Cash Management and Treasury from SAP: A review of the latest solutions to analyze liquidity and risk metrics and mobilize cash

With SAP S/4HANA’s earliest release, SAP unveiled a new Bank Account Management solution that offers a user-driven bank account opening and closing workflow mechanism. This mechanism can be used by subsidiaries around the globe to request new house bank accounts and an upload tool to establish new accounts en masse. In SAP ECC, Treasury was typically required to enter a ticket with the IT department to request that an account be set up in back-end configuration. It was then tested and transported to Production. Within Bank Account Management, bank hierarchies can be defined, and cash pooling carried out. Utilizing this functionality, header and participant accounts are designated and cash is easily concentrated between source and target accounts, bypassing the more complex In-House Cash process.

As of SAP S/4HANA version 1909, the cash manager can submit a Cash Trade Request to the front-office trading desk to initiate new transactions such as FX spot trades. Cash Trade Requests trigger a trade request and the trading process in Transaction Manager.

Also, within Cash Management, cash flow forecasting has undergone several iterations with each SAP S/4HANA release to address several shortcomings, such as the standard cash position report’s dated look and feel, heavy dependence upon general ledger account balances, and lack of synchronization with cash-in-transit. A single table, FQM_FLOW, now centralizes all cash flows (similar to the Universal Journal or table ACDOCA in Finance & Controlling), allowing new data elements such as flow types and liquidity items to be created from remote systems and various modules of SAP. These new data elements form the foundation for the improved cash management reporting available in SAP S/4HANA. SAP has referred to the FQM_FLOW table as the One Exposure from Operations Hub. The cash manager can include or exclude items based on certainty-level, i.e. likelihood of cash conversion in the current period.

Liquidity Planner and other legacy reports have been phased out in favor of SAP Analytics Cloud (SAC) reports and dashboards and used in conjunction with SAP Business Planning & Consolidation (BPC) and underlying configuration in SAP S/4HANA. These reports automate cash flow forecasting using plan data (from different business units), forecast data (flows in SAP that have not yet been cleared/confirmed by the bank), and actual data (cash flows cleared/confirmed by the bank). Subsidiaries can submit their forecasts to headquarters within SAP instead of emailing a spreadsheet where the values then would have to be manually keyed into an overall cash forecast. The Treasury Executive Dashboard, also available in SAC, visualizes real-time insights into treasury operations for treasury executives and includes key performance indicators, such as liquidity, cash position, debt volume and structure, counterparty limits, the volume of bank guarantees, and market trends. The Treasury Executive Dashboard in SAC is a cloud solution that requires a separate license and can plug into and enhance SAP ECC installations.

SAP has also developed a fresh and simple solution for bank connectivity, SAP Multibank Connectivity. This solution is a cloud offering that allows customers to connect to their banking partners either through the SWIFT network, or traditional host-to-host channels. A separate license is required, and SAP does the legwork to establish connectivity, expediting the linkage with the bank(s), and again virtually eliminating the need for internal IT involvement. SAP MBC is an optional component and customers can still connect through other channels if desired.

Another treasury product available from SAP is Advanced Payment Management (APM), which is available as of SAP S/4HANA version 1809 Support Pack 2. Before being released to corporate SAP customers, APM was accessible to SAP Banking customers in the Financial Services industry under the name Payment Engine (FS-PE). For corporate customers, APM offers APIs which bring payment information from multiple source systems enabling SAP S/4HANA to serve as a payments hub. This has effectively replaced the “BCM Connector” solution used by some ECC customers since ECC 6.0 Enhancement Pack 6. Bank Communication Management and In-House Cash, nevertheless, have not been phased out – rather they are both integrated to work with APM. APM can enrich payment data for clients who do not use the Payment Medium Workbench and integrates with cash management. Transaction posting & clearing can be made simpler since APM can run the payment program in the background with the click of a button.

Bank Fee Analysis is an SAP S/4HANA tool in which SAP customers can import Bank Services Billing (BSB) files in XML format and monitor bank fees by the bank and other criteria. Treasury can validate that fees meet expected conditions or assess the need to change bank service providers.

Foreign Bank Account Reporting (“FBAR”), which allows companies to meet the requirements of the regulatory requirements in countries such as the United States, is also a new addition to the SAP S/4HANA landscape. Accounts that meet a certain minimum and maximum balance criteria can be identified and authorized signatories can be tracked. Neither Bank Fee analysis nor FBAR were available on ECC.

In Fiori, bank reconciliation has undergone a facelift with new, more intuitive screens. Combined with the latest SAP Machine Learning innovations from SAP, customers can leverage this innovative technology by automating the cash application process beyond the auto-clearing capabilities of the electronic bank statement and/or lockbox statement.

SAP has also improved its transaction and risk management capabilities. As of SAP ECC 6.0 Enhancement Pack 8, SAP enabled functionality allowing companies to meet the IFRS9 global derivative accounting standard in its Hedge Management Cockpit and activated the ability to handle new hedging scenarios available under U.S. GAAP. Hedge requests and hedges can be created automatically, and various other improvements are available for FX and other instrument types.

For companies that have a straightforward set of treasury requirements and are running a public cloud or multi-tenant solution (which SAP has recently referred to as the SAP essentials edition), quick wins toward automation can be achieved. While not all functionality is available, the solution is still robust and includes country-specific localization extensions, for instance.

During the current COVID-19 crisis, treasury departments have cited liquidity and funding as their top concern and top problem to be addressed. SAP Treasury’s near real-time cash management solutions can bring great value during these uncertain times and help glean insight into sources and uses of liquidity. Not only are the recent innovations available to customers who have upgraded to the latest SAP platforms and versions, but traditional solutions that have been available in ECC versions remain available to SAP ECC and SAP S/4HANA customers alike. For example, SAP Treasury supports the full life cycle of a revolving credit facility, from processing draw downs and fee settlements to posting journal entries and reporting on utilization. Users can report on intraday bank activity, credit risk and credit limits, working capital, and analyze AP/AR aging schedules.

SAP Treasury has long rivaled the most advanced treasury workstations in the market and has been used by some of the largest Fortune 100 companies. With all its recent innovations, SAP Treasury is more viable than ever and may accelerate its market share vis-à-vis third-party treasury management software solutions – especially as more and more companies roll out SAP S/4HANA. With SAP Treasury, SAP customers’ treasury operations can be integrated with other functions within the organization through a common set of master data and transactional data. It is often selected for its compatibility within an Information Systems-driven implementation and support/maintenance framework, its integration with other parts of the organization, and unique ability to automate processes within a central GL book of record.

TruQua is seeing increased demand for incorporating cash management elements to greenfield and Central Finance implementations. We welcome clients to reach out to us to learn more about all that SAP Treasury has to offer.

About the Author

Allie Meyer is a Senior Principal at TruQua, specializing in treasury transformations. At TruQua, Allie leads the SAP Treasury & Cash Management service offering which includes helping clients transition to the new S/4HANA functionality. Throughout her career, Allie has led many full life cycle implementations of Treasury & Risk Management module of SAP, including the areas of Transaction Manager and Cash Management, with both a technical and functional focus. She has also provided post go-live SAP support for clients and worked on treasury internal audit and treasury operating model engagements. Allie is a Certified Treasury Professional (CTP), a member of the Association for Financial Professionals (AFP), and recently served as the Market Leader for Americas SAP User Group (ASUG), Treasury Special Interest Group. Allie is also a certified SWIFT for Corporates specialist.  Allie received a Bachelor of Arts degree from Furman University and an MBA degree from the University of South Carolina Moore School of Business.