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SAP BI concepts, technology, and best practices

Balance-Sheet and Cash-Flow

Planning with SAP NetWeaver BI

by Rajasekhar Gummapadu, Manager, Deloitte Consulting LLP

Balance-sheet and cash-flow planning helps you get your cash picture under control. Learn how to

design a solid, flexible SAP NetWeaver BI data model for balance-sheet planning. Examine the five key

steps required to create balance-sheet planning and cash-flow planning.

October 2008

Volume 6 | Number 9

>>inside

How to Create a

Generic Retractor

in Integrated Planning

Although global and larger organizations are

interested in knowing their consolidated short-

term and long-term cash positions (based on

their operational income statement and capital

planning), it’s even more important for SAP

NetWeaver BI planning resources to know

these positions. They need to understand how

to implement balance-sheet and cash-flow

planning by using SAP NetWeaver BI func-

tionality. The main objective of building the

balance-sheet planning application is to gener-

ate a long-term cash-flow plan. You can use

SAP NetWeaver BI Integrated Planning to

implement a global, integrated planning solu-

tion for balance-sheet and cash-flow planning.

>> Key Concept

Balance-sheet and cash-flow planning

using SAP NetWeaver BI Integrated

Planning enable you to look to your

company’s financial future, such as key

financial ratios, accounts payable,

accounts receivable, sales projections

and costs, future earnings, and short-

term and long-term cash positions.

These financial projections aren’t just

for global organizations anymore.

Quick Tip

Avoid the SID Generation

Error While Activating

Data in a DSO

SAP NetWeaver BI 7.0

Improve Query

Performance and

Visibility with BI Statistics

It’s common to implement income statement planning to monitor operational efficiency and to

project an organization’s future earnings. However, in today’s global and more competitive

business environment, you also need to know the effect that this operational plan will have on

future balance sheet items and cash flow.

Why would you want to implement balance-sheet and cash-flow planning? For any of a variety

of reasons including: projecting your key financial ratios; estimating your accounts payable and

accounts receivable positions based on sales projections and cost of sales; estimating the inter-

est income and expenses for the planning period and seeing how they will affect your future

earnings; determining the cash-flow structure to verify the organization’s borrowing and paying

capability; effectively managing your cash; maximizing the returns on your short-term cash

investments; and effectively managing your balance sheet.

These benefits aren’t free, however. You must meet some business and technical challenges to

achieve this implementation. The biggest challenge is simulating the double-entry system in the

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>>continued on page 4

From account To account Rule — January

501010 201020 0.5 Table 1 Example of an account determination rule

>>continued from cover

planning solution. Transaction processing

in SAP Financial Accounting (FI) and

SAP Strategic Enterprise Management

Business Consolidation (SAP SEM-BCS)

uses the double-entry method when

posting journal entries. Income statement

planning uses the single-entry concept.

For example, to increase the expense

amount, you adjust the amount for any

expense account without specifying

whether to pay that expense increase in

cash or credit.

Another challenge is creating an iterative

balancing functionality to calculate the

balance sheet assets and liabilities. Like

account determination rules that handle

the double-entry system for credit transac-

tions, cash balancing evens out the assets

and liabilities and then posts the differ-

ence to the cash account, assuming that all

other transactions are cash.

Other challenges include the assumptions

used to calculate accounts payable and

accounts receivable, a complex payment

structure for the interest payment on each

debt instrument, and the establishment of

other calculations, such as interest, divi-

dends, and re-classifying short-term

payments on long-term debt to current

liabilities.

The Data Model

Since no robust standard content is avail-

able for balance-sheet and cash-flow

planning, it’s important to design a solid,

flexible, SAP NetWeaver BI data model

for balance-sheet planning. Here are some

things for you to consider while designing

the data model:

• Align the data model with the SAP

SEM-BCS data model for real-time

reporting

• Include objects such as version (0BCS_

VERSION) and the reporting value

type (0VTYPE) for flexibility in multi-

ple scenarios and versions of planning

data

• Use the navigational attributes of reporting

instead of including the InfoObjects in an

InfoProvider (for example, region details)

• Include the balance-sheet and cash-flow

planning InfoProvider in SAP SEM-

BCS to give you multi-provider real-

time reporting with actual data

• Partition the balance-sheet and cash-

flow planning InfoProvider for faster

performance in the planning application.

