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The most important control elements for configuring SAP Treasury are:
Control elements
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Organizational Forms
Treasury divisions are organized in many different ways. This ranges from fully
decentralized to centralized (e.g. Treasury coordination centers). The basic organizational forms are :
Decentralized organization
Centralized organization
Centralized and decentralized (mixed) organization.
Decentralized organization
Centralized organization
Divisions featuring fully decentralized organization are usually divided into enterprise areas, countries, or profit centers. Decentralized Treasury departments are solely
responsible for monitoring the cash flows and exposures specific to their areas and
undertake financial transactions on this basis. The only common elements in larger
enterprises are a standardized system for reporting to the central Treasury department and generally applicable instructions or specifications.
With this more risk-averse organizational form, short reaction times are the norm.
However the sizes of contracts in operational areas tend to be smaller and the
distribution of know-how tends to lead to a slight increase in personnel requirements.
Holding companies are often organized centrally. Here all areas of responsibility
from group-wide cash management to trading and management of financial transactions - are controlled by the central Treasury department which acts as an inhouse bank.
This organizational form results in netting effects in the group exposure and provides opportunities for comparing the cash flows between subsidiaries. As a consequence of group-wide control, financial transactions are concluded in the
corresponding contract sizes and transaction costs are kept to a minimum. In addition to this, currency-specific clearing is possible between the subsidiaries. With
this organizational form, only services, such as an additional, local cash management office, or the maintenance of contacts to local banks, are decentralized.
Mixed organization
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This is the most commonly used organizational form in practice, although subsidiaries tend to undertake some financial transactions with the central Treasury
department and some directly with external partners. The underlying organizational structure varies from enterprise to enterprise, since the areas of responsibility
defined for subsidiaries depends on what is considered practical and advantageous.
In this typical set-up, it is possible to access both the aggregated data for the entire
group and the data for the individual companies. The following examples, which
reflect typical financial transactions and liquidity planning requirements, show
what a range of possibilities need to be catered for:
Representation of currency exposure for one or more subsidiaries
Currency-specific clearing between subsidiaries
Internal financial transactions between group and subsidiary
External financial transactions between central Treasury department or subsidiary and banks
External financial transactions by the central Treasury department on behalf
of the subsidiary
When these requirements are represented in the system, two main questions need
to be born in mind:
From which organizational unit in the company are liquidity and risk positions viewed?
With which internal or external partner are financial transactions concluded?
On this basis you can decide which areas of responsibility you want to centralize
and which areas of responsibility you want to decentralize.
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Areas of Responsibility
The discussion as to how to distribute responsibilities and skills typically affects
the cash management, liquidity management and treasury management areas.
Investment and
borrowing policy
For liquidity management you need to decide on your short- to mid-term investment and borrowing policy. Larger groups need to specify whether financial investment and borrowing decisions are made for the whole enterprise or per
individual company. In this context you also need to decide which financial transactions are permitted.
Because financial transactions are recorded in the money market, forex, derivatives, securities and loans areas, you can link these up to operational cash flows.
Moreover, SAP Treasury provides instruments for analyzing your interest rate
and currency risk as well as conventional and modern valuation procedures (such
as mark-to-market) and simulation procedures (such as Value at Risk).
Company code
This is the smallest organizational unit for which a complete self-contained set of
accounts can be drawn up for purposes of external reporting. The process of external reporting involves recording all relevant transactions and generating all supporting documents for financial statements such as balance sheets and profit and
loss statements.
For Treasury, the company code is an organizational unit in the group, in whose
name financial transactions are executed. You assign each financial transaction to
a company code. The company code, together with the chart of accounts, are the
organizational elements which ensure integration with SAP Financial Accounting. Using the company code as your analysis unit you can begin to represent
parts of the described organizational structures in the system.
You can define each enterprise area (such as subsidiary, central Treasury
department) as a company code.
You can assign each financial transaction to one company code respectively.
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Fig. 3-3: Cash position in Treasury across various company codes as well as internal and
external financial transactions
For each company code (that is, for each individual company or division) you
can also carry out liquidity and risk evaluations on a cross-company code
basis (reflecting a group view).
You can display views of the foreign currency exposure of a subsidiary as well
as views of the aggregated currency position across the entire group (that is,
for all subsidiaries).
You can run the flexible financial transaction evaluations to acquire a list of
closed forward exchange transactions or a list of expiry dates for OTC
options, for example either individually, per company code, or across all
company codes.
In line with accounting principles, a standardized system of accounts is required to
ensure the orderly transfer of data to Financial Accounting. The chart of accounts
defined by the accounting department is a system of accounts for recording values
and value flows which helps to ensure orderly accounting. Your chart of accounts
should be designed in such a way that it ensures precise assignment of transactions
to accounts together with reporting in the respective balance sheet and profit and
loss items (in compliance with commercial and tax law). Each company code is
assigned to a specific chart of accounts.
