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SAP Solution in Detail mySAP ERP SAPÆ IN-HOUSE CASH WITH mySAPô ERP

SAP Solution in Detail mySAP ERP

SAPÆ IN-HOUSE CASH WITH mySAPô ERP

SAP Solution in Detail mySAP ERP SAPÆ IN-HOUSE CASH WITH mySAPô ERP
SAP Solution in Detail mySAP ERP SAPÆ IN-HOUSE CASH WITH mySAPô ERP

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CONTENTS

. Integration of SAP In-House Cash in Your Payment

SAP In-House Cash

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5

5

The In-House

Account Management Functions

Cash

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. 7

7

Master Data of the Current Account

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– Company Code and

Bank

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Business

– Partners

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– Product

Definition.

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– Account

Data

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– Conditions

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. 9

Customer Payment Processes Supported by SAP In-House

 

11

Automated

Intragroup

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. 11

Example: Automated Intragroup Payments

 

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The Benefits of Automated Intragroup

 

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Automated Outgoing Central Payments

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– Example: Automated Outgoing Central Payments

 

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– The Benefits of Automated Outgoing Central

 

13

Automated Outgoing Local Payments

 

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– Example: Automated Outgoing Local Payments

 

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– The Benefits of Automated Outgoing Local Payments

 

14

Automated

Incoming

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. 15

 

. 15

Example: Automated Incoming Payments

The Benefits of Automated Incoming Payments

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15

Integration with SAP Cash and Liquidity

 

16

Bank

Statements

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– Bank Statements Sent to the Head Office by the House Bank

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16

– Bank Statements Sent to Subsidiaries from the In-House Cash Center

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16

Using Multiple In-House Cash Centers for Posting Across Bank Areas

 

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17

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

 

17

Account Management and Manual

18

Example: Central and Local Payments Using Multiple In-House Cash Centers

 

18

Currency Conversion

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. 20

Periodic

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21

System Architecture

 

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24

. Communication Between Organizational Units

SAP

Technology.

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24

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

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24

Summary

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25

SAPÆ 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

Subsidiary

Bank

Region 1

U.S.

Subsidiary

Bank

Bank

ASIA

Subsidiary

Bank

Bank

Region 2

Subsidiary

Bank

Subsidiary

Bank

Bank

Region 2 Subsidiary Bank Subsidiary Bank Bank Figure 1: Initial Scenario To gain a competitive edge,

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.

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 recipro- cal clearing process. You can also use these tools to pay external

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

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 pro- cessing transactions with their own business partners indepen- dently 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, central- ized, 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 busi- ness partners with their own house banks.

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.

5

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 pay- ment 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 Head office of group/holding, incl. in-house cash center Subsidiary A
House bank
of head office
Head office of
group/holding, incl.
in-house cash center
Subsidiary A
Subsidiary B
Subsidiary C
House bank of
subsidiary A
House bank of
subsidiary B
House bank of
subsidiary C

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 pro- cessing and payment program execution to remain unchanged. The key is to replace the external house bank account with the

in-house cash center account in the configuration. If 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:

ï Subsidiaries and affiliated companies

ï The head office (in-house cash center and the financial accounting functions of mySAP ERP Financials)

ï House banks used by the head office

ï External business partners and their house banks (partner banks)

Group

Group
Subsidiary A Subsidiary B Subsidiary C External business partner
Subsidiary A
Subsidiary B
Subsidiary C
External business
partner
Head Office In-House Cash Center Financial accounting system Account management Partner bank House bank of
Head Office
In-House Cash Center
Financial
accounting
system
Account
management
Partner bank
House bank of
head office

Figure 3: Organizational Entities

For a subsidiary, the in-house cash center is a virtual bank that serves as a house bank. The subsidiary keeps an 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.

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 dis- patches 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.

THE IN-HOUSE CASH CENTER

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 pay- ments 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:

ï Parked, meaning no posting has taken place yet on any current account

ï 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

ï 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

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.

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.

