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Balance-Sheet and Cash-Flow Planning with SAP

NetWeaver BI
by Rajasekhar Gummapadu, Manager, Deloitte Consulting LLP • October 1, 2008

Balance-sheet and cash-flow planning helps you get your cash picture under control. Learn how to

design a solid, flexible SAP NetWeaver BI data model for balance-sheet planning. Examine the five

key steps required to create balance-sheet planning and cash-flow planning.

Key Concept

Balance-sheet and cash-flow planning using SAP NetWeaver BI Integrated Planning enable you to look
to your company’s financial future, such as key financial ratios, accounts payable, accounts receivable,
sales projections and costs, future earnings, and short-term and long- term cash positions. These financial
projections aren’t just for global organizations anymore.

Although global and larger organizations are interested in knowing their consolidated short-term and long-
term cash positions (based on their operational income statement and capital planning), it’s even more
important for SAP NetWeaver BI planning resources to know these positions. They need to understand how
to implement balance-sheet and cash-flow planning by using SAP NetWeaver BI functionality. The main
objective of building the balance-sheet planning application is to generate a long-term cash-flow plan. You
can use SAP NetWeaver BI Integrated Planning to implement a global, integrated planning solution for
balance-sheet and cash-flow planning.

It’s common to implement income statement planning to monitor operational efficiency and to project an
organization’s future earnings. However, in today’s global and more competitive business environment, you
also need to know the effect that this operational plan will have on future balance sheet items and cash
flow.

Why would you want to implement balance-sheet and cash-flow planning? For any of a variety of reasons
including: projecting your key financial ratios; estimating your accounts payable and accounts receivable
positions based on sales projections and cost of sales; estimating the interest income and expenses for the
planning period and seeing how they will affect your future earnings; determining the cash-flow structure
to verify the organization’s borrowing and paying capability; effectively managing your cash; maximizing
the returns on your short-term cash investments; and effectively managing your balance sheet.

These benefits aren’t free, however. You must meet some business and technical challenges to achieve this
implementation. The biggest challenge is simulating the double-entry system in the planning solution.
Transaction processing in SAP Financial Accounting (FI) and SAP Strategic Enterprise Management Business
Consolidation (SAP SEM- BCS) uses the double-entry method when posting journal entries. Income
statement planning uses the single-entry concept. For example, to increase the expense amount, you
adjust the amount for any expense account without specifying whether to pay that expense increase in
cash or credit.

Another challenge is creating an iterative balancing functionality to calculate the balance sheet assets and
liabilities. Like account determination rules that handle the double-entry system for credit transactions,
cash balancing evens out the assets and liabilities and then posts the difference to the cash account,
assuming that all other transactions are cash.

Other challenges include the assumptions used to calculate accounts payable and accounts receivable, a
complex payment structure for the interest payment on each debt instrument, and the establishment of
other calculations, such as interest, dividends, and re-classifying short-term payments on long-term debt to
current liabilities.
The Data Model

Since no robust standard content is available for balance-sheet and cash-flow planning, it’s important to
design a solid, flexible, SAP NetWeaver BI data model for balance-sheet planning. Here are some things for
you to consider while designing the data model:

• Align the data model with the SAP SEM-BCS data model for real-time reporting

• Include objects such as version (0BCS_VERSION) and the reporting value type (0VTYPE) for
flexibility in multiple scenarios and versions of planning data

• Use the navigational attributes of reporting instead of including the InfoObjects in an InfoProvider
(for example, region details)

• Include the balance-sheet and cash-flow planning InfoProvider in SAP SEM- BCS to give you multi-
provider real-time reporting with actual data
 • Partition the balance-sheet and cash-flow planning InfoProvider for faster performance in the
planning application.

To achieve the functionality you need, you must create a real-time InfoProvider to host the data for balance
-sheet-planning and cash-flow planning. Depending on your requirements, you might also need to create
some custom InfoObjects, such as ZFP_BSML and ZCS_ITEM. Since these objects won’t be available in
the source systems, you must maintain master data for them in the SAP NetWeaver BI system. The
following points further explain the custom objects used in the model:

Balance sheet manual line items (ZFP_BSML): In balance-sheet planning, you need to plan one level
below the consolidated item (0CS_ITEM) so you can set up multiple lines for each account

Reference consolidated item (ZCS_ITEM): This InfoObject establishes the account determination rules that
map income statement accounts to balance sheet accounts

Timing fiscal year/period (ZFP_CTFIP): This is the InfoObject that is the reference for the fiscal
year/period (0FISCPER). You use it to establish timing rules for paying accrued interest on departmental
instruments.

