FSC010 Treasury & Risk Mgt

SAP AG 2003

FSC010 SAP Treasury Processes FSC010 SAP Treasury and Risk Management Processes

THE BEST-RUN BUSINESSES RUN SAP

SAP AG 2005

FSC010SAP Treasury and Risk Management Processes

mySAP ERP 2004 2005/Q2

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Copyright 2005 SAP AG. All rights reserved.

No part of this publication may be reproduced or transmitted in any form or for any purpose without the express written consent of SAP AG. The information contained herein may be changed without prior notice.

Copyright

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Target group

z Participants: Project leaders

Project team members

Consultants

Users

z Duration: 5 days

User notes

The training materials are not intended for self-study but rather as a supplement to the information provided by the trainer. Therefore, you can use the ample space in the material for your own notes.

The exercises are only a supplement to the examples used in this course. There may not be sufficient time to complete all the exercises during the course. If this is the case, you can use the exercises after the course to practice what you have learned.

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Course Overview

Contents:

z Course Goalsz Course Objectivesz Contents/

Course Overview Diagram

z Main Business Scenario

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This course will prepare you to:

z Create and manage process-oriented transactions in Transaction Manager, Market Risk and Credit Risk

z Configure and carry out typical business processesin these areas.

Course Goals

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Course Objectives

z By the end of this course, you will be able to:

z Use the support tools for back-office processingz Describe the interrelationships in SAP CFM

Transaction Manager

z Set up the necessary structures for short, middle and long term liquidity management

z Explain the different ways of monitoring and controlling market and credit risks

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Course Overview: Units

Unit 2 Transaction Manager: Basics

Unit 3 Transaction Manager: Money Market

Unit 4 Transaction Manager: Foreign Exchange,Derivatives

Unit 5 Transaction Manager: Securities Management

Unit 6 Market Risk Analyzer

Unit 7 Credit Risk Analyzer

Unit 1 Course Overview

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z You want to get an initial overview of the components of Transaction Manager, Market Risk Analyzer and Credit Risk Analyzer.

z You will learn about the business processes within the components.

z You are currently using or have successfully implemented the SAP R/3 FI module. You now want to set up a system to manage short, medium and long term company liquidity and make use of risk management facilities.

Main Business Scenario

You are a member of a project team, which will make both basic and all other settings required for mapping financial transactions in Corporate Finance Management.

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Transaction Manager: Basics

Unit 4 Transaction Manager: Foreign Exchange,Derivatives




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Identifying processes in Treasury

SAP Treasury overview


Corporate FinanceManagement functions(treasury and risk Management)

Business partner

Standing instructions

Banks

Overview of financial instruments

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By the end of this unit, you will be able to:

z Give an overview of SAP Treasury z Explain the various corporate finance management

processes and the standard functions of SAP CFMz Process your SAP business partner z Explain the role categories used in SAP Business Partner

CFM and create business partner relationshipsz Set up standing instructions and define authorizations for

business partnersz Differentiate between banks in general,

business partner banks and house banks

Transaction Manager Basics:Unit Objectives

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Corporate Finance Management comprises the following components:

Transaction Manager supports the management of financial transactions and positions

You can use Market Risk Analyzer to analyze interest rate, currency and stock risks

Credit Risk Analyzer is used to determine the credit risks and includes an online limit check

SAP Corporate Finance Management: Overview

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TransactionManager

RiskManagement

PriorityPriority

1 Ensuring liquidity 952 Optimizing finance costs 923 Optimizing yields on financial assets 744 Securing costs (example: against

possible exchange rate fluctuations) 615 Securing turnover (example: against

possible exchange rate fluctuations) 526 Profit contribution with active

management of open positions 30

%

SAP Treasury: Transaction and Risk Management

ObjectiveObjective Company Company WeightingWeighting

SAP Treasury tasks and their distribution in both areas of Transaction Manager and Risk Management can collectively be derived from the company objectives: with Transaction Manager you can optimize yields and cost structures, and with Risk Management secure against market and credit risks.

Transaction Manager supports financial transaction and position management. You can use Market Risk Analyzer to analyze interest rates, currency ands stock risks. Credit Risk Analyzer helps you assess credit risks and includes an Online Limit Check.

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Corporate Headquarters Corporate Headquarters TreasuryTreasury

AnalyzerFinancial Markets

Credit Risk

Analyzer

MarketRisk

Analyzer

nn

Transaction Manager

Money Market

Securities Foreign Exchange Derivatives

BusinessPartner

InformationSystem

Financial Accounting

Configuration of SAP Treasury Components

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Transaction Manager

. . .

