Organizations around the globe struggle to wrangle cash-relevant information into a single version of the truth. Between the various point solutions and ERP systems a company may use and the assorted solutions inherited from mergers and acquisitions, system landscapes are becoming more heterogeneous than ever.
In addition, the financial systems in these landscapes often have separate connections via different channels to different banks. As a result, without proper system integration, global cash balances, expected payments, cash flows, foreign exchange exposures, and a host of other information become hard to manage or to rely on. Plus, many organizations use Microsoft Excel spreadsheets to track such data, which can be limited in terms of accuracy and drill-down capabilities.
With increasingly complex regulations and a volatile global business environment to contend with, it is critical that organizations have the ability to manage their cash data quickly and reliably across the various systems in their landscapes.
Introducing SAP Cash Management powered by SAP HANA
To solve the customer need for accurate and timely cash flow information, SAP introduced SAP Cash Management powered by SAP HANA, which combines the analytical capabilities and big data power of SAP HANA with the attractive user interface (UI) of SAP Fiori — all while integrating with a company’s existing treasury applications from SAP as well as other vendors.
SAP Cash Management powered by SAP HANA
is a separately licensed part of SAP Simple Finance that provides real-time analytics, insight-to-action support, and the merging of transactional and planning data on any desktop or mobile web browser.
Figure 1 shows the SAP Fiori launchpad for SAP Cash Management powered by SAP HANA. By combining the calculation power of SAP HANA and the UI of SAP Fiori, cash managers can see multiple key performance indicators (KPIs) and applications — including cash positions, bank risk, and liquidity forecast — on the same page. From there, they can drill down into details or trigger actions as needed.
Let’s look into the major function areas of SAP Cash Management powered by SAP HANA — Bank Account Management, Cash Operations, and Liquidity Management — in more detail, so you can get a sense of how the solution can help cash managers tackle challenges in the near, mid, and long term.
Bank Account Management
Bank accounts are core assets that are owned and controlled by an organization’s cash or treasury department. However, with expanding and complex enterprises — including subsidiaries and merged companies, for example — it is difficult to have a complete view of all bank accounts.
In SAP ERP Financials, only a limited amount of information is available, and processes to manage that information are lacking. SAP Cash Management powered by SAP HANA addresses some of these limitations by delivering Bank Account Management (see Figure 2).
Bank Account Management enables the cash department, rather than IT, to own bank account master data. It also provides attributes — including payment approval signatories, overdraft limits, and bank statement upload time — to reflect the daily business of the cash department.
Cash managers can group banks to show their relationships clearly, using either a standard hierarchy provided by Bank Account Management or a customized version based on their needs. As a result, it’s an intuitive master data reporting tool that provides end users with a thorough view of their bank structure and bank accounts.
Of course, these accounts aren’t static. While cash and treasury organizations are becoming more centralized, it’s nonetheless difficult to oversee the status of bank accounts centrally in a transparent way. To manage bank accounts centrally, group cash managers need a process in place to govern the opening, closing, and changing of bank accounts. The process can involve multiple employees — from subsidiary cash managers to group cash managers to CFOs, for example — and the process steps may vary among different companies. Bank Account Management streamlines processes and provides cash managers with centralized control via SAP Business Workflow.
Bank Account Management also helps improve compliance-related tasks. By the end of each quarter or year, for instance, group cash managers need subsidiaries to review their bank account information to ensure it is up to date. Typically, it’s an email-centric task with many people involved, prone to manual errors or at the very least, inefficient work. Using SAP Business Workflow, Bank Account Management streamlines the process and can dramatically improve user efficiency in accomplishing this task.
Cash managers are tasked with reviewing their cash position to understand cash distribution, whether bank accounts have sufficient funding (or a surplus) for the day’s payment obligations, and whether to invest free cash in the short term.