Cash-flow item (ZCASHITEM): Cash-flow accounts are the solution for cash-flow planning. This item holds
the master data for all of the different cash-flow categories.

Planning rates (ZFP_RATE): This is the key figure that is used to maintain such planning rates as interest
rates, swap rates, and account determination multipliers

In addition to these custom objects, the following InfoObjects can be helpful: ZPLANYEAR provides the
capability to plan multiple years; ZROUND lets you create scenario capability; and 0VERSION enables you
to keep track of budget, forecast, and prior forecast data.
The Five Key Steps

Now that you’re aware of the data model, I will go over the five key steps required to create balance-sheet
planning and cash-flow planning:

Step 1. Integration with SAP SEM-BCS. This step extracts the opening balances for SAP SEMBCS. First,
you need to determine the integration existing between the balance-sheet planning application and SAP
SEM-BCS to get your opening balances. I recommend that you physically move your opening balances to
the balance-sheet and cash- flow planning InfoProvider because you use them extensively in the functions
that help you enhance performance. To do this, you create a simple copy-planning function in the Planning
Modeler of SAP NetWeaver BI Integrated Planning.

Step 2. Account determination rules. This step finalizes the account determination rules that map the
balance sheet accounts to the profit and loss accounts. It also sets up the planning function that calculates
the balance sheet amounts to simulate the double-entry system. Using the account determination rules,
you estimate the balances for the balance sheet accounts.

For example, if the fuel expenses (profit and loss account: 501010) are $10,000 for the month of January,
half of it ($5,000) is on credit (credit account: 201020), and the other half ($5,000) is paid in cash, then
the account determination rule is as shown in Table 1.

From account To account Rule—January

501010 201020 0.5
Table 1 Example of an account determination rule

This model uses the balance sheet rules input-ready report, as shown in Figure 1, to maintain the account
determination rules using the InfoObjects, the consolidated item (0CS_ITEM) as To Account, the
reference item (ZCS_ITEM) as From Account, and the ZFP_RATE key figure to partially or fully allocate
this amount to one or more balance sheet accounts. These rules map the income statement accounts to the
balance sheet accounts to create the double-entry system in the planning environment for credit and
accrued transactions. Using this methodology, you can also allocate the amounts on one balance sheet to
another balance sheet account (e.g., by reducing the depreciation of the property, plant, and equipment,
and increasing the depreciation reserve section by the same amount).

Figure 1 Balance sheet rules

The planning function in Figure 2 reads the income statement planning information to create the balance
sheet amounts based on the account determination rules. You create this planning function using the
formula extension functionality in SAP NetWeaver BI Integrated Planning. In the example in Table 1, the
rule function reads the profit and loss account information for account 501010, which is $10,000, and
multiplies it by 0.5 from the rule number for January. Then, the rule function posts the calculated amount
to balance sheet account 201020. An example of a posted record is shown in Table 2.

DATA FITM TYPE 0CS_ITEM.

DATA TITM TYPE ZCS_ITEM.
DATA XITM TYPE 0CS_ITEM.
DATA YITM TYPE ZCS_ITEM.
DATA RATE TYPE F.
DATA AMT TYPE F.
DATA REG TYPE ZREGION.
DATA RREG TYPE ZREGION.
DATA MADJ TYPE ZFP_BSML.
DATA RMADJ TYPE ZFP_BSML.
DATA SLICE TYPE ZSLICE.
DATA BSDT TYPE ZFP_BSDT.
DATA RFTM TYPE ZCS_ITEM.