US GAAP

HGB (German Commercial Code)

Asset ManagementOrganization

TransactionManager

Money MarketMoney Market

ForexForex

SecuritiesSecurities

DerivativesDerivatives

TreasuryOrganization

FrontOfficeFrontOffice

MiddleOffice

MiddleOffice

BackOfficeBackOffice

Contracting financial transactions is one of the fundamental tasks of many financial departments. Depending on corporate policy, emphasis may be placed on providing an internal service for sibling companies or on actively investing liquid funds, financing planned investments, or hedging existing risks in the financial markets.

Transaction Manager provides you with the necessary tools for all related transactions, from creating to transferring relevant finance accounting data. This supports both conventional treasury and asset management departments with a trading-related focus. This gives you the advantage of being able to execute all types of transactions from short-term financing to strategic long-term investments all on the same platform.

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Transaction Manager: Functions

z Comprehensive management of financial transactions and positions Trading and back office support

Monitoring, checking, and releasing

Data transfer to financial accounting(including accruals/deferrals and valuations)

z Flexible configuration of company-specific transaction and position management processes

z Assignment of financial transactions to portfolios or management in securities accounts

z Flexible reporting and portfolio analysisz Data interface

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Central Functionsexamples: trader/user, currencies, correspondence,

financial mathematics, posting logic, payment transactions, workflows, archiving, market data,

information system

FIFI

Financial accounting

AMAM

Investment accounting

COCO

Controlling

Central Dataexample: business partner, banks

Financial Transactions Structure

Money Market

Forex

Derivatives

Securities

Transaction Manager: Basic Functions

The central functions of Transaction Manager are: y Structuring financial transactions (example: product categories such as deposits, overnight money

etc.)

y Central data (example: business partner with all authorizations and the bank data for the business partner's payment details)

y Central functions (see slide). Transaction Manager also supports standardized interfaces for Financial Accounting, Cash

Management, Market Risk Analyzer, Credit Risk Analyzer, Market Data Binding.

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Sample of a Range of Financial Instruments

Fixed-term deposits

Deposits at notice

Commercialpaper

Interest rate instrument

Cash flow transaction

Facility

Product Types

DerivativesForexSecuritiesMoney Market

Stocks Subscription

rights Investment

certificates Bonds Convertible

bonds Warrant bonds Warrants

Forex spot transactions

Forex forward transactions

Forex swaps

Cap/Floor FRA Swaps

- Interest rates- Cross currency

interest rates OTC options

- Currencies- Interest rates- Securities- Swaption

Futures

Securing instrumentsInvestment/Loan

Instruments

Within short-term transactions, money market or foreign exchange transactions provide the option of bridging liquidity deficits or surpluses. For mid- and long-term, investments and borrowings are represented by securities transactions.

Derivative financial instruments, on the other hand, help you secure against interest rate and currency risks.

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Revenue/Risk Goals

Revision of planning data

Feedback

Correctivemeasures

Documentation and control functions

Analysis and trading process

Transaction and position management process

Analysis(planning)

Decision

FinancialFinancialTransactionsTransactions

Identifying Processes

From a strategic point of view, the analysis and trading process is the starting point for the various Treasury processes. For example, the risk positions of the risk objectives you have set are identified and analyzed.

Once you have decided to complete certain financial transactions, you enter the trading processes for these transactions in Transaction Manager. Transaction Manager also supports the management of other transactions and the generated financial positions.

A range of documentation and control functions are available for all Treasury activities. You can perform evaluations for specific instruments or across the whole system to ensure that the various documentary and control tasks of corporate finance management and financial accounting are conducted accurately.

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Transaction Manager: Transaction and Position Management Process

Postings Payment

transactions Reversals Accrual/Deferral Valuations

Create offer/order/contract

Exercise/expiration Terminations Rollovers Exercising rights

User AuthorizationLimit Management

Release

Settlement/Control Interest rate adjustment Netting Referencing Confirmation Letters Securities transfer postings Corporate actions

TradingTrading Back OfficeBack Office AccountingAccounting

In transaction and position management, the following areas are differentiated: y In Trading, you create transactions and exercise rights. y In Back Office, you settle transactions, that is, you check entered transactions and carry out

position management-related processes, such as securities transfers.

y In Accounting, you carry out all bookkeeping for relevant activities in the subledger and transfer posting information to the Financial Accounting general ledger.

