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SAP Treasury integration with financial accounting and cash management
Johan Dannestig
Denmark I Iceland I Sweden I UK I www.applicon.com
Fyrirlestrarheiti
1 december 2009 I 2 I
I. Treasury Applications from SAP, an overview II. Transaction Manager, integration to FI/CO and CM III. Demo
09-12-01 I 2 I
Denmark I Iceland I Sweden I UK I www.applicon.com
Fyrirlestrarheiti
1 december 2009 I 3 I
I. Treasury Applications from SAP, an overview II. Transaction Manager, integration to FI/CO and CM III. Demo
09-12-01 I 3 I
Denmark I Iceland I Sweden I UK I www.applicon.com
Gaining Efficiency in Finance
Optimizing Working Capital
Free-up Working Capital Decrease Day Sales Outstanding Decrease Bad-debt write-offs
Driving Strategy and Growth
Supporting Excellence in Corporate Operations
Manage Real-Estate Manage Global Travel Policies Develop Talents & Leadership
Ensuring Compliance and Mitigating Risks
Measure Profitability Control Costs Define Benchmarks and KPIs Link Strategy with Execution Handle Mergers & Acquisitions
Control Processes Efficiently Manage Risks Support Audits Decrease Cost of Finance
Accelerate Financial Close Organize Finance Operations
Efficiently across the Enterprise
Today’s business challenges in Financials What are the responsibilities of the CFO?
Denmark I Iceland I Sweden I UK I www.applicon.com
Financial Supply Chain Management and Treasury Applications from SAP
Issue invoice
Forecast cash
Finance working capital
Resolve disputes
Collect cash
Check credit- worthiness
Settle & pay Reconcile
Electronic bill presentment and payment
Dispute management
Collections management
Credit management
Cash and liquidity management
Treasury and risk management
In-house cash Bank Communication Management
Denmark I Iceland I Sweden I UK I www.applicon.com
Treasury Applications from SAP
SAP Treasury and Risk Management
Risk Analyzers
Transaction Manager
SAP Bank Communication Management
SAP Cash and Liquidity Management
SAP In-House Cash
Credit Risk Market Risk Portfolio Analyzer
Hedge Mgt Exposure Mgt
MM FX SEC COM DER DEB
Manage Financial Risk
Manage Financial Instruments
Manage Cash and Liquidity
Denmark I Iceland I Sweden I UK I www.applicon.com
SAP In-House Cash Core Functions and Benefits
Benefits
Reduce physical cash transfers by internal netting
Reduce number of bank accounts
Save bank fees for bank accounts and payment transactions
Avoid cost for external cross-border payments
Gain more interest keeping cash within the group
Reduce hedging deals concentrating exposure within the group
SAP In-House Cash
Central dispatching, routing, and processing of payments
Creation of provided account statements to account holders
Delivery of financial status to cash management
Tracking of payment status
Denmark I Iceland I Sweden I UK I www.applicon.com
SAP Cash and Liquidity Management Core Functions and Benefits
Benefits
Single, reconciled financial data source
Enables centralized treasury organization
Flexible planning framework
Natively integrated into SAP environment
Adaptable to your organization‘s requirements
Core SAP ERP component
SAP Cash Management
Daily cash position
Liquidity forecast
Electronic bank statements
Currency exposure
Disposition
Liquidity Analyzer as part of SAP ERP
Mid- and long-term liquidity planning
Decentralized access for data entry
Central system for liquidity reporting
SAP Liquidity Planner
Denmark I Iceland I Sweden I UK I www.applicon.com
SAP Bank Communication Management Core Functions and Benefits
Benefits
Improve control over payments
Full auditability ensures compliance
Real-time visibility of payment cycle
Reduces time and cost of bank reconciliations
Lower bank integration costs
Complete transparency of payment status
SAP Bank Communication Management
Batching of payments
Payment approval rules
Digital signature
Payment Monitor
Payment workflow
Integration to SWIFTNet
