IS 604: Contemporary Issues in IS Banking Enterprise Systems

Chair of Information Systems IV (ERIS)

Institute for Enterprise Systems (InES)

IS 604: Contemporary Issues in IS

Banking Enterprise Systems

Prof. Dr. Alexander Mädche

Chair of Information Systems IV

Institute for Enterprise Systems

Lecture

supported by:

Agenda – Session III

IS 604 Banking Enterprise Systems

2

Agenda

1 B2tec Company Overview

2 Introduction to SAP Banking Services

3 SAP Business Partner

4 Contract Management

5 Product Configuration

6 Financial Conditions & Pricing

… …

11 Accounting Integration

12 Bank Statement

3 Accounting Integration

Co

rre

spo

nd

en

ce

Pe

riod

ic

Pro

cessin

g

Double,

Triple,

Quadruple

Control

Archiving

Product Configuration

Accounting

Financial Conditions/Pricing

Contract Management

Financial

Customer

Information

Management

Reporting

Collateral

Insurance

Order Management/

Business Operation

Posting Control Processing/

Exception Handling

Open Item Management

Combined Settlement

Payment Distribution & Monitoring

Master Contract Management

Posting Lock

Management Settlement

Currency

Conversion

Cash Flow Item Management/

Payment Services

Billing and Invoicing Payment Distribution

Pooling

Credit Facilities


Accounting Integration 4 F

ron

t-O

ffic

e

Mid

-Off

ice

Ba

ck-O

ffic

e

Contact Advisory Offer Deal Mainte

nance

Create BP

Create

Account

Maintain

BP

Maintain

Account

Settle

Account

Create

Product Maintain

Product

Maintain

Conditions

Create

Conditions Assign

Product

Define Ind.

Conditions

Manage

Payments

Maintain Product

Pricing List

Create Product

Pricing List

Account

Settlement

Posting

Control

Business

Processes

Business

Events

Business

Transactions

Book on internal

accounts Reporting

Account

Closure

Current account life-cycle

Order

Management

Payments


Accounting Integration


5

Introduce solutions from SAP for accounting

Explain the difference between direct accounting

integration to General Ledger and accounting

integration through Bank Analyzer

Understand the concept of Central Reconciliation

Hub

GOALS OF THIS UNIT

Agenda: Accounting Integration 6

Agenda

1 Concepts of Integration into Accounting

2 Integration via SAP Bank Analyzer

3 Central Reconciliation Hub


Concepts of Integration into Accounting: Overview

IS 540 – Management of Enterprise Systems

7

In Transactional Banking systems a bank performs its operational activities as cash

management, accounts management etc.. To control its operations a bank needs

Analytical Banking systems, where it manages risks, profitability, regulation-related

issues and performs external and internal accounting of transactions. Accounting is

the processing and communication (reporting) of financial information of an economic

entity.

SAP provides the module Financial Accounting (FI) within SAP ERP to report

business transactions and to comply with external and internal reporting

requirements. SAP FI is delivered with sub-modules, one important module is SAP

General Ledger (GL). SAP GL records business transactions for external accounting

in accordance with specified reporting standards such as US GAAP and IFRS.

SAP Transactional Banking SAP Analytical Banking

Account

Management (AM) Accounting (FI) Bank Analyzer (BA)

Concepts of Integration into Accounting: Overview 8

The conventional transfer of operational data from account management systems to general

ledger applications (direct GL-Transfer) does not adequately meet these higher reporting

standards

Banking Services from SAP offers a new approach for financial accounting and reporting

standards. The integration of operational and accounting systems using SAP Bank Analyzer

ensures adequate analytical and financial reporting

Continuous processing of transactional data (such as payment items, interests and charges,

accruals and deferrals) and balance information from operational system to SAP Bank

Analyzer, Financial Accounting and Business Warehouse (BW) ensures that financial and

analytical reporting are complete and correct.

Extended customer requirements

regarding risk and return management

Additional legal restrictions

Increased importance and quality

requirements for internal and external

reporting


Concepts of Integration into Accounting 9

Conventional direct GL-Transfer

Data Aggregation

1. Payment Items

2. Interests

3. Charges

Accrual

Preparation of GL-

Docs

GL-Account

Determination

Reconciliation

Financial

Accounting

Posting GL-

documents to

Balance Sheet

and Profit and

Loss Accounts

Communication via RFC (idoc/ALE)

Accounting Mng.

System

= Sub-ledger

General

Ledger



Integration via SAP Bank Analyzer (SAP BA)

SAP DM/LM

Communication via

messages for

master and

transaction data

SAP Bank Analyzer

Data reflection

Data aggregation

Accruals / Deferrals

Results aggregation

Preparation of GL-

Documents

Balance Processing

Financial

Accounting

Posting of GL-

Documents

Central Reconciliation HUB

Account Mgt. System Sub-ledger General Ledger

BW (fine granular Sub ledger Reporting on a regular basis )

Communication via Enterprise Services



Motivation of Integration via Bank Analyzer The standard GL transfer function is no longer sufficient to meet legal and business reporting

requirements

Banking services from SAP fulfills the IFRS and Multi GAAP reporting requirements, and provides

analytical and reporting capabilities on demand in SAP Bank Analyzer

Banking services from SAP with enhanced loan functionalities require:

Integration of operational system data into Financial Accounting via SAP Bank Analyzer

