CFM

In-House Cash

Elke Romanov
 SAP AG 2001 In-House Cash - Romanov 1
Agenda

1 Introduction
2 SAP Organizational Entities

3 The In-House Cash Center

4 In-House Cash Processes

5 System Architecture Scenarios

6 Systemdemo

 SAP AG 2001 In-House Cash - Romanov 2

 Current Situation

Various and ever-changing multi-national corporate group structures . . .

Internal
Bank Internal
Bank
Head office
(Europe)
US
Subsidiary

Subsidiary
Subsidiary Asia

Subsidiary
Subsidiary

Subsidiary

Subsidiary
Region 1

Region 2

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

 SAP AG 2001 In-House Cash - Romanov 3
In-House Cash

In-House Cash is a solution for companies that operates globally to

manage their intra-group and external payment transactions more
efficiently.

z IHC is set up at the group headquarter

z IHC is a virtual bank where the subsidiaries have current accounts

In-House Cash Center processes all payments between various

affiliates.
z controls payment transactions on a regional and global level
z processes internal payment transactions on a cost-effective basis
z reduces the amount of external bank accounts needed
z optimizes cross-border payment traffic
z automates and standardizes business processes
z cash resources are kept within the group

 SAP AG 2001 In-House Cash - Romanov 4

Agenda

1 Introduction
2 SAP Organizational Entities

3 The In-House Cash Center

4 In-House Cash Processes

5 System Architecture Scenarios

6 Systemdemo

 SAP AG 2001 In-House Cash - Romanov 5

Organizational Entities

Corporate
Head Office
Subsidiary 3 Group
Subsidiary 2 In-House Cash Financial
Center Accounting
Subsidiary 1
Account
management

Functions and Tasks of the Organizational

Entities Involved

 SAP AG 2001 In-House Cash - Romanov 6

Organizational Entities: Subsidiary

Corporate
Subsidiary 3 Group
Subsidiary 2
Subsidiary 1

Subsidiary
z Individual trading entity (e.g. subsidiary) with its own systems (e.g. R/3)
z This subsidiary holds one or more current accounts within the corporate
group head office (In-House Cash Center).
z The subsidiary simply has to define new bank details (for the virtual bank) to
the corporate group head office (In-House Cash Center) as though it were a
normal house bank.

 SAP AG 2001 In-House Cash - Romanov 7

Organizational Entities: Head Office

Corporate
Head Office
Group
In-House Cash Financial
Center Accounting
Account
management

Head Office
z The head office manages the current accounts for the corporate group
subsidiaries within the IHC Center.
z The financial accounting department within the head office manages the
IHC Center general ledger accounts.
z Other components such as CO, MM, .... could be in use at the head office.

 SAP AG 2001 In-House Cash - Romanov 8

Organizational Entities: IHC-Center

Corporate
Head Office
Group
In-House Cash Financial
Center
Accounting
Account
management

In-House Cash Center

z The IHC Center is situated at the head office and can be a separate
organizational entity within the head office.
z The IHC Center manages the subsidiaries IHC current accounts as a head
office subledger
z Represents a part of the company that processes internal corporate group
and cross-group payments.

 SAP AG 2001 In-House Cash - Romanov 9

Organizational Entities: Financial Accounting Dept.

Corporate
Head Office
Group
In-House Cash Financial
Center Accounting
Account
management

Financial Accounting Department

z The general ledger accounts for the IHC Center subledger are set up here.
z It holds the IHC Center balances in summarized form.
z It creates the balance for the corporate group, taking account of IHC.
z The financial accounting department uses SAP-FI.

