Figure 1 – Launchpad BankApplications

The advantages of using the full version of BAM are multiple, but below we highlight three of the main reasons full BAM is a must have for the companies using one or multiple SAP environments.

Flexible workflows

Maintenance of bank account data can trigger workflows based on the organization’s requirements and the approval processes in place. With the workflows the segregation of duties can be enforced when maintaining a bank account.

Even though workflows are not a new functionality in S/4HANA, the fact that workflow templates are available and can be amended by defining preconditions, step sequences and recipients improves the approval process of bank accounts.

The workflows can be created and activated as completely new ones or based on the already existing templates . You can create a new workflow by copying an existing one and updating the parameters according to the new requirements.

All the requests to release or approve bank account changes are available as of S/4HANA 2020 in the My Inbox for Bank Accounts app, the dedicated inbox app where users can check the status of each request initiated by the users themselves or sent to them and act upon.

Easy data replication

One of the challenges multiple organizations have, especially those operating various SAP environments, is data synchronization and replication. We often come across situations when banks, house banks and bank accounts are not maintained in all relevant environments creating data inconsistencies and making processes more difficult than they already are.

One of the ways of avoiding these types of situations is by replicating banks, house banks and bank accounts from production to quality assurance and to development environments using standard Idocs.

Figure 2 – Bank data replication in S/4 HANA

If the organization is operating on multiple SAP and non-SAP instances and running processes in a S/4 HANA side-car solution, the challenge of maintaining banks, house banks and bank accounts grows exponentially. Distributing the data via Idocs will not only keep all the systems coordinated, it will also decrease the amount of manual work and avoid situations when processes fail because of delays in keeping the data up to date in all relevant environments.

Figure 3 -Bank data replication across multiple environments

Simple way of managing cash pools

Cash pooling structures can easily be set up by the user and in this way the BAM solution is integrated with the process of making cash management transfers.

Even though the cash pooling and cash concentration in S/4HANA are managed using five different apps (shown in the figure below), the actual structure of the cash pool is defined directly in the Manage Bank Accounts app (Cash Pool tab).

Figure 4 – Five apps to manage cash pooling and cash concentration in S/4HANA

In the Cash Pool tab, the user can define the cash pool structure as per each company’s requirements. It is important to keep in mind the fact that a bank account can be assigned only to two different cash pools: once as the header account of a cash pool, and once in a different cash pool, as a subaccount.

The cash pools created in the system are not restricted to one company code but can be defined using various currency accounts belonging to multiple company codes. For each of the bank accounts included in a cash pool, a target balance as well as a minimum transfer amount can be defined in the Cash Pool tab of the Manage Bank Accounts app, with the mention that both (target balance as well as minimum transfer amounts) must be defined in the bank account currency.

During the cash concentration process, when bank transfers are generated, the payment methods defined in this tab will be picked up. Therefore, if required, two different payment methods can be assigned; the first for the structure where the bank account is acting as a header account and the second for the one where the account in scope is a subaccount. To pick them up from the drop-down list, the assigned payment methods must be initially setup in the system.

To conclude

Maintaining banks, house banks and bank accounts can be a difficult task especially in large organizations operating with different SAP and non-SAP environments. It can be time-consuming; it can involve multiple people from different parts of the organization (IT, master data, cash and banking etc.) and it can easily be prone to errors and mismatches if not correctly maintained and synchronized. Having one single source of truth for the bank accounts – which is easy to maintain, user-friendly, with appropriate controls in place and reporting capabilities, easy to replicate the data across different environments and which allows the user to create and maintain not only the bank accounts but also the cash pool structures – can save time, resources and simplify processes.

The process where virtual accounts are managed in IHC is depicted below:

In this process, we rely on a simple set of building blocks:

• In-house cash accounts to manage intercompany positions between Treasury and OpCo’s,
• GL accounts to represent external cash and the IC positions.
• Processing of external bank statements,
• Distribution of internal bank statements from IHC towards the OpCo’s ERP system,
• On the external bank statement for the Master Account, an identifier needs to be available that conveys to which virtual account the actual collection was originally credited. This identifier ultimately tells us which OpCo these funds originally belongs to and which IHC account to credit.

