Treasury Overview

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Scope of Financial supply chain management• Financial supply chain management

(FSCM) is an integrated approach to provide better visibility and control over all cash-related processes.

• Better predictability of cash flow,• Reduction of Working capital.• Reduction of operating expenses and end-

to-end integration of business processes.

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Financial supply chain management

• Process flowCredit management

Issue invoice

Electronic bill presentation

Forecast cash

Cash & liquidity management

Finance working capital

Dispute management

Resolve dispute

Collect Cash

Treasury & Risk management

In-house cash management

Settle & pay

Collections management

Check credit worthiness

worhiness

Reconcile

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SAP Treasury and Risk Management (TRM)

• SAP Treasury and Risk Management is a series of solutions that are geared towards analyzing and optimizing business processes in the finance area of a company.

• Integration• SAP Treasury and Risk Management is an integrated

solution, in which the various components are closely linked. The financial transactions managed in the Transaction Manager can be evaluated and monitored using the analyzer components. In addition to the TRM analyzer components Market Risk Analyzer, Portfolio Analyzer, and Credit Risk Analyzer, the Transaction Manager is also linked to SAP Cash Management

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Components of Treasury

1.Business partner2.Basic functions3.Transaction manger4.Market risk analyzer5.Credit Risk analyzer6.Portfolio Analyzer (FIN-FSCM-TRM-PA)

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SAP Treasury and Risk Management (TRM)

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Transaction Manager  • The Transaction Manager is a powerful instrument that executes

efficient liquidity, portfolio and risk management. You have the option of carrying out liquidity and risk analysis in the Transaction Manager. Based on these analyses and the current conditions on the financial markets, you can make decisions about future investments and borrowings.

• The Transaction Manager: • helps you manage your financial transactions and positions. This

involves trading, back office, and the connection to Financial Accounting.

• helps you utilize existing rationalization and enables you to automate typical processes.

• provides flexible reporting and evaluation structures for analyzing your financial transactions, positions, and portfolios.

• enables you to directly measure the effects of the financial transactions on the liquidity or interest rate risk, due to being integrated in Treasury and Risk Management.

• The Transaction Manager can be used in companies, asset management areas, and in traditional Treasury departments.

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Features of Transaction Manager• The Transaction Manager helps you realize the

following corporate goals:• 1.Financial services for affiliated group companies.• 2.Activities on financial markets for investing liquid

funds.• 3.Financing short-term and long-term investment

projects.• 4.Hedging potential or existing risks.•

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Components in the Transaction Manager

1.Money market2.Foreign Exchange3.Derivatives4.Securities

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Product types in the money market

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Money market1.Money market transactions are used for short to medium-term

investment and barrowing liquid funds.2.The money market area is a sub component of the Transaction

manager and is closely integrated with other components.3.You can implement cash management decisions in the Money

Market area based on the liquidity surplus or deficit determined in Cash Management.

• 4. It is also closely linked to the Financial Accounting (FI) component since all the data that is relevant for posting in the Money Market area is automatically transferred to FI.

• 5. You can maintain current market data (exchange rates, securities prices, reference interest rates, indexes etc.) in various ways

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Features of Money Market• Trading• The trading area contains functions for entering money market

transactions. It also enables you to also call up information on transactions or make changes at a later date. Collective processing functions are available to help you manage your transactions efficiently.

• Types of products in the Money Market area are:• ●     Fixed-Term Deposits• ●     Deposits at Notice• ●     Commercial paper• ●     Interest rate instruments• ●     Cash flow transactions

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Master Data Management• Financial transaction processing in the

Transaction Manager is based on master data.

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Cash Management – Liquidity Forecast Process

• Treasury consists of one module that could be potentiality used for the cash flow statement preparation-TR –CBM (Cash Budget Management). This module would allow to classify all the cash inflows and outflows using the “Commitment items" defined as SAP master data. Then the cash flow statement should be probably prepared in the report painter.

•

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1.Cash Position• Cash management• 1. cash management is used monitor payment flows and

safeguard liquidity, so that you can meet your payment commitments

• Integration:1. cash management is a subcomponent of treasury.• This means it is closely linked with treasury management (TR-

TM)• and market risk management (MRM).• 2. Cash management offers the functions described above for

liquidity analysis purposes while MRM offers methods and process of assessing risks positions.

• 3.Treasury management contains the actual financial translations and the portfolio analysis functions.

• 4.Cash management is integrated with many other SAP components

• For eg:the liquidity forecast integrates cash in-and outflows from financial accounting, purchasing, and procurement with long-term liquidity analysis.

•

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Cash position• Cash position supplies information on the current financial

situation in your bank and bank clearing accounts. Integration with payment advices means that cash position can give you an

• Overview over Short-term liquidity movements.• Integration:--The cash position reproduces the activity in your

bank accounts. it is derived from the prompt entry (on their value date). of all payments made within a short period of time.

• Data is supplied from three sources.• 1.Fi postings to the G/L accounts relevant to cash management.• 2.Memo records entered manually.• 3.Cashflows from transactions managed in the treasury

management .

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The graphic below illustrate of the cash position in the Sap system

• .Electronic Bank

Statement

Planning analyses

Correspondence

FinancialAccounting

Cash ManagementCash position

Bank Accounting

FIC

M

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Cash Budget management• Is to identify control payment flows in light of

liquidity considerations • While cash management takes a short term view,

Cash budget management deals with medium-term and long – term liquidity developments

• Before you can use cash budget management you must also having the financial accounting. The cash balances come from cash and bank accounts in financial accounting. Every posting made in financial accounting affects the balances in cash budget management

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CBM includes the following functions• 1 . Displaying business transactions having an affect on liquidity

. By revenue and expenditure item• 2. planning and displaying the payment flows and funds

balances for any period you choose• How to use cash budget management• The SAP system distinguishes between different forms of

organization, which have specific meanings within their respective applications. You can use them to define your company structure from an application specific viewpoint.

