Banks and Cash Management

H-pack Packaging Industries LLC

BUSINESS BLUEPRINT DOCUMENT

Financial Accounting

Banks and Cash Management

Project: Hotpack Revolution

Hotpack Packaging Industries LLC

Version: 1.0

Date: 01 November 2018

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 Banks and Cash Management

FICO-BCM

Document Information

Document Name Business Blue Print

Title Business BluePrint_FICO-BCM.docx

Document Purpose To explain business functions desired by H-pack in the cash management
module of SAP

Document Status

Contact for Enquiries Manesh M S

Release Description Created by Date Approved by Date

Bank and cash Mahesh Ravindran

V1.0 01 Nov 2018 Manesh M S 15 Nov 2018
management / Jenson T V

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 Banks and Cash Management

INDEX
Contents
1 General information about the scenario .................................................................................... 4
1.1 Background ............................................................................................................................ 4

1.2 Enterprise Resource Planning Objectives ............................................................................. 4

2 General Requirements / Expectations ....................................................................................... 4

3 Process flow charts ..................................................................................................................... 5

4 Organisational considerations ................................................................................................... 5

5 Solutions in SAP .......................................................................................................................... 5

5.1 Bank account management ................................................................................................... 5

5.2 Cash operations ..................................................................................................................... 7

5.3 Liquidity management............................................................................................................ 8

5.4 Cash Journals ........................................................................................................................ 9

5.5 Bank reconciliation ............................................................................................................... 11

5.6 Managing bank to bank transfers ........................................................................................ 11

6 Process Linkages/Integration points ....................................................................................... 12

7 Functional Deficits ..................................................................................................................... 12

8 Approaches to Cover Functional Deficits ............................................................................... 12

9 Business process Improvements/Benefits ............................................................................. 12

10 Authorization and Roles ............................................................................................................ 12

11 Reports and Forms .................................................................................................................... 13

12 Interface/Developments ............................................................................................................. 13

13 Conversions ............................................................................................................................... 13

14 Signoff ......................................................................................................................................... 13

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 Banks and Cash Management

1 General information about the scenario

This document defines an overall framework for implementing functionalities in SAP cash
management module for H-pack packaging industries LLC. It highlights business objectives and
benefits expected to be achieved with this implementation. This document covers all major business
processes for bank and cash management as described in the scope document awarded for
implementation.

1.1 Background
H-pack packaging industries LLC undertakes trading, manufacturing, marketing and distribution of
different varieties of food packaging materials and related products. They manufacture high quality
disposable packaging materials and related materials, paper and protection and hygiene products
through its different manufacturing facilities in UAE and India. Managed by a team of highly qualified
and experienced professionals, it has adopted policies for developing and enriching the potential of
each of its employees who serves the business. With a view to further expand operations and also to
adopt world class business practices, the management has decided to implement S/4 HANA ERP
product from SAP and they would like to derive the maximum benefits out of it.

H-pack plans to implement the following modules available in SAP S/4 HANA ERP:-

FI Financial Accounting
CO Controlling
SD Sales and Distribution
PP Production Planning & Controlling
MM Materials Management
HR Human Resources

1.2 Enterprise Resource Planning Objectives

 To implement SAP S/4 HANA standard business processes, adhere to business basics and use
SAP as a model for best business practices.
 Integrate business processes and functions across the organization.
 Improve H-pack’s capacity to close its books quickly at the month end on global and consolidated

2 General Requirements / Expectations

H-pack expects the following to be covered using the cash management module in SAP:-
 Handling of multiple bank accounts with multiple banks

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 Banks and Cash Management

 Electronic /Manual reconciliation of bank accounts with statements received from banks
 Managing cash journals and petty cash payments
 Handling of incoming and outgoing payments through different payment types
 Cash flow and liquidity forecasting
 Working capital
 Liquidity ratios
 Receipts through credit / debit cards

3 Process flow charts

Not applicable

4 Organisational considerations

As explained in the blue print for FI module organisational structure.

5 Solutions in SAP

SAP has enhanced cash management module in it to more effectively manage bank accounts
centrally, overview the cash daily operations and long-term liquidity trends accurately and precisely.
Cash managers can easily and intuitively get a high-level overview and detailed insight into bank
accounts, cash position and cash flows, enabling them to make decisions and take actions directly.
Major features in the cash management module include:-
 Bank account management
 Cash operations
 Liquidity management
Processes that are relevant for H-pack in each of the above features are explained in sections below.