FOREACH FITM,TITM,MADJ.
XITM = TITM.
YITM = FITM.
RATE = {ZPL_RATE, FITM, TITM, 200000,MADJ,#}.
IF RATE <> 0.
FOREACH RMADJ, SLICE,BSDT,RFTM IN REFDATA.
AMT = AMT + {0CS_TRN_LC, FITM,RFTM,BSDT,RMADJ,SLICE}.
ENDFOR.
{0CS_TRN_LC, XITM, YITM, 200000,MADJ,1} = AMT* RATE.
ENDIF.
AMT = 0.
RATE = 0.
ENDFOR.
Figure 2 Code for the planning function

From account Reference account Amount

201020 501010 5000
Table 2 Example of posted record with account determination rules function

Step 3. Establish cash balancing. This step finalizes the planning calculations for interest, dividends,
accounts receivable, accounts payable, and the cash- balancing functions. The basic accounting rule for the
balance sheet is that assets and liabilities must balance. You can set up transaction systems to perform this
balancing automatically, but during planning, you have to manually estimate the accrued balances based
on income statement activity, assuming that the activity used cash. In other words, you need to balance
your assets and liabilities and then post the difference to the cash account.

For example, in the account determination rule section, the balance of $5,000 paid in cash creates the
difference between the assets and the liabilities on the balance sheet. When the cash-balancing function
executes, it makes the adjustment in the cash account.

However, in most complex organizations it’s not that simple because cash balances have many restrictions.
For example, if an organization wants a minimum cash balance of $5 million on hand at all times and its
cash balance goes below this amount, you need to borrow from credit lines. Conversely, if the company
accumulates excessive cash beyond $5 million, then the system should invest that cash in high interest-
yielding sources.

Cash-balancing involves the following activities:

• Balance your assets and liabilities and post the difference to cash

• Verify whether your minimum cash requirements are met, and then borrow if you have a deficit or
move cash to investment accounts if you have an excess

• Calculate your interest expense for additional loans or your interest income on any new investments

• Calculate your retained earnings and adjust your balance-sheet planning

Cash balancing is an iterative process. It needs to run multiple times to equalize the assets and liabilities
on the balance sheet for all the planning periods. For some examples of the formula for retained earnings
calculation, see Figure 3, which was created using the formula extension functionality in SAP NetWeaver
BI Integrated Planning.

DATA CSTM TYPE 0CS_ITEM.

DATA BSML TYPE ZFP_BSML.
DATA SUM TYPE F.
DATA SUM1 TYPE F.

FOREACH CSTM,BSML.

SUM={0CS_TRN_LC,CSTM,BSML}.

IF CSTM >= 0000300000 AND CSTM <= 0000899999.

SUM1=SUM1+SUM.

ENDIF.

ENDFOR.

{0CS_TRN_LC,0000251200,100009}=SUM1
Figure 3 Example formulas for retained earnings calculations

In addition to the cash-balancing functions, you also need to define the functions for accounts receivable,
accounts payable, interest, dividends, or any other specific calculations that your organization might want
to incorporate into its balance sheet planning. The formula extension functionality in SAP NetWeaver BI
Integrated Planning is very flexible, allowing you to create these kinds of calculations. Figure 4 shows
sample formula code for the calculation of the accounts receivable amount based on sales and the days-
sales-outstanding assumptions.

DATA CSTM TYPE 0CS_ITEM.

DATA BSDT TYPE ZFP_BSDT.
DATA SUM TYPE F.
DATA FYP TYPE 0FISCPER.
DATA MD TYPE F.
DATA AMT TYPE F.
DATA DSO TYPE F.
DATA BSML TYPE ZFP_BSML.
DATA PER TYPE 0FISCPER3.
DATA PC TYPE 0PROFIT_CTR.

FOREACH FYP.

PER = SUBSTR(FYP,4,3).

IF PER <> ‘014'.

SUM=0.

FOREACH CSTM,BSDT,BSML,PC.

IF CSTM >= 0000300000 AND CSTM <= 0000303999.

AMT = {0CS_TRN_LC,CSTM,FYP,PC,BSDT,BSML}.

SUM = SUM + AMT.

ENDIF.

ENDFOR.

DSO = {ZPL_RATE,#,FYP,#,100005,#}.
MD = ATRV (0NUMDAY,FYP).

*MESSAGE W001 (/MSG0) WITH SUM FYP MD.

{ZFP_BLNLC,0000121100,FYP,#,#,100010} =((SUM/MD)*DSO*-1).

ENDIF.

ENDFOR.
Figure 4 Accounts receivable calculation

Step 4. Cash-flow rules layout and calculation function. This step finalizes the cash-flow rules layout
and the calculation functions. Since generating long-term cash-flow planning is the key reason for using a
balance-sheet planning application, cash-flow planning requires going through the following stages.