The idea here is that Treasury will receive the external bank statement and automatically post the receipts into the correct IHC account using the identifier. By posting items on the IHC account, the intercompany positions are updated. Then, at the end of the day, a set of internal bank statements is generated in IHC and sent through an interface to the OpCo’s ERP. The OpCo’s ERP processes these statements, clears out the customers invoices and updates the IC position with treasury.

The two major benefits of using IHC over the solution as described in the previous articles of this series are:

1. The OpCo’s do not require any direct integration with the bank and can rely on internal interfacing with Treasury. Especially in companies with a fragmented ERP landscape this can become a valuable proposition.
2. IHC can very aptly integrate virtual account management processes with internal netting payments, payments on behalf of (POBO) and payment in name of processes.

Implementing virtual accounts in SAP

In the explanation below we assume that the basic FI-CO settings for the company code a.o. are already in place. Also, it is by no means a complete inventory of all the settings that are required to get IHC up and running. It focusses more on the configurational parts that specifically cater for the VA requirements specifically.

Master data – general ledger accounts

Three sets of GL accounts need to be created: balance sheet accounts for the representation of the intercompany positions, one set for virtual account clearing purposes between the EBS and the IHC accounting process, and the GL account to represent the cash position with the external bank. These GL accounts need to be assigned to the appropriate company codes and can now be used to in the bank statement import process and the IHC accounting process.

In the Treasury entity we should create a single GL (per position currency) representing the IC position with all its OpCo’s because the granularity of IC position per OpCo is managed in the IHC subledger. This approach results in less of an increase of accounts in the chart of account.

Transaction code FS00

House bank maintenance bank account maintenance

In order to be able to process bank statements and generate GL postings in your SAP system, we need to maintain the house bank data first. A house bank entry comprises of the following information that needs to be maintained carefully:

1. The house bank identifier: a 5-digit label that clearly identifies the bank branch.
2. Bank country: The ISO country code where the bank branch is located.
3. Bank key: The bank key is a separate bank identifier that contains information like SWIFT BIC, local routing code and address related data of your house bank.

Transaction code FI12

Secondly, under the house bank entry, the bank accounts can be created, including:

1. The account identifier: a 5-digit label that clearly identifies the bank account.
2. Bank account number and IBAN: This represents the bank account number as assigned to you by the bank.
3. Currency: the currency of the bank account.
4. G/L Account: the general ledger account that is going to be used to represent the balance sheet position on this bank account. Or the IC position with Treasury.

Transaction code FI12 in SAP ECC or NWBC in S/4 HANA

The idea here is that we maintain one house bank and bank account in the treasury company code that represents the Master account as held with your house bank. This house bank will have the G/L account assigned to it that represents the house banks external cash position.

In each of the OpCo’s company codes, we maintain one house bank and bank account that represents each of the IHC bank accounts as held with the treasury center. This house bank will have the G/L account assigned to it that represents the intercompany position with the Treasury entity.

Electronic bank statement settings

The electronic bank statement (EBS) settings will ensure that, based on the information present on the bank statement, SAP is capable of posting the items into the general or sub ledgers according to the requirements. There are a few steps in the configuration process that are important for this to work:

1) Posting rule construction

Posting rules construction starts with setting up Account symbols and assigning GL accounts to it. The idea here is to define at two account symbols, the first one to represent the external Cash position (BANK), and the second one for the virtual account clearing between IHC and EBS (VACLR)

A separate account symbol for customers is not required in SAP.

For the account symbol for BANK we do not assign a GL account number directly in the settings; instead we will assign a so-called mask by entering the value “+++++++++”. What this does in SAP is for every time the posting rule attempts to post to “BANK”, the GL account as assigned in the house bank account settings is used (FI12 or NWBC setting above).