5.1 Bank account management

This is the master data that need to be set up before starting with any of the bank transactions
provided in SAP. Details of the bank master records that need to be created are outlined in the BBP
for master data. In S/4 HANA these can be maintained using a FIORI app provided by SAP for this
purpose or partly through transaction FI12_HBANK. Even though some of the header information and
address can be maintained using this transaction, further details can only be maintained through the
app. Therefore it is always recommended to use the app for bank account maintenance. With Bank
Account Management, users in H-pack will be able to centralize the management of bank accounts
and perform the following tasks:-
 Maintaining the bank account master data that supports:

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 Banks and Cash Management
o Common account properties such as bank account number, IBAN, bank statement data,
contact persons, SWIFT code and so on
o Payment signatories
o Overdraft limits
o Connectivity path that enables the integration with house bank accounts, G/L accounts, or
bank accounts in central or remote systems
o File or hyperlink attachments
o Customer-defined fields
 Managing bank accounts by:-
o Displaying bank accounts in standard views including the "Bank Hierarchy" view, the
"Account List" view, and the "House Bank Account List" view
o Defining custom views using bank account groups
o Managing cash pools and performing cash concentration
o Importing or exporting bank accounts using the tool "Import and Export Bank Accounts"
 Using workflow processes for opening, modifying, closing, reopening, and reviewing bank
accounts
Pasted below is a screen shot from S/4 HANA bank account maintenance app for a clear picture of
the functions available.

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5.2 Cash operations

The cash operations component in the SAP cash management module contains a number of apps
that can be used for day-to-day cash management processing. With Cash Operations, H-pack can
review short-term cash forecast based on imported bank statements, check cash flows by navigating
to the line items, manage bank transfers and outgoing payments by approval process. Other daily
operations tasks include memo records, cash concentration, deficit cash pools and so on. Cash
operations help to monitor liquidity status of the company enabling initiation of liquidity plans to
mitigate financial risks and maximize financial benefits.
Image pasted below explains how the SAP cash operations and liquidity management components
addresses the short term and long term planning.

The time horizon may vary from organisation to organisation. From the above picture, it is clear that
the short-term planning is addressed by the cash operations module and the mid and long-term
planning requirements are addressed by the liquidity forecasting module.
SAP cash operations module use a feature called One Exposure which acts as a central repository to
all actual and forecast business transactions. Data flow to One Exposure need to be set up correctly
together with all bank account master data to ensure correct functioning of the cash operations
module. Once set up, H-pack can avail following features of cash operations module through different
fiori apps available:-
 Monitor bank statements imported
 Cash Position report with drilldown to detail
 Overview of bank risk
 Initiation of bank transfers and manual payments
 Track bank transfers
 Approve bank payments

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 Deficit cash pools

5.3 Liquidity management

Liquidity management functionality in SAP cash management deals with mid-to long-term planning,
determination of actual values, to provide actual-to-plan, plan-to-forecast and plan-to-plan variance
analysis reporting. It also helps to create a rolling plan so as to understand what payment obligations
are to be fulfilled and whether they need to make investment or funding plans. The functionality
included in the Liquidity Management component supports daily forecast and reporting activities
(Cash Flow Analysis). Liquidity Management also tracks plan and forecast data.
Liquidity Management supports basic planning functions, such as:
 Opening of a new planning period
 The system recommends initial amounts, such as use last year’s actual numbers
 The person entering the plan data has the ability to change the amounts
 Bump-up, bump-down plan data by percentage change
 The planning status of subsidiaries can be tracked
 High-level status tracker to check status of submitted or missing plans
SAP provides sample templates to be used with liquidity management to upload plan data from MS
Excel. The Liquidity Management functionality also supports liquidity planning by liquidity item,
planning level, and cash pool. It also supports multiple currencies for use in foreign exchange (FX)
forecasting and hedging purposes.
For mid-term planning, there is a short-term liquidity forecast fiori app which will show both cash
position and forecast data in the same report. Another feature is the cash flow analysis report which
shows all cash postings under categories that are pre-configured. These categories indicate a
purpose for which cash posting is planned or made. This report is usually mentioned as the liquidity
planner as this was the term used in versions prior to S/4 HANA.
Liquidity management module also supports creation of a rolling plan which H-pack use to create and
track liquidity plans for a specific planning period. Diagram pasted below shows the steps involved in
creating a rolling plan ( For example a 12 month rolling forecast with monthly granularity):-

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An explanation of the steps involved is as below:-

 At the beginning of each period a new planning cycle is started by a user in treasury department
 Connected entities can submit their plan. Data can be defaulted into the new plan from either of
liquidity forecast data, previous period plan data or last year’s actual data. Users can adjust the
data before the plan is submitted.
 Treasury user can track submission of plans by subsidiaries using a status tracker app provided.
 Once all subsidiaries submit their plans, the treasury user can review them, make final
adjustments and release the plan for the planned period.
 Liquidity planner has feature for entering planned data by currency which facilitates forecasting in
foreign currency which is useful for hedging purpose.
 Once the planned data is in the system, comparisons can be made with actual data available from
One Exposure.

