Cash Management in SAP S/4HANA Finance – Detailed Overview

What is SAP Cash Management?

Cash Management in SAP S/4HANA Finance takes care of the cash movements in business. It ensures on-time availability of funds for financial requirements and payment obligations and maintains accurate liquidity in the business.

What is for you in this article?

In this blog, we will discuss an overview of what Cash Management in SAP S/4 HANA is. How it has emerged over time from ECC to S/4HANA. You would further learn its Key Components and understand their role individually in the development process.

Conclusively, by the end, you would get an idea of what exactly to expect when you get started and implement the SAP S/4 HANA Cash Management solution.

So let us get started.

Key Component in SAP Cash Management

The next-generation SAP Cash Management product provides the following three components:

1. Bank Account Management
2. Cash Flow Management (Cash Operations)
3. SAP Liquidity Management (Liquidity Planner)

An Overview

Cash Management in SAP S/4HANA

With SAP S/4 HANA, the classic SAP cash and liquidity management has been replaced by the new SAP Cash Management. So, if you are using the classic SAP cash and Liquidity management, you can migrate the related master data to the new SAP cash Management.

Though Cash Management in SAP is not a new concept. It was there in ECC also. However, in S/4HANA, it is more advanced, compact and user-friendly.

The Comparison

Classic Cash Management Vs. New Cash Management

Classic Cash Management in ECC

The previous functionalities and modules that were known as SAP Cash and Liquidity Management are referred to as Classic Cash Management now.

It is consist of the Classic Cash Position report ( FF7A) and classic Liquidity Forecast report (FF7B) as well as the classic Liquidity Planner with all its transaction codes, programs and reports.

New Cash Management in S/4HANA

Classic Cash Management has been completely replaced by the new Cash Management in S/4 HANA. However, in the backend, classic Cash management settings about planning levels and planning groups are still in place. Even, also the liquidity planner still exists.

---

Key Components

Now, We will start knowing the key components of Cash Management in SAP S4 HANA Finance.

1. Bank Account Management

With Cash Management in SAP S/4 HANA, the entire management of bank data has completely changed. Previous functions for maintaining bank and bank account data are no longer valid. Additionally, you must activate at least the basic scope of Bank Account Management (BAM Lite) to create and maintain bank accounts and banks.

Consequently, no SAP customer can migrate to or implement SAP S/4 HANA without also at least implementing a portion of BAM.

Where is the Bank Account Management required?

Bank accounts are the core of all operations involving cash. We use it in almost all the departments in the business.

Treasury/Cash Department- Bank accounts are needed in the treasury department to make treasury payments and to manage cash. Therefore, bank accounts can be considered core assets of the cash or treasury department.

Bank accounts are owned and controlled centrally by the group cash or treasury department.

AR/AP and Payroll Departments- Not only are bank accounts used by Treasury or the cash management department, but you also need bank accounts across the entire organization from accounts payable and accounts receivables to payroll.

You may read: AR/AP Interview Questions in SAP FICO

Bank Account Management in SAP Cash Management in S/4HANA

In S/4 HANA Cash Management Bank Account Management is introduced as a brand-new function and core component.

The new Bank Account Management function comes with the following features:

I) Bank Account Master Data and Attributes

True Management tool- Bank Account management offers you a true management tool for your Bank Account Master Data.

Access Through Fiori Apps – You can access all maintenance functions through SAP FIORI apps.

Shorter Maintenance Process – Earlier the House Bank Maintenance was an important configuration task that we do in the development system. It involved transporting the house banks and house bank accounts from the development system to production.

Now with Bank Account Management we no more require this long process. Instead, now you maintain the house bank data directly in the Production. Likewise, now the treasury department or user group owns the bank master data rather than IT.

Maintain Bank Master Data – The new BAM also provides more functions to control and maintain bank master data. For example, you can now maintain payment approval signatories, overdraft limits, cut-off times, bank statement upload times, internal contact person and external contact person for a specific bank account master data.

You may be interested in: Bank Accounting Configuration in SAP FICO

II) Reporting on Bank Master Data with Bank Hierarchy and Bank Account Group

Flexible Reports – Bank Account management in cash Management in SAP S/4 HANA addresses the need to analyze the access details for banks and bank accounts through flexible reports.

Reporting Functionalities – BAM offers complete reporting functionalities with filters, views and variants.

Hierarchies Creation – BAM also slows you to create two types of hierarchies to help you structure your reports.

• Bank Hierarchies
• Bank Account Groups

You can do many things with Bank account groups. For example:-

1. you can take your accounts and group them in a hierarchical structure.
2. Further, you can use a bank account group to group bank accounts into areas of responsibility for different users.
3. Else you can also achieve other reporting and control goals.
4. You can also use bank account groups for your cash position reporting.

III) Structure Process and workflow for opening, closing and changing bank accounts

As per the old process, these functionalities for managing bank account master data did not allow for any change in procedure or workflow. Instead, these tasks were IT tasks performed in the development system and then transported to quality assurance and production.