Additional features in accounting integration such as:

Multi currency accounting

Fair value

NPV / amortized costs

Valuation

Accruals and Deferrals

Other features depending on the business and legal requirements

Functional

Aspects

Accruals Deferrals IFRS and

multi

GAAP

Valuations Aggregation Multi

Currency

Accounting

Cash Flow

Statement

Maturity

Grouping

Direct GL Transfer X X

Integration via

Analytical Systems X X X X X X X X



Agenda





Integration via SAP Bank Analyzer: Architecture 13

SAP Loans

Management

Master Data /

Transactional Data

SAP Deposit

Management

Master Data /

Transactional Data

Other Banking

Systems

Inflows / Outflows

Operational

Business

Support

SAP Bank Analyzer

(Sub-ledger for banking)

Non-banking

Sub-ledger

BW General Ledger

GL Acct.

Determination Valuation Classification

Flow Data Valuation Grouping

Banking Services from SAP


The integration scenario for Deposits- and Loans Management is part of BaS from SAP 7.0. It covers the end-

to-end scenario that begins with operational banking, is followed by analytical banking and ERP General

Ledger, and ends with Reconciliation and Reporting in SAP NetWeaver Business Warehouse (formerly SAP

NetWeaver Business Intelligence).

Banking Services from SAP 8.0

Integration via SAP Bank Analyzer: Architecture 14

SAP Loans

Management

Master Data /

Transactional Data

SAP Deposit

Management

Master Data /

Transactional Data

SAP Bank Analyzer

BW General Ledger

Result Data Layer (RDL)

Process and Methods Layer (PML)

Source Data Layer (SDL)

Analytics Layer

General Ledger Connector Balance Processing


Integration via SAP Bank Analyzer: Communication 15

Banking Services from SAP communicates using interfaces. The interface sends

IX information messages (XML messages sent using a proxy), which are

managed by SAP NetWeaver Process Integration (PI).

The IX Services are carried out by account managing systems (such as SAP FS-

AM and Loans), which use reports to distribute master and flow data to Analytical

Banking (SAP Bank Analyzer).

To ensure that data is transported to Bank Analyzer correctly and completely, you

can use a Monitor for Processed XML Messages to manage the message

processing.

Outflow data that is not successfully distributed is stored in the Post Processing

Office (PPO) in the Operational Banking application.

Inflow data that is not successfully distributed is stored in the Post Processing

Office (PPO) in the Analytical Banking application.

The General Ledger Connector in the analytics layer in Bank Analyzer

aggregates the sub-ledger documents. It generates compressed results and

sends them to the general ledger using End-of-Day Processing.


Integration via SAP Bank Analyzer: Communication 16

SAP DM/LM

Communication via

messages for

master and

transaction data

SAP Bank Analyzer

Data reflection

Data aggregation

Accruals / Deferrals

Results aggregation

Preparation of GL-

Documents

Balance Processing

Financial

Accounting

Posting of GL-

Documents

Central Reconciliation HUN

Account Mgt. System Sub-ledger General Ledger

BW (fine granular Sub-ledger Reporting on a regular basis )

Communication via Enterprise Services

Recommended option


Integration via SAP BA: Accounting Process 17

Foundation:

Market Data

Volatilities

Interest

rates

Market

Prices

Exchange

rates

Analytics Layer

Processes and Methods Layer

Source Data Layer

Results Data Layer

Contract

Master Data Account

Master Data Transactional

Data

Classifications Valuations Outflows /

Inflows • GL Account

Derivation

Financial Accounting:

• Fair Value

• NPV / Amortized costs

• Accruals / Deferrals

• Multi Currency

• Nominal Accounting

• Accruals / Deferrals

Key Data Results Flow Data Results …

General Ledger Connector Balance Processing

• Aggregation of flow results

• Daily Reporting to General

Ledger accounts

• Account balances by period, balances to date, daily

balances

• Periodic fine-granular sub-ledger reporting on

single transaction level

GL BI


Integration via SAP BA: Accounting Process 18



Agenda





Central Reconciliation Hub 20

The importance of reconciliation within banking is explained by the existing requirement to

ensure the correctness and consistency of business data and provide proof of correctness

for governmental regulations and for bank monitoring and auditing.

From the IT system landscape perspective reconciliation means to ensure end-to-end data

quality. Solution for this requirement from is – Central Reconciliation Hub.

The Central Reconciliation Hub is an application-independent hub for reconciling data across

various components

Reconciliation across the components of the IOA scenario ensures that all data from a

sending component are stored by the recipient

In particular, it provides for the reconciliation requirements for the process components of

Operational & Execution and Analytics, and between Analytics and the GL

It identifies mismatches, locates them, and triggers actions to resolve any data

inconsistencies found

Supports daily processing of high data volumes


Central Reconciliation Hub: Example Architecture 21


Accounting Integration 22

Solution for accounting from SAP is Financial Accounting

(FI) module that enables reporting of business

transactions and compliance with external and internal

reporting requirements

SAP Bank Analyzer provides sub-ledger functionality.

The advantage of accounting integration via Bank

Analyzer over direct GL transfer is are additional

possibilities, such as: Calculation of deferrals

Support of IFRS and Multi-GAAP accounting standards

Valuations

Multi-currency reporting

Cash flow statement

The Central Reconciliation Hub is an application-

independent hub for reconciling data across various

banking components.