For the account symbol VACLR we can assign a dedicated O/I clearing GL that is used to clear out the EBS posting against the IHC posting (more on that later). These GL accounts should have already been created in the first step (FS00).

Now that we have the account symbols prepared, we can start tying together these symbols into posting rules. We need to create 3 posting rules.

Posting rule 1 is going to debit the BANK symbol and it is going to credit VACLR symbol

Posting rule 2 is going to debit the BANK symbol and it is going to credit a BLANK symbol. The posting type however is going the be set to value 8 “Clear Credit Subledger Account”. What this setting is going to attempt is to clear out any open item sitting in the customer sub-ledger using algorithms. We will explain more on these algorithms below.

As you can imagine, posting rule 1 is applicable for the Treasury entity. Posting rule 2 is going to be used in the OpCo’s EBS process.

Transaction code OT83

2) Posting rule assignment

In the next step we can assign the posting rules to the so-called “Bank Transaction Codes” (or BTC’s like NTRF) that are typically observed in the body of the bank statements to identify the nature of the transactions.

To understand under which Bank Transaction Code these collections are reported on the statement, you typically need to carefully analyze some sample statement output or check with your bank’s implementation team for feedback.

Important to note here is to assign an algorithm to posting rule 2. This algorithm will attempt to search the payment notes of the bank statement for “reference numbers” which it can use to trace back the original customer invoice open item. Once SAP has identified the correct outstanding invoice, it can clear this one off and identify it as being paid.

If SAP is unsuccessful to automatically identify the open item, it can be manually post processed in FEBAN or FEB_BSPROC.

Transaction code OT83

3) Bank account assignment

In the last part, we can assign the posting rules assignments to the bank accounts. This way we can differentiate different rule assignments for different accounts if that is needed.

Transaction code OT83

4) Search strings

If the posting rule assignment needs more granularity than the level provided in step 2 above (on BTC level), we can setup search strings. Search strings can be configured to look at the payment notes section of the bank statement and find certain fixed text or patterns of text. Based on such search strings, we can then modify the posting behavior by for instance overruling the posting rule assignment as defined in step 2.

Whether this is required depends on the level of information that is provided by the bank in its bank statements.

Transaction code OTPM

Prepare IHC to parallel post certain bank statement items into IHC accounts

In IHC there are two ways to parallel post bank statement items into IHC accounts; as payment items or as payment orders.

This can be controlled by setting a specific function module on BTE2810. If we set function module “BKK_IHB_BASTA_IN_POST”, SAP will post an IHC payment item. If we assign “IHC_APPL_XBS_POST”, SAP will post an IHC payment order.

Additional information can be found in note 2370212.

In the subsequent part of the article we assume that we use the payment item logic.

Transaction BF42

IHC account determination from payment notes

In this section of the configuration we can determine which IHC account should be used to post the bank statement items towards using payment notes search strings.

For example, if the master account bank statement payment notes for VA collections for a particular VA contains a string “From VA 54353” and we know this belongs to IHC account “F4000EUR01”, we can setup a rule in this part of the configuration for that. This will ensure that all items on a bank statement containing this text string will get posted into IHC account F4000EUR01.

Maintenance view TBKKIHB1

Assign external BTC to posting category

Here we can identify the external banks BTC codes (NTRF, NCMZ a.o.) which are applicable for the VA movements to post into IHC. Secondly, we can identify with which posting category to post them into the IHC accounts.

Once we identified the BTC code related to our VA collections (e.g. NCMZ), we can link them to the correct posting categories here. You could use standard categories 90 (Balancing Ext. Acct (D)) for debits and 91 (Balancing Ext. Acct (C)) for credits.

Alternatively, you can setup and link your own custom posting categories here to more precisely control how our VA collections are posted into IHC. This is out of scope for this article though.