Bank Conditions Limits statements Account Subsidiary A Business + 100 partners - 120
Bank
Conditions
Limits
statements
Account
Subsidiary A
Business
+ 100
partners
- 120
Currency conversion
Currency
conversion

Reporting

+ 100 partners - 120 Currency conversion Reporting In-House Financial Cash accounting Center system GL
In-House Financial Cash accounting Center system GL General-ledger (GL) transfer
In-House
Financial
Cash
accounting
Center
system
GL
General-ledger (GL) transfer
Blocks Turnovers No. Post. date Val. date Curr. Amount1 1 12/30/00 12/31/00 USD 100.00 C
Blocks
Turnovers
No.
Post. date Val. date
Curr. Amount1
1
12/30/00
12/31/00
USD
100.00 C
2
12/31/00
12/31/00
USD
9.58 D

Figure 4: Account Components

Business Partners

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, anoth- er 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 appli- cation recognizes standard roles, such as account holder, authorized drawer, bank statement recipient, contact person, and account maintenance officer. A subsidiary, for example, could have several roles and act as account holder, bank state- ment recipient, and contact person. You can create your own roles if the standard roles do not cover all your requirements. Business partner data is stored centrally, so if a particular busi- ness partner already exists, you can just create the partner in 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

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 condi- tions for a particular account, you merely change the default settings for the product in the account itself.

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 dis- played 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 pay- ment 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 pay- ment items.

Conditions

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

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.

Interest Debit Credit Overdraft Transaction interest interest interest interest Subsidiary A Account charge:
Interest
Debit
Credit
Overdraft
Transaction
interest
interest
interest
interest
Subsidiary A
Account charge:
Credit interest
Value
US$5
-5.00
0.5%
Date
+100.00
Item
Mailing
Account
Periodic
Direct
charges
charges
charges
charges
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 value- date 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 cal- culated 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.

Limits on Drawing from Accounts

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:

ï The internal account limit controls the drawing limit for payment transactions.

ï The overdraft limit controls the calculation of overdraft interest. If the limit is exceeded and an overdraft condition (such as an interest rate charge) has been defined, an over- draft condition is applied to the account.

ï 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.

Automated Intragroup Payments

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

Example: Automated Intragroup Payments

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 simulta- neously 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).

In the in-house cash center, the incoming IDoc triggers provi- sional or final postings to the respective current accounts. Whether postings should be executed provisionally or 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 in- house cash center has a receivable position owed from subsid- iary A and a payable position due to subsidiary B. This clears payables between group companies without the need for physi- cal 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 subsid- iaries. This triggers corresponding postings to the clearing accounts and settles the open items.

Group Head Office In-House Cash Center Financial accounting system 2b Subsidiary A Account management 2a
Group
Head Office
In-House Cash Center
Financial
accounting
system
2b
Subsidiary A
Account
management
2a
Subsidiary B
1

Bank statementIn-House Cash Center Financial accounting system 2b Subsidiary A Account management 2a Subsidiary B 1 Payment

PaymentCash Center Financial accounting system 2b Subsidiary A Account management 2a Subsidiary B 1 Bank statement

Figure 6: Internal Payment Clearing

In-House Cash Center Financial Accounting System General Ledger Subsidiary A Subsidiary B Payment clearing -200
In-House Cash Center
Financial Accounting System
General Ledger
Subsidiary A
Subsidiary B
Payment clearing
-200 (to B)
+200 (from A)
200
(2)
200 (1)
IHCC receivables
IHCC payables
200
(2)
200 (1)
(1) Internal outgoing payment
(debit account A)
(2) Internal incoming payment
(debit account B)

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.

You also save on charges for external bank transfers. The in- house 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 com- panies 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 sim- plify 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

payment to the external business partner (step 2 in Figure 8). The current account of
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 sub-
sidiary A and the executing party and sends it to both as an IDoc
(step 4 in Figure 8). Subsidiary A and the executing party 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 infor-
mation, 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
Financial
accounting
system
4b
Subsidiary A
Account
4a
management
2
Subsidiary B
Payment program
3
5
1
7
6
External
Partner
business partner
bank
House bank of
head office
Bank statement
Payment

Figure 8: Outgoing Central Payments

The Benefits of Automated Outgoing Central 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.

With SAP In-House Cash, you can run a precise financial analysis within your group at any time. Functions for automatic post- processing and automatic data transfer to the financial account- ing system can significantly reduce the staff required for 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 gener- ous current-account overdrafts at short notice, ensuring that the individual subsidiaries are solvent at all times.