With the Cash Operations functionality of SAP Cash Management powered by SAP HANA, cash managers easily and intuitively get a high-level overview and detailed insight into payments, enabling them to make decisions and take actions directly. The SAP Fiori launchpad for SAP Cash Management powered by SAP HANA includes two important KPIs for managing cash operations: Bank Statement Monitor, which shows the success rate of bank statement imports, and Cash Position Details, which indicate the amount of cash the organization has at a given point in time. With the two, the cash manager can see not only how much cash is on hand, but how up to date the information is based on the percentage of bank statements that have been successfully processed.
If any bank statements haven’t been imported 100% successfully, the cash manager can drill down into the details to identify the root cause of the problem, see bank account details, and retrieve contact information for internal and external people who can help resolve the issue.
Once any import problems are resolved, the cash manager can review the cash position, which includes where cash is distributed among countries, company codes, and banks. Drill-down features show which banks have expected deficits, inflows, and outflows, for example, during the day. The system also shows payment details down to individual payments, including whether a payment has reached the bank and if the information has been reconciled (see Figure 3). Cash managers can also issue bank transfers to resolve significant deficits or surpluses.
While the Cash Operations functionality of SAP Cash Management powered by SAP HANA allows cash managers to consider daily operations, it’s critical for organizations to be able to accurately forecast cash flow and effectively hedge against currency rate fluctuations over the longer term, so they can consider any risks involved with their level of cash flow, and then decide on their investing and financing strategies. This forecasting and analysis relies on posted data such as accounts payable, accounts receivable, and purchase orders — and the more data that resides in the company’s ERP system or other connected systems, the better the forecast can be.
The challenge lies in integrating with business entities or subsidiaries that aren’t using the same SAP ERP system. SAP Cash Management powered by SAP HANA provides ways to address this challenge, including payment factory or in-house bank functionality for consolidating data on a central platform. However, for long-term planning, manual input from local experts is needed — and ideally those inputs are based on precise mid-term forecasts out of the system. Cash managers must collect information from departments and subsidiaries along multiple processes, from order-to-cash to purchase-to-pay to the finance processes of treasury. Cash managers not only need to acquire high-level aggregated figures, but also drill down into line items to trace the root cause of exceptional cash flows. What makes the activity even more difficult is that information is often distributed among different systems.
The Liquidity Management function in SAP Cash Management powered by SAP HANA looks into the short- and mid-term view based on booked system data, and supports the manual planning process for long-term planning. While the rolling liquidity forecast process is still manually driven, the manual processes can be streamlined and supported by the application and the ability of SAP HANA to handle large amounts of data at high speeds.
The rolling forecast process is enabled by the integrated business planning capability of SAP Simple Finance. A group cash manager may trigger a planning process that will be distributed to everyone involved with an email or workflow inbox item. From there, the subsidiaries’ cash managers, if they are SAP users, can easily click on the links via a web browser to open the application with all the selection criteria pre-filled.
The cash manager can then enter planning data, and the system can provide suggested amounts for different liquidity items based on the data collected from the system. The system allows the user to choose the automated liquidity forecast, actual cash flows from the same month of the previous year, or the last planning cycle’s plan amounts (see Figure 4). The user can then increase or decrease the amounts by a specified factor and copy them into the plan columns of the planning cycle.
Once the cash flow plan is finished, the cash manager can look at foreign currency information to set up a currency hedge plan. Then cash managers at subsidiaries can submit their results to group cash managers. The system automatically aggregates the liquidity plans from the subsidiaries for the group cash managers. The aggregated results show the liquidity structure forecast from the financial asset and liability perspective, which can provide guidance for the next month’s treasury operations. Once the cash flow plan is finished and consolidated, the cash manager can look at foreign currency exposure in the submitted plans and set up a currency hedge plan with SAP Treasury and Risk Management. The group cash manager can also perform variance analysis to decide how the forecast compares to the actual data both in the aggregate and for each subsidiary.
Adapt and Evolve
Strong cash management is critical when faced with reduced bank lending and other liquidity challenges. Businesses need cash to operate, and when it can’t be procured easily from the outside, it must be generated and conserved from within. SAP Cash Management powered by SAP HANA has the tools to help companies adapt to today’s market and evolve to meet organizations’ specific needs. For more information, visit www.sap.com/solution/lob/finance.html.