Importing and processing bank statements

We should now be in good shape to import our first statements. We could download them from our electronic banking platform. We could also be in a situation where we already receive them through some automated H2H interface or even through SWIFT. In any case, the statements need to be imported in SAP. This can be achieved through transaction code FF.5. The most important parameters to understand here are the following:

1. File parameters: Here we define the filename and storage path where our statement is saved. We also need to define what format this file is going to be, i.e. MT940, CAMT.053 or one of the many other supported formats
2. Posting Parameters: Here we can define whether the line items on the bank statements are going to be posted to general or sub-ledger.
3. Algorithms: Here we need to set the range of customer invoice reference number (XBLNR) for the EBS Algorithm to search the payment notes for any such occurrence in a focused manner. If we would leave these fields empty, the algorithm would not work properly and would not find any open invoice for automatic clearing.

Once these parameters are maintained in the import variant, the system will start to load the statements and generate the required postings.

Transaction code FF.5 / FEBP

Display IHC account statement

Now that we successfully loaded an external bank statement, we can now check whether the items are posted into the IHC account. This can be done via transaction code F9K3. For each IHC account we can now look at the “Account Turnover” and observe all the VA collections that are posted on the account.

Transaction code F9K3

Prepare the IHC account for FINSTA statement distribution

We need to enable the distribution of internal IHC statements to the OpCo’s ERP on the IHC account master record. This can be achieved via F9K2. On the “Account Statement” tab we can adjust the statement format to “FINSTA” and dispatch type to “ALE” to ensure we are going to send FINSTA statements over an ALE connection. This would be the most common combination; other combinations can be configured and selected here as well.

Transaction code F9K2

Setting up ALE partner profiles

Finally, we can configure the system to determine to which system the FINSTA’s need to be send. This can be done in WE20, partner type GP (business partner).

Here we need to setup the outbound parameters for the FINSTA message type. An appropriate port needs to be selected that represents the ERP of the OpCo.

Transaction code WE20

Trigger the distribution of a FINSTA statement

Now that we have some transactions posted on the IHC account and the FINSTA settings enabled, we can trigger the system to send the FINSTA statements to the receiving ERP system. This can be done in F9N7.

Here we can select the correct IHC account and statement date and run the program to generate the FINSTA statement.

Once the finsta is generated and sent to the receiving ERP, it can be processed there via FEBP there.

Transaction code F9N7

Closing remarks

This is the third part of a series on how to set up virtual accounts in SAP. Please find below the other articles on this subject:

• Virtual Account Concepts | How to setup virtual accounts in SAP, Part II
• Why should a Treasury implement virtual accounts? | How to setup virtual accounts in SAP, Part I

Compared to intraday bank statement reporting, end-of-day (EOD) bank statement reporting is only available the next calendar day. The information therefore always comes too late to be meaningful for cash management decisions – apart from providing an opening bank balance for the next day.

Business rationale behind IBS reporting

So, why would a Treasury typically start implementing IBS reporting in its cash management processes?

1. Cash visibility: In general, IBS reporting will provide your cash management function an additional tool to improve cash visibility. Achieving cash visibility intrinsically might not be a goal of its own, but by achieving visibility, the cash manager now has information to make certain economically relevant decisions in certain situations.
2. Managing cash: By creating cash visibility, we now have an opportunity to manage cash on our accounts in an intelligent way. In case we estimate a positive closing balance, we could decide to invest this surplus in, for example, a money market fund or overnight deposit to earn some return. In case of an expected deficit, we need to fund the account to ensure no EOD negative position happens. This can be achieved by transferring funds from another bank account (in same currency), swapping funds from another bank account (in different currency), or funding it from, for example, a facility drawdown.
3. Reduced risk of delinquency: As we now implemented a process to increase control over our bank balances, we now have less chance of e.g. rejected payments due to insufficient available funds and therefore less chance of being delinquent on certain obligations to pay.
4. Reduced requirements on overdraft facility: By reducing the chance of having insufficient funds on our account, the overdraft facility requirements can also be reduced.
5. Timely clearing of open items: IBS can also be used to clear off open items throughout the day, as opposed to only rely on clearing from EOD statements. Benefit here is that KPI’s like days sales outstanding (DSO) will improve and that reconciliation effort is spread out more through time.