To achieve the functionality you need, you

must create a real-time InfoProvider to

host the data for balance-sheet-planning

and cash-flow planning. Depending on

your requirements, you might also need to

create some custom InfoObjects, such as

ZFP_BSML and ZCS_ITEM. Since

these objects won’t be available in the

source systems, you must maintain master

data for them in the SAP NetWeaver BI

system. The following points further

explain the custom objects used in the

model:

• Balance sheet manual line items (ZFP_

BSML): In balance-sheet planning, you

need to plan one level below the con-

solidated item (0CS_ITEM) so you can

set up multiple lines for each account

• Reference consolidated item (ZCS_

ITEM): This InfoObject establishes the

account determination rules that map

income statement accounts to balance

sheet accounts

• Timing fiscal year/period (ZFP_

CTFIP): This is the InfoObject that is

the reference for the fiscal year/period

(0FISCPER). You use it to establish

timing rules for paying accrued interest

on departmental instruments.

• Cash-flow item (ZCASHITEM): Cash-

flow accounts are the solution for cash-

flow planning. This item holds the master

data for all of the different cash-flow

categories.

• Planning rates (ZFP_RATE): This is the

key figure that is used to maintain such

planning rates as interest rates, swap rates,

and account determination multipliers

In addition to these custom objects, the fol-

lowing InfoObjects can be helpful:

ZPLANYEAR provides the capability to

plan multiple years; ZROUND lets you

create scenario capability; and 0VERSION

enables you to keep track of budget, fore-

cast, and prior forecast data.

The Five Key Steps

Now that you’re aware of the data model,

I will go over the five key steps required

to create balance-sheet planning and cash-

flow planning:

Step 1. Integration with SAP SEM-BCS.

This step extracts the opening balances for

SAP SEM-BCS. First, you need to deter-

mine the integration existing between the

balance-sheet planning application and SAP

SEM-BCS to get your opening balances. I

recommend that you physically move your

opening balances to the balance-sheet and

cash-flow planning InfoProvider because

you use them extensively in the functions

that help you enhance performance. To do

this, you create a simple copy-planning

function in the Planning Modeler of SAP

NetWeaver BI Integrated Planning.

Step 2. Account determination rules.

This step finalizes the account determina-

tion rules that map the balance sheet

accounts to the profit and loss accounts. It

also sets up the planning function that cal-

culates the balance sheet amounts to

simulate the double-entry system. Using the

account determination rules, you estimate

© 2008 BI EXPERT Reproduction prohibited. All rights reserved.

October 2008 • www.SAPexperts.com

Figure 1 Balance sheet rules

DATA FITM TYPE 0CS_ITEM.

DATA TITM TYPE ZCS_ITEM.

DATA XITM TYPE 0CS_ITEM.

DATA YITM TYPE ZCS_ITEM.

DATA RATE TYPE F.

DATA AMT TYPE F.

DATA REG TYPE ZREGION.

DATA RREG TYPE ZREGION.

DATA MADJ TYPE ZFP_BSML.

DATA RMADJ TYPE ZFP_BSML.

DATA SLICE TYPE ZSLICE.

DATA BSDT TYPE ZFP_BSDT.

DATA RFTM TYPE ZCS_ITEM.

FOREACH FITM,TITM,MADJ.

XITM = TITM.

YITM = FITM.

RATE = {ZPL_RATE, FITM, TITM, 200000,MADJ,#}.

IF RATE <> 0.

FOREACH RMADJ, SLICE,BSDT,RFTM IN REFDATA.

AMT = AMT + {0CS_TRN_LC, FITM,RFTM,BSDT,RMADJ,SL

ICE}.

ENDFOR.

{0CS_TRN_LC, XITM, YITM, 200000,MADJ,1} = AMT* RATE.

ENDIF.

AMT = 0.

RATE = 0.

ENDFOR.

the balances for the balance sheet accounts. For example, if the fuel expenses (profit

and loss account: 501010) are $10,000 for

the month of January, half of it ($5,000) is

on credit (credit account: 201020), and the

other half ($5,000) is paid in cash, then

the account determination rule is as shown

in Table 1.

This model uses the Balance Sheet Rules

input-ready report, as shown in Figure 1,

to maintain the account determination

rules using the InfoObjects, the consoli-

dated item (0CS_ITEM) as To Account,

the reference item (ZCS_ITEM) as From

Account, and the ZFP_RATE key figure

to partially or fully allocate this amount to

one or more balance sheet accounts. These

rules map the income statement accounts

to the balance sheet accounts to create

the double-entry system in the planning

environment for credit and accrued trans-

actions. Using this methodology, you can

also allocate the amounts on one balance

sheet to another balance sheet account (e.

g., by reducing the depreciation of the

property, plant, and equipment, and in-

creasing the depreciation reserve section

by the same amount).

The planning function in Figure 2 reads

the income statement planning informa- Figure 2 Code for the planning function

tion to create the balance sheet amounts

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Account Reference account Amount

201020 501010 5000 Table 2 Example of posted record with account determination rules function

based on the account determination rules.