Chart of accounts
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Account assignment
references and
account determination
Using the company code and the chart of accounts you can represent various organizational forms and ensure integration of Treasury with other SAP applications.
Business partners
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The organizational element business partner has its roots in the business partner
concept. A business partner is an organization or private individual in which you
have a business interest. In Treasury you undertake financial transactions with a
business partner. Typical partners might be banks or a central Treasury department. You assign roles (or functions) to your business partner (such as counterparty, issuer, paying bank or borrower), which reflect the roles of the partner in
the transactions undertaken. Each business partner may be assigned several roles.
You can display an overview of your relationships with business partners in a tree
structure.
You can use transaction authorizations to ensure that only transactions of a certain product type are concluded with a business partner.
Transaction authorizations
You can store standing instructions for your business partner. If, for example, you
want to always use the same bank and payment details for a business partner and
certain product types, you can define standing instructions so that the relevant
information is automatically inserted. The further automatic processing which is
based on this, provides great scope for rationalizing processes.
Standing Instructions
If you apply the business partner concept to the described organizational structures, the following is the result:
The central Treasury department, which undertakes financial transactions with
external banks as business partners, is defined as a company code and as a
business partner.
Each company code can conclude transactions with a business partner.
The company codes central Treasury or subsidiary can therefore conclude
external transactions with the business partner external bank.
You can specify that internal financial transactions between the company codes
(such as a subsidiary) and the internal business partner (such as the central
Treasury, as an in-house bank) can be concluded.
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Such an organizational structure has the following advantages for the central
Treasury department and the subsidiaries:
The central Treasury department can conclude financial transactions with both
the external banks and the subsidiaries.
Each subsidiary can conclude financial transactions both at an external bank
and internally at the central Treasury. You can also represent the central Treasurys transactions with the subsidiary.
You can use the transaction authorization concept to only allow certain financial transactions between subsidiaries.
Securities account
Portfolio
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Treasury Workstation
In addition to the described possibilities for structuring the way individual company units are organized, you can also represent physical distribution scenarios
in the system. Perhaps different company units are represented in local systems
and these need to be brought together for liquidity control or to ensure the correct
conclusion of financial transactions. This is relevant for:
Distribution scenarios
Companies that use an R/2 System for operational parts of their information
processing such as procurement, sales and distribution or accounting.
Head offices of groups that determine the cash position of their subsidiaries
by collecting information from various R/2 and R/3 Systems.
At the same time, you want to use the Treasury functions so that you can adequately represent your financial transactions. The problem is that integrating information from operational goods and services processes into central cash management
decisions is very time-consuming. So that your requirements can be met, the SAP
components provide several ways of acquiring the requisite information from the
basic systems.
The SAP R/3 System to which the liquidity information is imported is generally
known as the Treasury workstation. The interface both in the transporting
system and in the Treasury workstation is Cash Management. The transporting
(or basic) system captures the current cash position of the operational areas and
calls the relevant dataset at defined points in time in order to transfer the information to the Cash Management application in the Treasury workstation.
Treasury
workstation
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Cash position
In the Treasury workstation you can carry out aggregated evaluations of the cash
position. This means that, even with a distributed physical set-up, you can run
global evaluations covering different organizational units such as the various
company codes or subsidiaries in the group structure shown.
Financial transactions
You manage your financial transactions entirely in the Treasury workstation, that
is, in the R/3 System. There, in addition to a broad range of product types, you
can make use of all the Treasury administration functions provided. These support the complete process cycle from trading through back office processing to
the transfer of data to Financial Accounting. Market Risk Management, moreover,
provides you with an integrated view of your risk positions, as well as various
risk valuation methods. Once the transactions have been transferred to Financial
Accounting, you can use special functions to transfer the relevant accounting
information to the operational systems. Parts of the General Ledger are maintained in the Treasury workstation and updated by the postings in Treasury Management. The relevant documents are transferred to the General Ledger of the
basic system (R/2 or R/3) from these R/3 accounts.
Coupling scenarios
The previous section described the logical coupling alternatives in the Treasury
workstation. The following section describes the technical coupling alternatives
via which data transfer between distributed systems can take place:
You can use reports or transactions which employ Application Link Enabling
(ALE) technology to couple operational R/2 or R/3 applications with the Treasury workstation. The reports ensure that cash management data can be transferred to the Treasury workstation.
You can also use ALE technology to transfer relevant accounting information
from the Treasury workstation back to the operational system.
SAP is planning to support further Treasury scenarios to supplement these distribution scenarios. The reflection of financial transactions between head offices and
subsidiaries is a key issue here, as are possibilities for coupling up with non-SAP
systems. In the next few years, the various distribution scenarios will gradually
become accessible via the Internet, thereby extending the technical possibilities
offered by the R/3 System.
With the Treasury workstation you can represent distributed enterprise scenarios in the
system and thus analyze and compare individual and cross-enterprise liquidity and risk
positions.
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