This article will now only focus on the cash management side; the IBS reconciliation process may be discussed another time. If you like to know more about bank reconciliation using intraday statements, feel free to reach out to us. We have a pre-developed solution that we can implement at your side.

IBS concepts

There are a few design considerations that need to be looked at before attempting to implementing this solution in SAP.

1. Reporting formats: MT942, CAMT.052, BAI2 are formats that can be imported by SAP standard and are also supported by most banks to some degree. There may be some informational or structural benefits that one format has over the other which should be considered in the design.
2. Reporting frequency: It is possible to agree with the bank on reporting frequencies of IBS. Ten times through working hours? Or one time only, half an hour before the payment cut-off time? In most cases, the bank will charge a fee for every statement it sends, so this should be considered in the design.
3. Delta vs cumulative reporting: As it is possible for the bank to report multiple times a day, it is important to understand how the data is reported. There are two methodologies. In case of delta reporting, only new transactions are reported, relative to the previously distributed IBS. Alternatively, there is cumulative reporting, where all booked items are reported on the statement throughout the day. Delta reporting typically means that the data in your SAP system needs to be appended for every new IBS. Cumulative reporting means that every time you process an IBS in SAP, the data needs to be rebuilt completely.
4. Data integration: The intraday data as provided by the bank needs to be integrated with already existing cash-relevant data to compile a proper reporting view of estimated closing balance for the day. This needs to happen in the cash management module of SAP (FF7* reports). The design of the structure of the cash management report should be carefully aligned with the liquidity structure (i.e. ZBA structure).
5. Prevention of duplications: Integrating the intraday data with existing data should be designed with data duplication in mind. It is paramount that the data on the same cash movement is not counted twice from two sources and data duplication should always be prevented while designing the solution. For example, if we are not careful, a payment flow can be included in the report twice, once from the intraday statement when it is debited and once from the payment in transit GL in the SAP administration. This would result in a skewed estimated closing balance.

Ultimately, the goal here is to receive and upload intraday bank statements throughout the day and to load cash movement data into your SAP system. This cash-relevant data needs to be made visible through the cash management reports so that the cash manager can better estimate EOD balances and make intelligent decisions related to funding accounts or investing excess funds.

Setting up Intraday Bank Statement reporting in SAP

We will now go into detail on how to setup intraday statement reporting and assume that the basic FI-CO settings for e.g. the company code are already in place. We also assume that the EOD bank statement process has already been implemented. To learn how to set this up, please read this article on virtual accounts.

Cash Management

It is important to understand that intraday statement data is converted into so called ‘Memo Records’ once loaded in SAP. These memo records can be visualized in the cash management reports (FF7AN/FF7BN). We will now explain the necessary settings on the cash management report section to ensure that the intraday data can be made visible in these cash management reports.

Define planning levels

First, we need to define a planning level; a label that is assigned to all cash movements as reported on the intraday statement. The planning level is used to structure the data in the cash management reports.

The level is a two-digit label, freely definable. We set it to C1.

The sign we need to set to blank as cash movements reported on this level can be both positive and negative.

The source will be ‘BNK’. This ensures that this planning level is reported on both ‘cash position’ and ‘liquidity forecast’ in the FF7AN/FF7BN reports.

The descriptions are freely definable. We define it as ‘INTRADAY’.

Define planning types

A planning type is a label under which a ‘memo record’ is stored on the SAP database. A planning type is subsequently linked to a ‘planning level’ to ensure the underlying data can be visualized in the cash management reports.

First, we define the planning type label: we set it identical to the planning level; C1 and link it to planning level C1.