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Currency riskCurrency risk Interest rate riskInterest rate risk Stock riskStock risk

Market risk procedure Cash flow analysis

Value at riskSensitivities

Mark-to-marketInterest/Currency exposure

Organizational elementsReporting characteristics

Structured products Flexible portfolio hierarchies

Business areas

Decision support and simulation

Market data scenariosFictitious transactions

Market Risk Analyzer

In addition to conventional financial management tasks, such as cash management, ensuring liquidity, and liquidity management, controlling market risk plays a crucial role in ensuring a company's competitiveness. For these activities, Market Risk Analyzer offers comprehensive position analysis, such as mark-to-market valuation of financial transactions.

Additionally, risk or performance figures, such as exposure, future value, effective interest rate and effective rate, internal rate of return, sensitivity, and value at risk can be determined. Both contracted positions and fictitious financial transactions can be included in the reporting functions for these variables.

Valuations can be based on either real or simulated market prices. As well as a high level of flexibility for organizing reports, Market Risk Analyzer provides a reliable valuation basis for market risk controlling.

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Characteristics

Credit RiskAnalyzer

Transaction con-clusions: updatinglimits

OKLimitcheck

CFM Transaction ManagerCFM Transaction Manager

Exposure8.5

632.3688.112.3

Limit10.5700.7716.74.8

PartnerEuro BankUnited BankCarltonBrightline

ReportingReportingUtil. in %

80.9%90.3%96.0%256.3%

Free Limit2.068.428.6-7.5

Credit Risk Analyzer

z Integrated online limit checkz Analysis, measurement and

control of credit and settlementrisks

z Company-wide limit attributionz Determining attributable

amounts with flexible formulas

z Netting & collateral

The tightening of regulations on risk control internationally confirms the growing importance of analyzing and limiting insolvency risk. System support is also necessary for measuring, analyzing, controlling and limiting counterparty default risk for other business considerations.

Credit Risk Analyzer is designed to meet all of these requirements with the objective of provide you with comprehensive support for controlling counterparty default risk. The first release covers the specific risks related to your company's financial transactions. Further releases will concentrate on integrating the sales/accounts receivable area. This will enable company management to recognize credit risks when they arise and avoid them.

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Classic drilldown report

A B C18,234.97 27,276.08 87,751.8429,932.07 38,373.42 32,756.44

... ... ...

Object list

Graphical reports

0

20

40

60

80

100

A B C D

Reports

Many evaluations offer a selection of different formats for data output.

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z Before you can conclude financial transactions with a business partner, you must create the partner in the system. SAP Business Partner will help you do this.

z In addition, you want to authorize specific business partners only for certain transactions.

z How can you automatically get suggestions for business partner settings when creating transactions?

Business Partner: Standing Instructions

You are a member of a project team, which will make both basic and all other settings required for mapping financial transactions in corporate finance management.

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PersonGroup

Organization

Organization

z A business partner is a person or legal entity with whom/which you have a business relationship.

z There are 3 different business partner categories:

Business Partner: Definition

A business partner is a person, organization or group of persons/organizations with which your company can have a variety of relationships.

Business partners are divided into various categories, which each have different attributes. CFM differentiates between

- persons (examples: private individual, broker)

- organizations (examples: bank, company)

- groups (examples: non-trading partnership, shared apartment)

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Overview of Extracted Business Partner Data

Company Code Company Code DataData

GeneralGeneralDataData

Account management Account management Payment transactionsPayment transactions

Account interestAccount interestPayment data Payment data

Autom. payment Autom. payment transactions transactions Dunning dataDunning data

Correspondence dataCorrespondence data

Business Business PartnerPartner

Address overviewAddress overviewCredit profileCredit profile

Identification/BranchesIdentification/BranchesControlControl

Bank detailsBank detailsPayment transactions/Payment transactions/

ValuationsValuationsRole dataRole data

Legal dataLegal dataBusiness year infoBusiness year info

Personal dataPersonal dataEmployment dataEmployment dataAdditional dataAdditional dataCredit standingCredit standing

Fiscal dataFiscal dataReporting dataReporting data

Business Business Partner RolePartner Role

DescripDescrip--tionstions

In CFM, you conclude financial transactions with a business partner. Typical partners are banks or a central treasury department. You create a master record for each business partner.

The user interface for business partner data was fully revised as part of the Enjoy project. The screen layout has been restructured and you can now navigate between several tabs containing individual business partner views.

The data you can maintain for a business partner is split into two areas: - General Role Data

is centrally stored for all roles. The amount of accessible data may vary according to role category, depending on the settings in Customizing.

- Company code-dependent data is data which only applies for the role category in the respective company code.

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Initial screen: Process Business Partner

Characteristics for Processing a New Business Partner:

Person

Organization

Group

Grouping

BP Role

To create a new business partner, you must enter a BP role, the business partner type and the grouping on the initial screen.