5.4 Cash Journals

Cash journal functionality in SAP is a sub ledger of bank accounting which can be used to manage
cash incomings and outgoings in a company. Even though this functionality is predominantly used for
recording petty cash transactions like reimbursement of staff expenses, telephone expenses etc. this
can be also used to record cash payments to vendors and cash/check receipts from customers as
well. It is possible to create multiple cash journals for company code and each cash journal will be
associated with a G/L account in that company code. Hence the system automatically displays the

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balances and transactions done in that journal whenever it is selected using transaction FBCJ. From
cash journal, postings can be made to a G/L account, vendor or customer accounts.
Following cash journals are recommended to be created for H-pack:-
 Cash journal 2000 for company code HPUK
Business transaction types will be created for these cash journals under the standard categories and
G/L accounts will be assigned to each category other than vendor and customer. Standard categories
available for assignment while creating business transactions for cash journal are as below:-
 C - Receipt from bank account
 B - Payment to bank account
 R - Revenue
 E - Expense
 D - Customer posting
 K - Vendor posting
Details of the business transactions to be created will be identified in the realisation phase.
Business transactions can also be used to add or remove cash from the GL associated with a cash
journal. Make sure that sufficient balance is available in cash journal before making any payment.
As mentioned earlier, it is possible to make payments to vendors or receive payments from customers
using a cash journal. But making an entry in cash journal will not automatically clear the
vendor/customer open items. These have to be cleared manually using transaction F-44 in case of
vendor open items and F-32 in case of customer open items.
Diagram pasted below shows the process flow in cash journal transactions.

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5.5 Bank reconciliation

SAP has facility to carry out reconciliation of the bank accounts with an actual statement received
from bank. This can be done either through an automatic mode or through a manual mode. For
automatic mode, the transaction used in FF.5 and for manual mode the transaction used is FF67. The
automatic mode of bank reconciliation in SAP support import of bank statements received
electronically. Along with other European formats, this transaction supports standard SWIFT formats
(MT940) and Multi cash format. H-pack has to liaise with their banks and get the statement in any of
these standard formats as they wish to use the electronic bank reconciliation feature in SAP. If bank is
providing a custom format, then it has to be converted into a multi cash format before it is used in this
transaction.
During execution of electronic bank statement, the system automatically clears open items if one is
found based on matching rules set. Otherwise, lines in the statement have to be manually cleared
with open items in the bank account.

5.6 Managing bank to bank transfers

As part of managing bank accounts, H-pack has a scenario wherein they would like to transfer
amounts between different bank accounts for various purposes. SAP offers a standard solution for
fund transfers between banks and it is called “Transfer with repetitive codes” using transaction
FRFT_B.

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The process steps to be followed in enabling fund transfer between banks are as below:-
 To enable fund transfers using this transaction, a repetitive code is created first using transaction
OT81. A repetitive code is nothing but a mapping of sending and receiving bank details as master
data. Once this data is mapped and released, it can be used for transfers on a regular basis.
 Transaction FRFT_B is then used to create fund transfer entry using the repetitive code. Once
this entry is created, it can be released to form a payment request which can be routed through
different approval workflow cycles.
 The payment request is then processed using transaction F111 to generate payment medium files
and to affect transfer between bank accounts

6 Process Linkages/Integration points

Please refer to the same chapter in the blue print for general ledger.

7 Functional Deficits

 Nil

8 Approaches to Cover Functional Deficits

 Nil

9 Business process Improvements/Benefits

Implementation of different functionalities in the bank and cash accounting module of SAP will help H-
pack to streamline its business with various suppliers and also eliminate errors while reconciling their
transactions with them. This will improve their handling of trade receivables which will have a great
impact in the supply chain functions of the organization. This will improve efficiency of their business
and will allow them to make well informed business decisions.

10 Authorization and Roles

Detailed authorization matrix need to be prepared during project execution phase based on functional
roles and responsibilities.

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11 Reports and Forms

Table below shows some of the available standard reports for bank and cash management:-
Sl.No. Transaction code Description

1 S_ALR_87012309 Cash book

2 S_ALR_87012348 Cashed checks per bank account

3 S_ALR_87012349 Outstanding check analysis per G/L account and vendor

4 FF7AN Display cash position

5 FF7BN Display liquidity forecast

6 FF67 Manual import of bank statement

7 FF.5 Automatic import of bank statement

8 FF.7 Compare payment advices

9 FF/9 Compare advices with bank statement

10 FPS3 Process today’s bank statement

12 Interface/Developments

Nil

13 Conversions

Nil

14 Signoff

Role Name Signature Date

Core Team Sajad Kottayi

Core Team Akhil C Prasad

SAP Consultant – IVL Mahesh Ravindran

Project Manager- Hotpack Thomas K K

Project Manager- IVL Manesh M S

Head- Project Delivery, IVL Rajesh Thampy

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