SAP In-House Cash & Electronic Payments Management

Creating a virtual bank to better manage internal payments.

George Kamtsioras| Business Development | SAP Hellas and Cyprus Limassol, June, 11th,2013

Financial Excellence with Treasury Applications from SAP

Treasury applications from SAP SAP Treasury and Risk Management Risk Analyzers Manage Global Financial Risks Optimize Debt and Investment Strategies
Credit Risk Analyzer Market Risk Analyzer Portfolio Analyzer

Exposure Management Hedge Management Transaction Manager

Money Market Foreign Exchange Derivatives Debt Mgmt Securities Commodities

Manage Cash and Liquidity

SAP Cash and Liquidity Management Cash Management SAP In-House Cash Liquidity Planning

Optimize Payments and Bank Communication

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SAP Bank Communication Management

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Why do I need In-House Cash?

Multinational corporate structures with a high volume of internal and external payment transactions can improve by using In-House Cash in following issues:
Payment transaction control on a regional and global level Cost-effective processing of internal and external payments Reduction of external bank accounts Reduction of cross-border payments Automation and standardization of financial processes

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Relevance of In-House Cash

The concept of an In-House Cash solution is relevant, if one or more of the following factors are present:

Multi-country activity Banking in many countries Significant inter-company trading Advanced Cash Management operations Regular change of banks

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Current Situation
Various and ever-changing multi-national corporate group structures . . .
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Head office (Europe) Internal Bank USA

Subsidiary

Internal Bank

Region 2
Subsidiary

Asia

Subsidiary Subsidiary Subsidiary Subsidiary

Region 1

. . . with a high volume of internal and external payment transactions

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Organizational Units
Corporate Group
Head Office
Subsidiary 3 Subsidiary 2
Account management

In-House Cash Center

Financial Accounting

Subsidiary 1

Organizational Units Operative subsidiaries 1,2,3... The IHC Center and the financial accounting department are situated within the head office The IHC Center (manages the subsidiary current accounts) The financial accounting department manages the chart of accounts and the general ledger balances
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Account Overview
FI GL Headquarter IHC
Pmnt clearing

(1) 200 (2) 540

Bank statements

Subsidiary 1

Subsidiary 2 + 100 - 50 .. ..

Limits

- 20 + 50 .. ..

IHC Receiv.

IHC Payab.

(2) 540

(1) 200

G/L Transfer Conditions

Account A
+ 100 - 120 .. .. Blocks

Business partner
No 1 Post.dte 30.12.00 31.12.00 Val.dte 31.12.00 31.12.00 Curr. EUR EUR Amnt 100.00 C 9.58 D

Currency conversion

Reporting

Turnovers

Condition Master Data

Head Office

D 4912132213 C

10.00

100.00 0.42

Charges
Account maintenance 10.00 USD

Interest
Credit interest 0.5%

Value date
Posting date +1 day

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Condition Group Category: Interest

Condition group category

Interest
0004 Interest of affiliated companies

Condition group

Conditon category

Debit interest

Credit interest

Overdraft interest

Transaction interest

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Condition Group Category: Charges

Condition group category

Charges
0004 Charges of affiliated companies

Condition group

Conditon category

Item charges

Mailing charges

Account charges

Periodic charges

Direct charges

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Condition Group Category: Value Date

Condition group category

Value date
0004 Value date of affiliated companies

Condition group

Conditon category

Value date

Value date subject of final payment

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In-House Cash Major Business Processes

Internal Payments

Central Payments

External Incomings

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Process 1: Internal Payment

Example: Subsidiary 1 makes a payment to Subsidiary 2

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Process 2: Central Payments

Example: Subsidiary 1 makes a payment to an external partner

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Process 3: External Incoming Payments Via IHC

Example: Partner pays subsidiary 1

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Payment Challenges
Compliance, Security & Efficiency Issues

High Maintenance Costs For Communication Interfaces Security Issues Cumbersome Interfaces Hinder Compliance Efforts Process Inefficiencies Cost of Working Capital Dependency on House Banks Lack of Payment Transaction Transparency

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Situation Without Bank Communication Management

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With Bank Communication Management

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Detail: Batch and Payment Monitor

The Batch and Payment Monitor provides an overview of the batch life cycle: creation approval sending confirmation completion (bank statement). The monitor has two levels:
Initially, it shows only batches (headers) On drill-down, it shows all the payments (items) that belong to the chosen batch

Drill-down

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Detail: Approvals
Once the Payments are batched, it can be decided if a Batch has to go for Approval or not This is done in the customizing setting Mark Rules for Automatic Payments (No Approval) Payments with no approval are called Automatic Payments

Batch 1

Approval Process

Batch 2

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Detail: Digital Signatures

Digital Signatures are used in the Approval Process of the Batches The object that is signed is the action document (Log from the Approve Payments Transaction) and not the batch file Digital Signatures are based on customizing for the existing Signature Tool

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Features
Increased compliance
Multi-eye release procedures for payment approvals Personal digital signatures for outgoing payments for internal audit Release of individual payments or entire batches Flexible approval rules (low-value payments = only one approver, for example) Approval, rejection, or resubmission of payments Flexible sorting and structuring of approval work list

Batching of payments
Logical structuring of payment files Flexible batching rules that can be enhanced Automatic creation of unique identifiers

Exception handling
Visibility of errors in payment status monitor Automatic generation of alert workflow items
Internal

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Enhancing SAP Bank Communication Management with Central In-House Bank and Payment Factory

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Business Benefits
Reduce physical cash transfers by internal netting Reduce number of bank accounts Reduce administrative overhead Enhance security, transparency and compliance

Save bank fees for bank accounts and payment transactions Avoid cost for external cross-border payments Reduce float and value date losses Gain more interest keeping cash within the group Reduce hedging cost using economies of scale Improve competitive position in external money markets Reduce maintenance costs

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Thank You!