• For example you can use company codes and business areas to define your business for accounting purpose and controlling areas to define your business for controlling purposes. Financial Management Areas (FM area) perform the same function in cash budget management and funds management

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Process flow• Process flow

Client

Cross

application component

Financial Accounting

Company Code

IndependentBalance

Sheetunit

BusinessArea

BalancingUnit (for

internalbalance Sheet)

ControllingArea

OrganizationalUnit in cost Accounting

Funds Management

FM areaOrganizational

Unit Cash Budget

ManagementAnd funds

management

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CBM and Funds management• Cash budget management covers the whole

company. its main task is to identify impending shortages or surpluses of funds in your business.

• In funds management the business is divided into areas of responsibility, which are then monitored centrally. Budget funds are assigned to the individual areas of responsibility.

• The ultimate aim of funds management is to compare to actual data with the existing budget and to highlight any variances which have occurred

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Difference between CBM & CM• 1.Planning interval:-- Cash management deals only with

the short-term liquidity of a business, while cash budget management is concerned with the medium term and long term.

• 2.Division of revenue and expenditure:-- Cash management divides revenues and expenditures by customer and vendor group. While, cash budget management, the division is by revenue and expenditure item.

• Financial budget:--Planning is not possible in cash management, but you can use cash budget management to plan payment flows for any periods you want.

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Financial management area

• The FM area is the commercial organizational unit, within which cash budget management and financial budgeting are conducted. It structures the business as a viewed from cash budget management.

• Financial accounting: The company code• Cash budget management :The financial management area.• Cash budget management you will be working with financial

management areas (FM areas) not company code.• One are more company codes can be assigned to an FM area.• You can choose have different currencies in your company

codes. You can also choose an Fm area currency which is different from those company codes.

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Commitment item• The basis data object in cash budget management is the commitment

item.• 2.With commitment items, you can divided business transactions

affecting liquidity in your business into revenue, expenditure, and balance items.

• 3.Commitment hierarchy:-- Commitment items are arranged in hierarchs. A distinction is drawn between

1) Account assignment items:--Make up the lowest level in the commitment item hierarchy.

2) summarization items:--You define a hierarchy by combining account assignment items at various summarization levels you decide yourself.

3) 4. You cannot plan in a summarization item, nor can you post to it. Data is totaled up using the bottom up principle.

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Commitment item master record• You must define an item category and

financial transaction in each commitment item master record. The item category controls whether the commitment is a revenue, expenditure, or balance item. The financial transaction is important When data is being recorded in cash budget management.

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Authorization check in cash budget management

• By allocating authorizations, you determine which objects your personal may process and what processing functions they may use.

• 2. Profiles consist of authorizations, for one work center.• The authorizations in cash budget management are

checked in the following order.1.Version authorization2.FM area authorization.3.Commitment item authorization.

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Assigning commitment items to G/L accounts

• 1.For data to be recorded in cash budget management, you must always enter an account assignment when posting data in the feeder system.

• 2.If do not define in the commitment item in the G/L account, you must specify one when entering a document, otherwise the system cannot post the document.

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Business transaction for CBM feeder system

• The following business transactions are supported in CBM• 1.)All financial accounting postings, in which “real” financial accounting

documents are produced. For exaple• 1.Actual values in relation to payments in and out.• 2.Commitments values are bank clearing (Debit and credit side).• 3.Commitment arising invoice issued and received • 4.Commitments are down payments (debit and credit sides)• 5.Commitments are down payment requests (debit and credit sides)• Recurring entry documents are not integrated.

• 2).From Materials Management.• Commitments arising from purchase request ion.

• Commitments arising from purchase orders.• Commitment arising from goods receipt

• 3).Commitments are funds reservation

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ObjectivesTo know our future cash inflows and

outflows to assess Liquidity Forecast

Process proposed should be automated fully

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Process Requirements

Reports for Daily, Weekly & monthly liquidity position at company Level

Consolidation of these reports at Group level

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Process DiagramRole Outputs/ ReportsProcess StepsInputs

F&A

Start

Sales Order Liquidity Forecast Reports

Variance Reports

FI Transaction

Liquidity Forecast

MM

Start

SD

Treasury

Loans

Purchase Order

Investment

Repayment

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Master Data in Cash Management• Structure for Liquidity Forecast

– Planning Level• to explain the beginning and ending account balances.

– Source Symbols• divides the planning levels according to the sources

– Planning Groups• customers and vendors are assigned to planning groups by means of master

data entries – Groupings

• maintained to specify which levels and accounts / planning groups – Structure

• enable you to group together bank and sub ledger accounts in the Liquidity forecast

– Planning Type & Memo Records• planning type controls the manual entry of planned memo record

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• The Items of the liquidity forecast report are picked up from the following components:

–Financial Accounting – Open Items accounted & account balances

–Materials management – Purchase Requisitions & Orders

–Sales and Distribution – Sales Orders –Treasury and Risk management – Investments,

Loans, Deposits, Foreign exchange

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Major BenefitsIntegration from all sources of Cash FlowsReal time updated DataActual Figures based on the updated dataAutomated ProcessFlexibility in Reports in term of Periodicity Flexibility in terms of Selection of ParametersComparison Reports