You create this planning function using

the formula extension functionality in

SAP NetWeaver BI Integrated Planning.

In the example in Table 1, the rule func-

tion reads the profit and loss account

information for account 501010, which is

$10,000, and multiplies it by 0.5 from the

rule number for January. Then, the rule

function posts the calculated amount to

balance sheet account 201020. An

example of a posted record is shown in

Table 2.

Step 3. Establish cash balancing. This

step finalizes the planning calculations for

interest, dividends, accounts receivable,

accounts payable, and the cash-balancing

functions. The basic accounting rule

for the balance sheet is that assets and

liabilities must balance. You can set up

transaction systems to perform this bal-

ancing automatically, but during planning,

you have to manually estimate the accrued

balances based on income statement activ-

ity, assuming that the activity used cash.

In other words, you need to balance your

assets and liabilities and then post the dif-

ference to the cash account.

• Balance your assets and liabilities and

post the difference to cash

• Verify whether your minimum cash

requirements are met, and then borrow

if you have a deficit or move cash to

investment accounts if you have an

excess

• Calculate your interest expense for

additional loans or your interest income

on any new investments

• Calculate your retained earnings and

adjust your balance-sheet planning

Cash balancing is an iterative process. It

needs to run multiple times to equalize the

assets and liabilities on the balance sheet

for all the planning periods. For some

examples of the formula for retained earn-

ings calculation, see Figure 3, which was

created using the formula extension func-

tionality in SAP NetWeaver BI Integrated

Planning.

In addition to the cash-balancing func-

tions, you also need to define the

functions for accounts receivable,

accounts payable, interest, dividends, or

any other specific calculations that your

organization might want to incorporate

into its balance sheet planning. The

formula extension functionality in SAP

NetWeaver BI Integrated Planning is very

flexible, allowing you to create these

kinds of calculations. Figure 4 shows

sample formula code for the calculation of

the accounts receivable amount based on

sales and the days-sales-outstanding

assumptions.

Step 4. Cash-flow rules layout and cal-

culation function. This step finalizes the

cash-flow rules layout and the calculation

functions. Since generating long-term

cash-flow planning is the key reason for

using a balance-sheet planning applica-

tion, cash-flow planning requires going

through the following stages.

First, you define the relevant master data

for ZCASHITEM, including its hierar-

chy. ZCASHITEM plays an important

role in building cash-flow planning

For example, in the account determination

rule section, the balance of $5,000 paid in

cash creates the difference between the

assets and the liabilities on the balance

sheet. When the cash-balancing function

executes, it makes the adjustment in the

cash account.

However, in most complex organizations

it’s not that simple because cash balances

have many restrictions. For example, if you

assume that an organization wants to have a

minimum cash balance of $5 million on

hand at all times and its cash balance goes

below this amount, you need to borrow

from credit lines. Conversely, if the

company accumlates excessive cash beyond

$5 million, then the system should invest

that cash in high interest-yielding sources.

Cash-balancing involves the following

DATA CSTM TYPE 0CS_ITEM.

DATA BSML TYPE ZFP_BSML.

DATA SUM TYPE F.

DATA SUM1 TYPE F. FOREACH

CSTM,BSML.

SUM={0CS_TRN_LC,CSTM,BSML}.

IF CSTM >= 0000300000 AND CSTM <= 0000899999.

SUM1=SUM1+SUM.

ENDIF.

ENDFOR.

{0CS_TRN_LC,0000251200,100009}=SUM1

activities: Figure 3 Example formulas for retained earnings calculations

© 2008 BI EXPERT Reproduction prohibited. All rights reserved.

October 2008 • www.SAPexperts.com

DATA CSTM TYPE 0CS_ITEM.

DATA BSDT TYPE ZFP_BSDT.

DATA SUM TYPE F.

DATA FYP TYPE 0FISCPER.

DATA MD TYPE F.

DATA AMT TYPE F.

DATA DSO TYPE F.

DATA BSML TYPE ZFP_BSML.

DATA PER TYPE 0FISCPER3.

DATA PC TYPE 0PROFIT_CTR.

FOREACH FYP.

PER = SUBSTR(FYP,4,3).

IF PER <> ‘014’.

SUM=0.

FOREACH CSTM,BSDT,BSML,PC.

IF CSTM >= 0000300000 AND CSTM <= 0000303999.

AMT = {0CS_TRN_LC,CSTM,FYP,PC,BSDT,BSML}.

SUM = SUM + AMT.

ENDIF.

ENDFOR.

DSO = {ZPL_RATE,#,FYP,#,100005,#}.

MD = ATRV (0NUMDAY,FYP).

*MESSAGE W001 (/MSG0) WITH SUM FYP MD.