Denmark I Iceland I Sweden I UK I www.applicon.com
SAP Treasury and Risk Management Core Functions and Benefits
Benefits
Optimization of hedging and risk management processes through exposure management for operational FX and commodity exposures
Increase transparency by having operational and treasury exposures evaluated for market risk
Comply with legal regulations and compliance requirements
SAP Transaction Manager
Support of standard financial instruments
Integrated and automated straight-through processing
State of the art risk management capabilities
Credit Risk Analyzer
Market Risk Analyzer
Portfolio Analyzer
SAP Risk Analyzers
Denmark I Iceland I Sweden I UK I www.applicon.com
Fyrirlestrarheiti
1 december 2009 I 11 I
I. Treasury Applications from SAP, an overview II. Transaction Manager, integration to FI/CO and CM III. Demo
09-12-01 I 11 I
Denmark I Iceland I Sweden I UK I www.applicon.com
SAP Treasury and Risk Management Portfolio Analyzer
Yield calculations: Money weighted, Time weighted, Modified Dietz method
Credit Risk Analyzer
Limit management: Limits freely definable, Multidimensional limits
Utilization: Formulas, Credit risk, Settlement risk
Market Risk Analyzer Price calculator: NPV, Prices, Sensitivities
Value at Risk: Varians/covarians, Historic, Monte Carlo
Simulate rates: What-if scenario, Relative, Absolute
Spot Forward Swaps Options Futures
FX Cap Floor FRA Swaps Options Futures
Derivat. Securities Bonds Warrants Stocks Certificates Repo Sec. lending
Debt Bonds Bank loans Commercial paper Facilities
MM Fixed deposits Deposits at notice CP Repo
Transaction Manager Front office: Position and deal reporting, Deal capture, Exercise, Dealer slip, Valuation tools, On-line limit check
Back office: Standing instructions, Correspondence, Netting, Settlement, Rate fixing (interest, FX), References, Corporate actions, Process monitors
Accounting: Flexible accounting determination, Accounting according to many international accounting standards – in parallel, Hedge accounting
Reporting
Reporting tools: SAP Query, ABAP List, and other 3rd party providers, BI
Middle office: Risk exposure, Controlling, Compliance,
Management reports: Positions, Performance, Ratios, Compliance
Ad hoc reporting: Point & click, Unified databases, Position, P&L, Period, CashFlow
Results database: Portfolio Hierarchy, Drill-down, Historic results
Data export: Excel, Flat files, BI
Denmark I Iceland I Sweden I UK I www.applicon.com
Postings Payment activities Reversals Accruals/deferrals Valuation
• Create order/contract • Exercise/expiration • Give notice • Rollovers • Exercise rights
User authorization User defined status codes
Limit management
Release
Settlement/Control Interest rate adjustment Netting References Confirmation letters Securities account transfers Corporate actions
Trading Back office Accounting
Transaction Management Process
Denmark I Iceland I Sweden I UK I www.applicon.com
Concept of Cash Management
Cash Position Liquidity Forecast
Bank accounts in currency: Account 1 : Account n Total
Payment transactions in transit: - incoming - outgoing
Financial investments and borrowings
Subledgers: - A/R - A/P - Purchase orders - Orders
Trading Cash
management decision
Market information
Denmark I Iceland I Sweden I UK I www.applicon.com
Valuation of Financial Transactions
Different legal frameworks use different principles for the valuation of Financial Transactions. This leads to different requirements such as:
Valuation of book value using various methods such as • Lowest value • Mark-to-Market • Amortized Cost
Different approach to transaction costs • Costs are included in the book value • Costs are posted directly to profit and loss account
Valuation of gain and losses when selling from the position such as • Average Cost • Lott accounting principles for example LIFO, FIFO
Special treatment for hedging transactions Many companies needs to report according to several frameworks in
