SAP Treasury

integration with financial accounting and cash management

Johan Dannestig
 Fyrirlestrarheiti

I.  Treasury Applications from SAP, an overview

II.  Transaction Manager, integration to FI/CO and CM
III.  Demo

Denmark I Iceland I Sweden I UK I www.applicon.com 1 december 2009 I09-12-01

2I I2I
 Fyrirlestrarheiti

I.  Treasury Applications from SAP, an overview

II.  Transaction Manager, integration to FI/CO and CM
III.  Demo

Denmark I Iceland I Sweden I UK I www.applicon.com 1 december 2009 I09-12-01

3I I3I
 Today’s business challenges in Financials
What are the responsibilities of the CFO?

Ensuring Compliance and

Driving Strategy and Growth
  Measure Profitability
  Control Costs
  Define Benchmarks and KPIs
  Link Strategy with Execution
  Handle Mergers & Acquisitions
Mitigating Risks
Gaining Efficiency in Finance
  Control Processes Efficiently
  Manage Risks
  Support Audits   Decrease Cost of Finance
  Accelerate Financial Close
  Organize Finance Operations
Efficiently across the Enterprise

Supporting Excellence in Optimizing Working Capital

Corporate Operations
  Manage Real-Estate   Free-up Working Capital
  Manage Global Travel Policies   Decrease Day Sales Outstanding
  Develop Talents & Leadership   Decrease Bad-debt write-offs

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Financial Supply Chain Management and
Treasury Applications from SAP

Electronic bill
Credit presentment Dispute Collections
management and payment management management

Check Finance
Issue Forecast Resolve Collect Settle
credit- working Reconcile
invoice cash disputes cash & pay
worthiness capital

Cash and Treasury

liquidity Bank Communication
and risk In-house cash Management
management management

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Treasury Applications from SAP

SAP Treasury and Risk Management

Risk Analyzers
Manage Financial Risk Credit Risk Market Risk Portfolio Analyzer

Transaction Manager
Manage Financial Hedge Mgt Exposure Mgt
Instruments MM FX DER DEB SEC COM

SAP Bank Communication Management

Manage Cash and SAP In-House Cash

Liquidity
SAP Cash and Liquidity Management

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SAP In-House Cash
Core Functions and Benefits
SAP In-House Cash
  Central dispatching, routing,
and processing of payments
  Creation of provided account
statements to account holders
  Delivery of financial status to
cash management
  Tracking of payment status
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Benefits
  Reduce physical cash transfers by
internal netting
  Reduce number of bank accounts
  Save bank fees for bank accounts and
payment transactions
  Avoid cost for external cross-border
payments
  Gain more interest keeping cash within
the group
  Reduce hedging deals concentrating
exposure within the group
SAP Cash and Liquidity Management
Core Functions and Benefits

SAP Cash Management

  Daily cash position

  Liquidity forecast Benefits
  Electronic bank statements
  Currency exposure   Single, reconciled financial data source

  Disposition   Enables centralized treasury

SAP Liquidity Planner
  Liquidity Analyzer as part of SAP ERP
  Mid- and long-term liquidity planning
  Decentralized access for data entry
  Central system for liquidity reporting
organization
  Flexible planning framework
  Natively integrated into SAP
environment
  Adaptable to your organization‘s
requirements
  Core SAP ERP component

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SAP Bank Communication Management
Core Functions and Benefits

SAP Bank Communication

Management

  Batching of payments Benefits

  Payment approval rules
  Improve control over payments
  Digital signature
  Full auditability ensures compliance
  Payment Monitor
  Real-time visibility of payment cycle
  Payment workflow
  Reduces time and cost of bank
  Integration to SWIFTNet reconciliations
  Lower bank integration costs
  Complete transparency of payment
status

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SAP Treasury and Risk Management
Core Functions and Benefits