Any control processes and workflow were usually managed outside SAP. Now that process has become a user procedure, performed directly in production.

You will also need a framework to manage and control changes. Bank Account Management in Cash Management in SAP S/4 HANA Finance enables you to centrally control any change in bank account master data and process these changes through a structured workflow, monitored by a changelog.

IV) Bank Account Inventory and Periodic Review Process

You will periodically have to take stock of your bank accounts. I.e. by performing an inventory of all the accounts held by an entity in your organization.

Certainly, it depends on the jurisdiction of the internal control environment where your Treasury Department operates.

While in the past customers were managing this process in external systems. Or they were simply using an email-centric procedure. But with the New Bank Account Management, they can take advantage of SAP business workflow functionalities. To streamline the process, the system has embedded these functionalities in the bank account review process App.

You may read: Interview Questions on Bank Accounts

2. Daily Cash Operation

In classic SAP Cash Management, your tools were limited and need to consolidate information and validate across different sources. You may even have opted not to use SAP Cash Management at all.

Overall, the process at times felt disconnected from your actual data and preparing reports was time-consuming.

But the New Cash Management in S/4 HANA resolves this issue by introducing a series of APPs and reports.

Know About: SAP S/4HANA Finance Online Training

I) Cash Management – Key Performance Indicators

Since KPI helps you to get a quick view of the Cash Management Reports. You need not look into any detailed report to find out whether any of the values you are monitoring is out of line. In other words, you can read the report at a glance.

Depending on the time of the day, you may see the status of the bank statement that has already been integrated and processed.

Likewise, towards the end of the day, you may be interested in checking your cash position. The KPI shows it all directly on the SAP Fiori Launchpad.

II) Bank Statement

A fundamental element for accurate knowledge about your cash position is the import status of your bank statements.

You may have deleted an issue while monitoring the import success rate of the bank statements. Likewise, perhaps you are simply executing your daily activity and need to drill down into more detailed information in the Bank Statement Monitor app.

Now, from the app, you can quickly see where the issue is and you can directly contact the person in charge of the account with the issue.

III) Cash Position

Once you are sure that you have processed all bank statements as expected, you are now ready to analyze your cash position.

Since you already had a glance and know the global level cash from the cash position KPI. Thus, now you can navigate into the various reporting dimensions that the Cash Position App provides. It also analyzes your cash balances aggregated by account, bank, country, currency etc.

Further, you can navigate into the cash position Detailed app, where you now get a line item level view of your cash balances. To clarify any doubts, you can drill down into the source document by navigating to the Check Cash flow items app.

IV) Payment management and bank transfers

Managing payments through the Bank Communication ( BCM) module may not necessarily be a cash management task. However, these payments certainly affect cash management.

How?

It works in such a way that the flow of information from accounts payable to cash management must be accurate, timely and reliable.

The “Make Bank Transfers App” is the tool to enter those transfers when you are the responsible cash manager or treasurer. This App is complemented by the Approve Bank Payments App and related approval workflow.

You can trigger the bank transfer directly from the Cash position App or the Cash Position Details App.

V) Cash pooling

Another way to make transfers is cash pooling. Cash pooling functionalities automate the bank transfers required for pooling your cash into one or multiple pool header accounts.

Importantly, Cash pooling is not necessarily a replacement for your ZBA program but does fulfil a similar function.

You can use cash poling to pool accounts that are not in a ZBA structure or to pool header accounts held at different banks.

3. SAP Liquidity Management

The main job of SAP Liquidity Management is to manage the planned cash flows and find actual values. For this job, there is a Liquidity Planner under Liquidity management. This Liquidity Planner provides various tools to input, adjust, aggregate and evaluate the cash flows.

These tools are very user-friendly and quick in providing the desired information as soon as it is available to the decision-maker.

The information that it provides is truly reliable and gives its user a clear picture of the real financial situation of the business. It not only helps the owner use its funds in a much more efficient manner but also can optimize its financial resources more effectively.

All these tools of the Liquidity Planner extend a great help to enhance financial planning, influencing expected cash flows.

(More to come in this section…)

“As for now, I am writing only a brief about the SAP Liquidity management here in this article. I will extend this topic by adding more information soon. Since I am in the process of completing it. In some time you will get more information on this topic. Kindly wait.”

EndNote

Cash Management in SAP is truly a very important subject in S/4HANA. We mainly require it to manage the funds, bank accounts, vendor payments and liquidity.

Is it important for me to learn SAP Cash Management?

The development of Cash Management is a very important part of the SAP S/4HANA implementation in a business.

Thus, as an SAP S/4HANA Finance consultant, you must know this subject. You should also know its components thoroughly to do the development process in the right manner and smoothly.

Learn More: SAP S/4HANA Finance Training with Cash Management

Important Video: Business Process in SAP S/4HANA Finance