parallel
Denmark I Iceland I Sweden I UK I www.applicon.com
Integration between TRM and GL
In SAP Treasury and Risk Management you use a separate Valuation Area for each accounting principle • The results of the valuations are calculated separately for each valuation area using
a full approach
Each Valuation Area is assigned to a GL Accounting Principle • The valuation area “001” should be assigned to the leading ledger in GL • When TRM generates postings with payment information it ensures that the payment
is only made once
It is possible to have a valuation area in TRM that does not post to the GL • The results of the valuations are then only available in TRM and meant for internal
treasury reporting
Denmark I Iceland I Sweden I UK I www.applicon.com
Fixed-term deposit 1 month 3.5% Acct assignment ref. DB000001
Deposit
Final repayment
D 1,000,000
C
1,000,000
Interest earned 273100
Nominal interest
D C 3,750
Bank clearing acct 113100
FT deposit Nominal int. Final repayment
D C 1,000,000
3,750
1,000,000
Debit Bal.sht Credit Bank
Debit Bank Credit Bal.sht
Debit Bank Credit Int. earned
Flow type
Posting details
1100 -
1120 +
1200 +
Sept 1st 1100 - Fixed-term deposit 1,000,000 Oct 1st 1120 + Final repayment 1,000,000 Oct 1st 1200 + Nominal interest 3,750 Balance sheet account acc. to
account assignment reference
Posting: Account Determination
Fxd-term dep. acct 113113
Denmark I Iceland I Sweden I UK I www.applicon.com
TRM Transaction Manager
Treasury Ledger
Integration between TRM and GL using Parallel Accounts
General Ledger
Number range 1 Position 1311044
…
Costs 1118500
Unreal. 1112200
90 1
Bank Acc. 1220155
91
3 3
Bond purchase
Valuation
Number range 2 Position 2311044
…
Costs 2118500
Unreal. 2112200
91
Dummy Bank 2299999
91
1 1
Bond purchase
Valuation
Valuation Area 001 Valuation rules for bonds: Post fees to P/L Mark-to-Market valuation
Valuation Area 002 Valuation rules for bonds: Activate fees Amortize costs
Valuation Area 003 Valuation rules for bonds: Post fees to P/L Lowest value principle
Valuation Area 004 Valuation rules for bonds: Post fees to P/L Mark-to-Market valuation
Number range 3 Position 3311044
…
Costs 3118500
Unreal. 3112200
Dummy Bank 3299999
90 1 91 Bond purchase
Valuation
Example: Purchase of new zero interest bond at the cost of 90€ with a fee of 1€ At year end the MtM value of the bond is 93€, amortized cost is 1€ at year end
Doc. # 1
Doc. # 4
Doc. # 2
Doc. # 5
Doc. # 3
Transaction Management
Purchase of new bond at the cost of 90€ with a fee of 1€
Denmark I Iceland I Sweden I UK I www.applicon.com
TRM Transaction Manager
Treasury Ledger
Integration between TRM and GL using Parallel Ledgers
General Ledger
Ledger 1 Position 311044
…
Costs 118500
Unreal. 112200
90 1
Bank Acc. 220155
91
3 3
Bond purchase
Valuation
Ledger 2 Position 311044
…
Costs 118500
Unreal. 112200
91
Dummy Bank 299999
91
1 1
Bond purchase
Valuation
Valuation Area 001 Valuation rules for bonds: Post fees to P/L Mark-to-Market valuation
Valuation Area 002 Valuation rules for bonds: Activate fees Amortize costs
Valuation Area 003 Valuation rules for bonds: Post fees to P/L Lowest value principle
Valuation Area 004 Valuation rules for bonds: Post fees to P/L Mark-to-Market valuation
Ledger 3 Position 311044
…
Costs 118500
Unreal. 112200
Dummy Bank 299999
90 1 91 Bond purchase
Valuation
Example: Purchase of new zero interest bond at the cost of 90€ with a fee of 1€ At year end the MtM value of the bond is 93€, amortized cost is 1€ at year end
Doc. # 1
Doc. # 4
Doc. # 2
Doc. # 5
Doc. # 3
Transaction Management
Purchase of new bond at the cost of 90€ with a fee of 1€
Denmark I Iceland I Sweden I UK I www.applicon.com
Fyrirlestrarheiti
1 december 2009 I 20 I
I. Treasury Applications from SAP, an overview II. Transaction Manager, integration to FI/CO and CM III. Demo
09-12-01 I 20 I
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