SAP Transaction Manager

  Support of standard financial

instruments
Benefits
  Integrated and automated straight-
through processing
 Optimization of hedging and risk
management processes through
exposure management for operational
FX and commodity exposures
 Increase transparency by having
SAP Risk Analyzers
operational and treasury exposures
  State of the art risk management evaluated for market risk
capabilities  Comply with legal regulations and
  Credit Risk Analyzer compliance requirements

  Market Risk Analyzer

  Portfolio Analyzer

Denmark I Iceland I Sweden I UK I www.applicon.com

 Fyrirlestrarheiti

I.  Treasury Applications from SAP, an overview

II.  Transaction Manager, integration to FI/CO and CM
III.  Demo

Denmark I Iceland I Sweden I UK I www.applicon.com 1 december 2009 I 09-12-01

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SAP Treasury and Risk Management
Reporting Credit Risk Analyzer Market Risk Analyzer Portfolio Analyzer
Ad hoc reporting: Utilization: Formulas, Price calculator: Yield calculations:
Point & click, Unified Credit risk, Settlement NPV, Prices, Sensitivities Money weighted,
databases, Position, risk Time weighted,
P&L, Period, CashFlow Modified Dietz method
Limit management: Value at Risk:
Reporting tools: Limits freely definable, Varians/covarians,
SAP Query, ABAP List, Multidimensional limits Historic, Monte Carlo
and other 3rd party Simulate rates:
providers, BI What-if scenario,
Results database: Relative, Absolute
Portfolio Hierarchy, Drill-
down, Historic results MM FX Debt Derivat. Securities
Fixed Spot Bonds Cap Bonds
deposits Forward Bank loans Floor Warrants
Deposits at Swaps Commercial FRA Stocks
notice Options paper Swaps Certificates
Management CP Futures Facilities Options Repo
reports: Positions,
Repo Futures Sec. lending

Performance, Ratios,
Transaction Manager
Compliance
Front office: Position and deal reporting, Deal capture, Exercise, Dealer slip,
Middle office: Risk Valuation tools, On-line limit check
exposure, Controlling,
Compliance, Back office: Standing instructions, Correspondence, Netting, Settlement, Rate
fixing (interest, FX), References, Corporate actions, Process monitors
Data export: Excel,
Flat files, BI Accounting: Flexible accounting determination, Accounting according to many
international accounting standards – in parallel, Hedge accounting
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Transaction Management Process

Release

Back
Trading Accounting
office
• Create order/contract   Settlement/Control   Postings
• Exercise/expiration   Interest rate adjustment   Payment activities

• Give notice   Netting   Reversals

• Rollovers   References   Accruals/deferrals

• Exercise rights   Confirmation letters   Valuation

  Securities account transfers
  Corporate actions

User authorization
User defined status codes
Limit management

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Concept of Cash Management

Market information Trading

Cash
management
decision

Cash Position Liquidity Forecast

Bank accounts Payment Financial Subledgers:

in currency: transactions investments - A/R
Account 1 in transit: and borrowings - A/P
: - incoming - Purchase orders
Account n - outgoing - Orders
Total

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Valuation of Financial Transactions

Different legal frameworks use different principles for the valuation of

Financial Transactions. This leads to different requirements such as:

  Valuation of book value using various methods such as

•  Lowest value
•  Mark-to-Market
•  Amortized Cost
  Different approach to transaction costs
•  Costs are included in the book value
•  Costs are posted directly to profit and loss account
  Valuation of gain and losses when selling from the position such as
•  Average Cost
•  Lott accounting principles for example LIFO, FIFO
  Special treatment for hedging transactions
  Many companies needs to report according to several frameworks in
parallel
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Integration between TRM and GL

  In SAP Treasury and Risk Management you use a separate Valuation

Area for each accounting principle
•  The results of the valuations are calculated separately for each valuation area using
a full approach
  Each Valuation Area is assigned to a GL Accounting Principle
•  The valuation area “001” should be assigned to the leading ledger in GL
•  When TRM generates postings with payment information it ensures that the payment
is only made once
  It is possible to have a valuation area in TRM that does not post to the
GL
•  The results of the valuations are then only available in TRM and meant for internal
treasury reporting