First, you define the relevant master data for ZCASHITEM, including its hierarchy. ZCASHITEM plays an
important role in building cash-flow planning because it hosts master data for the cash items required to
present cash flow. Some examples of cash-flow items are depreciation net profit, property, plant, and
equipment.

After you create all of the relevant cash items in master data, you establish the cash-flow hierarchy, which
depicts the organization’s cash-flow structure. Look at the example of hierarchy with master data in Figure
5. You can create the hierarchy using transaction RSH1 (edit hierarchy initial screen) in SAP NetWeaver BI.

Figure 5 Cash-flow hierarchy on ZCASHITEM InfoObject

Next, define the cash-flow rules (Figure 6). These rules map the balance sheet accounts to the cash-flow
items, establishing a relationship between the two. Therefore, changes in a particular balance sheet item
also represent the cash effect on the cash-flow item to which it is mapped. These cash-flow rules are
maintained in the system using the input-ready report shown in Figure 6. This report is created using SAP
NetWeaver BI Integrated Planning.
Figure 6 Cash-flow rules

Then, you create the planning function to generate the cash-flow amount. This cash-flow rules function
calculates the cash amount. You can use the formula extension function in SAP NetWeaver BI Integrated
Planning to generate the cash flow (Figure 7). This function calculates the change in the balance sheet
account for a particular fiscal year period and then posts it to the cash item to which it is mapped.

DATA XITM TYPE 0CS_ITEM.

DATA CITM TYPE ZCASHITEM.
DATA RATE TYPE F.
DATA AMT TYPE F.
DATA MADJ TYPE ZFP_BSML.
DATA SLICE TYPE ZSLICE.
DATA BSDT TYPE ZFP_BSDT.
DATA MADJ1 TYPE ZFP_BSML.

FOREACH FITM, CITM, MADJ.

RATE = {ZPL_RATE, FITM, CITM, 999997,MADJ,#}.

IF RATE <> 0.

IF MADJ <> #.

FOREACH SLICE,BSDT IN REFDATA.

AMT = AMT + {0CS_TRN_LC, FITM,#,BSDT,MADJ,SLICE}.

ENDFOR.

{0CS_TRN_LC, FITM, CITM, 999997,MADJ,1} = AMT* RATE * -1.

AMT = 0.

ENDIF.

RATE = 0.

ENDFOR.
Figure 7 Cash-flow amount calculation planning function

Next, you need to build the cash-flow report to present the cash flow. The cash- flow report is created
using ZCASHITEM and the cash-flow hierarchy in BEx Query Designer (Figure 8). You can create various
versions of this report to display the cash flow by year, month, and quarter.

Figure 8 Cash-flow report

Step 5. Create an integrated application. The final step is to create an integrated application using the
input-ready report-planning functions that I discussed in the earlier steps. SAP NetWeaver BI Integrated
Planning has two ways of putting together the planning application: a Microsoft Excel-based application
using BEx Analyzer, or a Web application using the BEx Web Application Designer. As you saw in Figures 1,
6, and 8, you can use various standard Web items such as tab pages, drop-down boxes, and button groups
in BEx Web Application Designer to create the Web-based application following the requirements of your
user group and business logic. You use the workbook functionality in BEx Analyzer to create the Excel-
based planning applications. You can integrate these applications with SAP NetWeaver Portal to provide role
-based access to the users. It is very important to consider the users’ requirements and skill sets before
you decide which type of application (Excel- or Web- based) is right for your balance-sheet and cash-flow
planning system.

Rajasekhar Gummapadu is an SAP practitioner with more than eight years of cross-functional
experience, more than half of which is focused in SAP implementation. He has strong technology and
functional experience with SAP ERP solutions in the area of Business Planning and Simulation (BPS), SAP
NetWeaver BI, SAP NetWeaver BI Integrated Planning, Business Consolidation (SAP SEM-BCS), Business
Planning and Consolidation (SAP BPC) and FI/CO. Raj serves as the functional and technical lead in the
area of financial planning and reporting-related implementations. He has successfully completed multiple
implementations as project manager by using his knowledge to bridge the gaps between the business and
IT goals. Raj is a qualified Chartered Accountant (India) and a Certified Public Accountant (USA). You may
contact him via email at rgummadapu@deloitte.com. Deloitte Consulting LLP, its affiliates, and related
entities shall not be responsible for any loss sustained by any person or organization who relies on this
publication.