 SAP AG 2001 In-House Cash - Romanov 10

Summary

Corporate
Head Office
Subsidiary 3 Group
Subsidiary 2 In-House
In-HouseCash
Cash Financial
Finanz-
Center
Center Accounting
buch-
Subsidiary 1
Account
Konten- haltung
management
verwaltung

Organizational entities:

z Operative subsidiaries 1,2,3...

z The IHC Center and the financial accounting department are situated
within the head office
z The IHC Center (manages the subsidiary current accounts)
z The financial accounting department manages the chart of accounts and
the general ledger balances.
 SAP AG 2001 In-House Cash - Romanov 11
Agenda

1 Introduction
2 SAP Organizational Entities

3 The In-House Cash Center

4 In-House Cash Processes

5 System Architecture Scenarios

6 Systemdemo

 SAP AG 2001 In-House Cash - Romanov 12

Overview of the IHC- Center
FI
FI –– GL
GL
Pmnt
Pmnt clearing
clearing
IHC
IHC
S1 S2 (1) 200 540 (2)
S1 S2
- 50 + 200 IHC
IHC IHC
IHC
+ 340 - 150 Receiv.
Receiv. Payab.
Payab.
(2) 540 200 (1)

Bank statements Limits

G/L Transfer
Conditions

Account A
+ 100
- 120
Business partner ...
Blocks

...
...
No Post.dte Val.dte Curr. Amnt

Currency
... 1
2
30.12.00
31.12.00
31.12.00
31.12.00
EUR
EUR
100.00 C
9.58 D

conversion Reporting Turnovers

 SAP AG 2001 In-House Cash - Romanov 13

IHC Center: Conditions

Interest

Debit Credit Overdraft Transaction

interest interest interest interest

Account A
Account charge 10.00 USD + 100.00 Credit interest 0.5 %
- 10.00
+ 0.42

Item Mailing Account Periodic Direct

charges charges charges charges charges

Charges

 SAP AG 2001 In-House Cash - Romanov 14

Agenda

1 Introduction
2 SAP Organizational Entities

3 The In-House Cash Center

4 In-House Cash Processes

5 System Architecture Scenarios

6 Systemdemo

 SAP AG 2001 In-House Cash - Romanov 15

Process 1: Internal Payment

Example: „Subsidiary 1 makes a payment to Subsidiary 2“

Corporate
Head Office
Group
Subsidiary 3 In-House Cash Financial
Subsidiary 2
2b. Center Accounting
Subsidiary 1 Account
2a.
management

Pmnt Program OP
1.

Payment Bank Statement

 SAP AG 2001 In-House Cash - Romanov 16

Process 1: Internal Payment
Corporate
Subsidiary 3 Group Head Office
Subsidiary 2 In-House Cash Financial
Center Accounting
Subsidiary 1
d Account
management
Pmnt Program OP
c

c Subsidiary 1:
z Defines a new (virtual) house bank „IHC Center“ beforehand
z Starts the standard payment program and generates a payment order
z House bank: IHC Center
z Payee: Vendor „Subsidiary 2“
z Partner bank: IHC Center
z When the IHC Center is in operation, it is possible to freely define the
payment conditions

 SAP AG 2001 In-House Cash - Romanov 17

Process 1: Internal Payment
Corporate
Subsidiary 3 Group Head Office
Subsidiary 2 In-House Cash Financial
Center Accounting
Subsidiary 1
d Account
management
Pmnt Program OP
c

d IHC-Center:
z Debits the IHC current account of subsidiary 1
=> Receivable due from subsidiary 1
z Creates a credit memo for the IHC current account of subsidiary 2
=> Payable due to subsidiary 2
z Generates and sends bank statements to subsidiaries 1 and 2
z The netting amount results from the account balance (based on the
turnovers)

 SAP AG 2001 In-House Cash - Romanov 18

Process 1: Internal Payment
Corporate
Subsidiary 3 Group Head Office
Subsidiary 2 In-House Cash Financial
Center Accounting
Subsidiary 1
d Account
management
Pmnt Program OP
c

Subsidiaries 1 and 2:

z Import the internal bank statements in the same way as the bank
statements from external house banks via the standard bank
statement programs
z At this point the system automatically clears the open items
z Internal payments without involvement of banks

 SAP AG 2001 In-House Cash - Romanov 19

Subsequent Process: Internal Netting

Head Office

In-House Cash Center

Subsidiary 1 Subsidiary 2 Subsidiary 3

- 20 + 100 - 100
+ 50 - 50 + 20
.. .. ..
.. .. ..