{ZFP_BLNLC,0000121100,FYP,#,#,100010} =((SUM/MD)*DSO*-1).

ENDIF.

ENDFOR.

because it hosts master data for the cash

items required to present cash flow.

Some examples of cash-flow items are

depreciation net profit, property, plant,

and equipment.

After you create all of the relevant cash

items in master data, you establish the

cash-flow hierarchy, which depicts the

organization’s cash-flow structure. Look

at the example of hierarchy with master

data in Figure 5. You can create the hier-

archy using transaction RSH1 (edit

hierarchy initial screen) in SAP

NetWeaver BI.

Next, define the cash-flow rules (Figure

6 on the next page). These rules map the

balance sheet accounts to the cash-flow

items, establishing a relationship be-

tween the two. Therefore, changes in a

particular balance sheet item also repre-

sent the cash effect on the cash-flow

item to which it is mapped. These cash-

flow rules are maintained in the system

using the input-ready report shown in

Figure 6. This report is created using

SAP NetWeaver BI Integrated Planning.

Then, you create the planning function

to generate the cash-flow amount. This

cash-flow rules function calculates the

cash amount. You can use the formula

extension function in SAP NetWeaver

BI Integrated Planning to generate the

cash flow (Figure 7 on the next page).

Figure

Figure 5

Accounts receivable calculation

Cash-flow hierarchy on ZCASHITEM InfoObject

This function calculates the change in

the balance sheet account for a particu-

lar fiscal year period and then posts it to

the cash item to which it is mapped.

Next, you need to build the cash-flow

report to present the cash flow. The

cash-flow report is created using

ZCASHITEM and the cash-flow hierar-

chy in BEx Query Designer (Figure 8

on page 9). You can create various ver-

sions of this report to display the cash

flow by year, month, and quarter.

Step 5. Create an integrated applica-

tion. The final step is to create an

>>continued on page 9

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Figure Cash-flow rules

DATA XITM TYPE 0CS_ITEM.

DATA CITM TYPE ZCASHITEM.

DATA RATE TYPE F.

DATA AMT TYPE F.

DATA MADJ TYPE ZFP_BSML.

DATA SLICE TYPE ZSLICE.

DATA BSDT TYPE ZFP_BSDT.

DATA MADJ1 TYPE ZFP_BSML.

FOREACH FITM, CITM, MADJ.

RATE = {ZPL_RATE, FITM, CITM, 999997,MADJ,#}.

IF RATE <> 0.

IF MADJ <> #.

FOREACH SLICE,BSDT IN REFDATA.

AMT = AMT + {0CS_TRN_LC, FITM,#,BSDT,MADJ,SLICE}.

ENDFOR.

{0CS_TRN_LC, FITM, CITM, 999997,MADJ,1} = AMT* RATE * -1.

AMT = 0.

ENDIF.

RATE = 0.

ENDFOR.

Figure Cash-flow amount calculation planning function

8 © 2008 BI EXPERT Reproduction prohibited. All rights reserved.

October 2008 • www.SAPexperts.com

Figure 8 Cash-flow report

>>continued from page 7

integrated application using the input-

ready report-planning functions that I

discussed in the earlier steps. SAP

NetWeaver BI Integrated Planning has

two ways of putting together the planning

application: a Microsoft Excel-based

application using BEx Analyzer, or a

Web application using the BEx Web

Application Designer. As you saw in

Figures 1, 6, and 8, you can use various

standard Web items such as tab pages, drop-

down boxes, and button groups in BEx

Web Application Designer to create the

Web-based application following

the requirements of your user group

and business logic. You use the work-

book functionality in BEx Analyzer to

create the Excel-based planning

applications. You can integrate these

applications with SAP NetWeaver Portal

to provide role-based access to the

users. It is very important to consider

the users’ requirements and skill sets

before you decide which type of appli-

cation (Excel- or Web-based) is right

for your balance-sheet and cash-flow

planning system. n

Rajasekhar Gummapadu is an SAP practitioner with more than eight years of cross-functional experience, more than half of which

is focused in SAP implementation. He has strong technology and functional experience with SAP ERP solutions in the area of

Business Planning and Simulation (BPS), SAP NetWeaver BI, SAP NetWeaver BI Integrated Planning, Business Consolidation

(SAP SEM-BCS), Business Planning and Consolidation (SAP BPC) and FI/CO. Raj serves as the functional and technical lead in

the area of financial planning and reporting-related implementations. He has successfully completed multiple implementations as

project manager by using his knowledge to bridge the gaps between the business and IT goals. Raj is a qualified Chartered

Accountant (India) and a Certified Public Accountant (USA). You may contact him via email at raj_g@techwavenet.com.

For group rates on electronic access, call 1-781-751-8799