. With larger credit amounts in the accounts of the in-house cash center, you can tap investment strategies 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 and positively influence your external credit ratings. The lean bank account structure helps reduce charges and cuts down on overhead costs related to liquidity analyses, posting transactions, sweeping, cash concentration, account reconciliation, and account management. You need fewer banks to process transactions with numerous business partners, which can significantly reduce your annual charges. In addition, the capability greatly simplifies netting processes – a major bonus for users. As the primary bank for your enterprise, the in-house cash center also handles the group’s internal financial transactions, further reducing your processing costs. In today’s increasingly globalized, highly competitive economy, SAP In-House Cash can provide a clear advantage in your bottom line.

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