= + 30 = + 50 = - 80

 SAP AG 2001 In-House Cash - Romanov 20

 Subsequent Process: Internal Netting

„Sweeping of Subsidiary 1‘s account balance to an external bank account“

Corporate Head Office

Subsidiary 3 Group
In-House Cash Financial
Subsidiary 2
Center Accounting
Subsidiary 1
Account
6.
management 1.

2.
3.
5.

4.

House bank Head office

subsidiary 1 house bank
Payment Bank Statement

 SAP AG 2001 In-House Cash - Romanov 21

Currency Conversion Function

Corporate
Head Office
Group
Subsidiary 3 In-House Cash Financial
Subsidiary 2 Center Accounting
Account
Subsidiary 1 management Local
Currency currency
Conversion GBP
Function
Pmnt Program OP
Payment order)
-100 YEN Acct 1 Transaction Account
+100 YEN Acct 2
currency currency
YEN USD
Currency Conversion Function
z Converts the incoming payment items from the subsidiaries into account
currency (manual conversion of payment items with IHC supported)
z Enters the account currency and the reference transaction amount (e.g. for
bank statement purposes) in the posting documents in IHC.
z Generates an additional posting on currency position accounts.

 SAP AG 2001 In-House Cash - Romanov 22

Process 2: Central Payments

Example: „Subsidiary 1 makes a payment to an external partner“

Corporate Head Office

Subsidiary 3 Group
In-House Cash Financial
Subsidiary 2
Center Accounting
Subsidiary 1
Account
2.
management 3.
Pmnt Program OP
1.
4.
5.

External
business 7. 6.

partner
Partner bank Head office
house bank
Payment Bank Statement

 SAP AG 2001 In-House Cash - Romanov 23

Process 2: Central Payments
Corporate
Subsidiary 3 Group Head Office
Subsidiary 2 In-House Cash Financial
Center Accounting
Subsidiary 1
d Account
management
e
Pmnt Program OP
c
f g
External
business
partner
i h
Partner Head Office
bank house bank

c Subsidiary 1

z The same steps as in process 1

d IHC Center
z Debits the IHC current account of subsidiary 1
z Generates and sends a bank statement to subsidiary 1

 SAP AG 2001 In-House Cash - Romanov 24

Process 2: Central Payments
Corporate
Subsidiary 3 Group Head Office
Subsidiary 2 In-House Cash Financial
Center Accounting
Subsidiary 1
d Account
management
e
Pmnt Program OP
c
f g
External
business
partner
i h
Partner Head Office
bank house bank

e IHC Center

z IHC Center forwards payment information to SAP-FI (Financial accounting)

Financial Accounting
f
z A payment order (payment request) is created in SAP-FI on the basis of this
payment information
z The payment order is either sent to the head office house bank immediately
or at a later point in time (collection of several payment orders = external
netting)

 SAP AG 2001 In-House Cash - Romanov 25

Process 2: Central Payments
Corporate
Subsidiary 3 Group Head Office
Subsidiary 2 In-House Cash Financial
Center Accounting
Subsidiary 1
d Account
management e
Pmnt Program OP
c
f g
External
business
partner
i h
Partner Head Office
bank house bank

g SAP-FI

zImports the bank statement via the standard bank statement programs

h Head office house bank

Procedure is the same as for a „normal“
payment order to a house bank
i Partner bank

 SAP AG 2001 In-House Cash - Romanov 26

Process 3: External Incoming Payments via IHC

Example: „Partner pays subsidiary 1“

Corporate Head Office

Subsidiary 3 Group
In-House Cash Financial
Subsidiary 2 Center Accounting
Subsidiary 1 Account
management
5.
4.

External
business
partner 2. 3.