In-House Cash Center Financial Accounting System Head Office Clearing Partner Subsidiary A (head office) Intercomp.
In-House Cash Center
Financial Accounting System
Head Office
Clearing Partner
Subsidiary A
(head office)
Intercomp.
Clearing Partner
Subsidiary A
(head office)
-400 (1)
+400 (1)
400
(2)
400 (2)
Clearing
IHCC Clearing
Partner Bank
House
400
(2)
400 (2)
400 (3)
External
Partner
bank of
business
bank
head
Outg. Payment
partner
office
House Bank
clearing
400 (4)
400 (1) 400 (3)
Bank Clearing
400 (4)
400 (1)
IHCC = in-house cash center

Bank statementBank Clearing 400 (4) 400 (1) IHCC = in-house cash center Payment (1) Transfer payment information

Payment400 (4) 400 (1) IHCC = in-house cash center Bank statement (1) Transfer payment information to

(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

Automated Outgoing Local Payments

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

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 partici- pants can be included in this scenario to achieve local payments instead of foreign payments to avoid cross-border costs.

Example: Automated Outgoing Local Payments

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 sub- sidiary. In this example, subsidiary B in the United Kingdom is determined as the executing party.

After the determination of the executing party, the in-house cash center debits the current account of subsidiary A, provi- sionally 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 sub- sidiary 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
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 informa-
tion, the payment is transferred to the house bank of the exter-
nal partner (step 6 in Figure 10). The external business partner
receives a corresponding bank statement from its own bank
(step 7 in Figure 10).
Group
In-House Cash Center
(Germany)
Subsidiary B
(United Kingdom)
Account
2
Financial
Subsidiary A
4a
(Germany)
management
accounting
system
4b
Payment program
1
3
5
7
6
External business partner
(United Kingdom)
Partner
bank
House bank of
subsidiary B
Bank statement
Payment

Figure 10: Outgoing Local Payments

The Benefits of Automated Outgoing Local Payments

In-House Cash Center Financial Accounting System Subsidiary B (United Kingdom) Subsidiary A Subsidiary B Outgoing
In-House Cash Center
Financial Accounting System
Subsidiary B
(United Kingdom)
Subsidiary A
Subsidiary B
Outgoing
(Germany)
(United Kingdom)
IHCC receivables
payment clearing
-400
+400
400 (3)
400 (2)
400 (3)
Financial Accounting System
Subsidiary A (Germany)
House Bank
Bank clearing
400 (4)
400 (4)
400 (2)
External
IHCC clearing
business partner
400 (3) 400 (1)
External
House
IHCC receivables
business
Partner
bank of
partner
bank
subsidiary
400 (3)
(United
B
Kingdom)
(1) Generate payment order to in-house cash center
(2) Generate payment request, payment order to house bank
(3) Import and post bank statement from in-house cash center
(4) Import and post bank statement from house bank
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 execut-
ing party. Because the subsidiaries are responsible only for the
execution of local payments, they no longer need to keep
accounts abroad.
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 busi- ness partner. Subsidiary A instructs its external business partner to make payment to its head office. The external business part- ner 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 busi- ness partner receives a bank statement from its house bank (step 2 in Figure 12).

The business partner’s house bank transfers the payment to 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 intend- ed for the in-house cash center and which current account is affected. Once the items have been identified, the system auto- matically transfers them to the in-house cash center for posting to the relevant current accounts (step 4 in Figure 12).

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.

Group Head Office In-House Cash Center Financial accounting system 5 Account Subsidiary A management Subsidiary
Group
Head Office
In-House Cash Center
Financial
accounting
system
5
Account
Subsidiary A
management
Subsidiary B
4
2
3
External
Partner
business partner
bank
House bank of
head office
1
Payment program
Bank statement
Payment

Figure 12: Central Incoming Payments

The Benefits of Automated Incoming Payments

The central processing of incoming payments reduces the num- ber of bank accounts your group needs, while fully 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.

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.

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.

In-House Cash Center Financial Accounting System Head Office Clearing Partner Bank clearing Subsidiary A Subsidiary
In-House Cash Center
Financial Accounting System
Head Office
Clearing Partner
Bank clearing
Subsidiary A
Subsidiary A
(head Office)
400
(4)
400 (1)
400 (3)
+400 (2)
-400 (2)
Clearing Partner
Clearing Partner
(head Office)
Bank
House
400