We need to define an archiving category. This defines the data retention period of the memo records. If the period is exceeded and the reorganization program is executed; the memo record data will be cleansed.

The auto-expiry option defines whether the memo record will expire automatically and becomes invisible in the cash management report output. This needs to be enabled. The idea here is that the intraday statement data will be superseded by the EOD statement data once this is loaded after midnight next calendar day. To ensure we do not double count identical cash movements from both sources, the intraday data needs to be expired.

Also, a number range and description need to be entered. No specific functional considerations are needed here.

Define grouping and maintain headers

A ‘grouping’ is a label that is used to structure the cash management report data in a meaningful manner for the user. The grouping can be selected in the cash management reports and is going to dictate how the data is shown to the user.

We will configure a grouping ‘CASHPOS’.

Maintain structure

Under the grouping we can now maintain the structure of the cash management data. For our report, we are including two components. The first component is the planning level., the second will be the GL account under which we record our bank account balances. This is the GL account we typically maintain in the house bank account data (table T012K, transaction FI13, NWBC).

For the first component we are going to add an entry as follows:

The grouping we set to ‘CASHPOS’.

The type we set to ‘E’ for planning level. Now we can define a planning level that is going to be relevant to our cash management report output.

We set the selection to C1 (our intraday planning level we defined earlier).

This setting will ensure all cash management data as stored under C1 planning level is going to be selected in the report output.

For the second component we are going to add an entry as follows:

The grouping we set to ‘CASHPOS’.

The type we set to ‘G’ for GL Account. Now we can define the bank GL account that is going to be relevant for our cash management report output.

The selection we are going to set to a GL account is saved in our bank account entry in table T012K.

This setting will ensure all cash management data as stored under the GL account and relevant for our bank account will be selected in the report output.

The combination of these two lines is going to ensure that we will only see the C1 data for our one bank account. We can add multiple lines to increase the scope of the reports output.

Importing and processing bank statements

We should now be in good shape to import our first intraday statements. We could download these statements from our electronic banking platform. Also, we could be in a situation where we already receive them through some automated H2H interface or even through SWIFT. In any case, the statements need to be imported in SAP. This can be achieved through e.g. transaction code FF.5. The most important parameters to understand here are the following:

1. File parameters: Here we define the filename and storage path where our statement is saved. We also need to define what format this file is going to be; MT940, CAMT.053, or one of the many other supported formats
2. Posting parameters: Here we can define whether the line items on the bank statements should be posted to general or sub-ledger. This section is not relevant for intraday statements, as SAP does not support GL postings and reconciliation from intraday statements out of the box.
3. Cash management: This is the most important section, specifically for intraday statement processing. The fields and tick boxes control a few parameters:
4. A/CM payment advice: This needs to be enabled to ensure that SAP creates the memo record data from the intraday statements.
5. B/Summarization: This tick box controls whether a single memo record will be created for the whole delta balance as reported on the statement or for each reported debit and credit on the statement. If high volumes are expected, summarization can reduce the number of memo records and improve performance a bit. Obviously, it does reduce the data granularity.
6. C/Planning type: Here we set the planning type under which the memo records are going to be recorded. In our sample we set this to C1.
7. D/ Account balance: This needs to be set if we are loading intraday statements.
8. Algorithms: Here we need to set the range of customer invoice reference number (XBLNR) for the electronic bank statement (EBS) algorithm, to search the payment notes for any such occurrence in a focussed manner. If we would leave these fields empty, the algorithm would not work properly and would not find any open invoice for automatic clearing. This section is not relevant for intraday statements as SAP does not support GL postings and reconciliation from intraday statements out of the box.

Once these parameters are maintained in the import variant, the system will start to load the statements and generate the required postings.

Transaction code: FF.5

Now we can check if the memo records are updated in table FDES.

Subsequently, we can check the FF7BN report for grouping ‘CASHPOS’ and observe the output.