Pmnt program OP
1. Partner bank Head office
house bank
Payment Bank Statement

 SAP AG 2001 In-House Cash - Romanov 27

Process 3: External Incoming Payments via IHC
Corporate
Subsidiary 3 Group Head Office
Subsidiary 2 In-House Cash Financial
Center accounting
Subsidiary 1
g Account
management

f
External
business
d e
partner
Partner Head office
c bank house bank

c Business partner

d Partner bank Procedure is the same as for a „normal“

payment order to a house bank
e Head office house bank

 SAP AG 2001 In-House Cash - Romanov 28

Process 3: External Incoming Payments via IHC
Corporate
Subsidiary 3 Group Head Office
Subsidiary 2 In-House Cash Financial
Center Accounting
Subsidiary 1
g Account
management

f
External
business
d e
partner
Partner Head office
c bank house bank

f SAP-FI
z Imports the bank statement via the standard bank statement programs
z Identifies items which are relevant for the IHC Center
z Forwards the corresponding items to the IHC Center

g IHC-Center
z Generates a credit memo for the IHC current account belonging to subsidiary 1
z Creates and sends a bank statement to subsidiary 1

 SAP AG 2001 In-House Cash - Romanov 29

Process 4: Internal Payments with several IHC Centers

Subsidiary 3
In-House Cash Financial
Subsidiary 2 Center America Accounting
Subsidiary 1 Account
2.
management

1.

3.

Subsidiary 6
In-House Cash Financial
Subsidiary 5 Center Europe Accounting
Subsidiary 4 Account
management
4.

Payment Bank Statement

 SAP AG 2001 In-House Cash - Romanov 30

Process 4: Internal Payments with several IHC Centers

Subsidiary 3 In-House Cash Financial

Subsidiary 2 Center America Accounting
Subsidiary 1 2. Account
managmt.

1.
3.

Subsidiary 6 In-House Cash Financial

Subsidiary 5 Center Europe Accounting
Subsidiary 4 Account
managmt.
4.

SAP-FI

z The incoming payment order from subsidiary 1 generates two payment orders,
one in the IHC Center America, and one in the IHC Center Europe

z IHC Center A manages a current account for IHC Center E, and vice versa

 SAP AG 2001 In-House Cash - Romanov 31

Process 5: Central Payments with several IHC Centers

Subsidiary 3
In-House Cash Financial
Subsidiary 2 Center America Accounting
Subsidiary 1 Account
2.
management

1.

3.

External 5. 4. In-House Cash Financial

business Center Europe Accounting
partner Partner bank Head office Account
house bank management

Payment Bank Statement

 SAP AG 2001 In-House Cash - Romanov 32

Agenda

1 Introduction
2 SAP Organizational Entities

3 The In-House Cash Center

4 In-House Cash Processes

5 System Architecture Scenarios

6 Systemdemo

 SAP AG 2001 In-House Cash - Romanov 33

Technical Overview
Subsidiary I
Subsidiary
R/3 4.0BIIor EDI-Converter
Subsidiary
R/3 4.0BIIIor EDI-Converter
Bank statement Payment
R/3 4.0B or EDI-Converter
Bank statement Payment
Bank statement Payment program
EDI
IDOC
House bank
IDOC
EDI

IHC Bank statement Incoming payments Financial

Accounting
(R/3 4.6C)

CFM (based on R/3 4.6C) G/L IDOC General Ledger

Electronic
Outgoing payments Bank statement RFC bank statement

BAPI PAYRQ

House bank Payment program

 SAP AG 2001 In-House Cash - Romanov 34

In-House Cash

SAP‘s Corporate Finance Management In-House Cash enables you

to optimize your intra-group and external payment transactions
more efficiently.

z IHC is a flexible software solution

z IHC offers numerous advantages, including automated and
standardized business processes

In-House Cash Future Plans:

z Integration of In-House Cash role in mySAP.com Workplace

z Supporting financial transactions via links to the Internet or
Marketplace.
z Linking directly to the most up-to date market information

 SAP AG 2001 In-House Cash - Romanov 35

Agenda

1 Introduction
2 SAP Organizational Entities

3 The In-House Cash Center

4 In-House Cash Processes

5 System Architecture Scenarios

6 Systemdemo

 SAP AG 2001 In-House Cash - Romanov 36