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 Posting: Account Determination

Fixed-term deposit 1 month 3.5% Acct assignment ref. DB000001

Sept 1st 1100 - Fixed-term deposit 1,000,000

Oct 1st 1120 + Final repayment 1,000,000
Balance sheet account acc. to
Oct 1st 1200 + Nominal interest 3,750
account assignment reference

Posting details

Flow type 1100 - Debit Bal.sht Credit Bank

1120 + Debit Bank Credit Bal.sht

1200 + Debit Bank Credit Int. earned

Fxd-term dep. acct 113113 Bank clearing acct 113100 Interest earned 273100
D C D C D C
Deposit 1,000,000 FT deposit
1,000,000 Nominal 3,750
Nominal int. 3,750 interest
Final 1,000,000 Final
repayment repayment 1,000,000
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Integration between TRM and GL using
Parallel Accounts
TRM Transaction Manager
Transaction Management
General Ledger
Purchase of new bond at the cost of 90€ with a fee of 1€

Number range 1 Position Costs Unreal. Bank Acc.

Valuation Area 001 1311044 1118500 1112200 1220155
Doc. # 1
Valuation rules for bonds: Bond purchase 90 1 91
Post fees to P/L Doc. # 4 …
Mark-to-Market valuation Valuation 3 3

Valuation Area 002 Number range 2 Position Costs Unreal. Dummy Bank
2311044 2118500 2112200 2299999
Valuation rules for bonds: Doc. # 2 91 91
Bond purchase …
Activate fees Doc. # 5
Amortize costs Valuation 1 1

Valuation Area 003 Number range 3 Position Costs Unreal. Dummy Bank
3311044 3118500 3112200 3299999
Doc. # 3 1 91
Valuation rules for bonds: Bond purchase 90
…
Post fees to P/L
Valuation
Lowest value principle

Valuation Area 004

Valuation rules for bonds:
Post fees to P/L
Mark-to-Market valuation

Example: Purchase of new zero interest bond at the cost of

Treasury Ledger 90€ with a fee of 1€
At year end the MtM value of the bond is 93€,
amortized cost is 1€ at year end
Denmark I Iceland I Sweden I UK I www.applicon.com
Integration between TRM and GL using
Parallel Ledgers
TRM Transaction Manager
Transaction Management
General Ledger
Purchase of new bond at the cost of 90€ with a fee of 1€

Ledger 1 Position Costs Unreal. Bank Acc.

Valuation Area 001 311044 118500 112200 220155
Doc. # 1
Valuation rules for bonds: Bond purchase 90 1 91
Post fees to P/L Doc. # 4 …
Mark-to-Market valuation Valuation 3 3

Valuation Area 002 Ledger 2 Position Costs Unreal. Dummy Bank

311044 118500 112200 299999
Valuation rules for bonds: Doc. # 2 91 91
Bond purchase …
Activate fees Doc. # 5
Amortize costs Valuation 1 1

Valuation Area 003 Ledger 3 Position Costs Unreal. Dummy Bank

311044 118500 112200 299999
Doc. # 3 1 91
Valuation rules for bonds: Bond purchase 90
…
Post fees to P/L
Valuation
Lowest value principle

Valuation Area 004

Valuation rules for bonds:
Post fees to P/L
Mark-to-Market valuation

Example: Purchase of new zero interest bond at the cost of

Treasury Ledger 90€ with a fee of 1€
At year end the MtM value of the bond is 93€,
amortized cost is 1€ at year end
Denmark I Iceland I Sweden I UK I www.applicon.com
 Fyrirlestrarheiti

I.  Treasury Applications from SAP, an overview

II.  Transaction Manager, integration to FI/CO and CM
III.  Demo

Denmark I Iceland I Sweden I UK I www.applicon.com 1 december 2009 09-12-01

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