The grouping is defined in Customizing and is used to classify business partners according to any criteria.

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Business partner: Relationships

Relationship

Relationship type

Relationship types

Parent company

Example:?Subsidiary

Dependent on classification

Outgoing relationship

"subsidiary of"

Rel. Type Description Rel. Cat Description

SUB2V. importantsubsidiary 0050

Subsidiary of

Subsidiary

Relationships can exist between different business partners. You can map these relationships on the Relationships tab page.

The relationship categories you can choose from are predefined in the system and depend on the business partner classification. Example: "Is subsidiary of" for an organization, or "Is married to" for a person.

You can refine the relationship categories by defining different relationship types. The specific relationship type is dependent on the relationship category already chosen.

Where two business partners are related, the relationship will appear in the master data for both partners.

Outgoing relationships are all the relationships with other business partners which were entered in that particular business partner.

Incoming relationships are all those relationships which were entered in the other business partner. In the slide example, the subsidiary has an outgoing relationship is subsidiary of, whereas the

parent company has a corresponding incoming relationship.

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Company-code Dependent Business Partner Data: Standing instructions

PaymentPaymentdetailsdetails

TransactionTransactionauthorizationsauthorizations

DerivedDerivedflowsflowsCorrespondence

Correspondence

Business partner A

Standing Instructions are master agreements concluded with a business partner. Standing instructions for business partners concerning payment details, correspondence and derived flows are included in tab pages in the maintenance of business partners. By integrating standing instructions in the business partner data, they have also been linked to release workflow business partner. You can also access the standing instructions with a separate menu path.

Master agreements can be made according to: y Authorizations

Which types of financial transactions are permitted with a business partner?

y Payment details For transactions with business partner A => Payment details of BP A as default values for the transaction

y Correspondence For transactions with business partner A => predefined: which correspondence is generated for which transactions?

y Derived flows For transactions with business partner A => predefined: if in the transaction with BP A, flow X is generated, tax/commission in the amount of y% is to be calculated

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Standing Instructions: Business Partner Authorizations

Assign

Business partner A

Transactionauthorizations

Authorization

X

CFM

FT deposit

51 A FT deposit100 Investment200 Borrowing

Deposit at notice

52 A Call money 100 Investment200 Borrowing

Money Market

In order to make use of a business partner (BP), you must - create the BP,

- release the BP for use and

- authorize the BP as a partner for specific financial transactions.

y You can only grant transaction authorizations if the business partner once set up is released and is not designated for deletion.

Transaction authorizations control which financial transactions are permitted with a business partner. You can assign transaction authorizations at the following levels:

- Contract type

- Product category

- Product type

- Transaction type

You have to assign authorization to each business partner and in each company code.

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Financial Transaction: Standing Instructions

Payment detailsPayment details

Assign Assign

CorrespondenceCorrespondence Derived flowsDerived flows

Assign

- Derivation procedure- House bank and corresp. bank account

- Business partner bank details

Business partner ABusiness partner A

- Confirmation- Print- Fax- SWIFT, IDoc- E-mail- Counterconfirmation

Payment details include all information required to conclude payments, that is, your own (house bank) account data and, where applicable, business partner bank details. You can process different payments in different currencies for each business partner. You can assign any payment details as Standing Instructions for a transaction. You can assign your instructions on the contract type, product type up to transaction type levels. When concluding a transaction with BP A, the payment details assigned to the relevant transaction are drawn automatically from the standing instructions and proposed as default values. This saves you making the entries manually.

Standing instructions for correspondence control how external correspondence, that is, correspondence with a (particular) business partner is to be handled. You can choose by determining any level from contract type to transaction type whether correspondence with the business partner for a particular transaction should be in print, by fax, e-mail, IDoc or Swift form. These details must be specified if correspondence is to be exchanged with a business partner.

You can use derived flows in the money market, foreign exchange, derivatives and securities areas to simplify the calculation of amounts (such as taxes) which depend on other flows. To generate derived flows, you must assign a derivation procedure to the relevant partner.

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Business Partner Standing Instructions: Payment Details

Payment details ID

Incoming Outgoing

CFMCFMMoney MarketMoney Market

FT deposit

51 A FT deposit100 Investment200 Borrowing

01 01x x

Assign

Currency Pay. det. ID

Housebank

Account ID

EUR 01 Deuba 1000

USD 01 Deuba 1050

......

......

......

......

......

......

BP ABP A

......

......

......


The system uses the house bank and the account ID defined in the business partner payment details to determine the bank account to which the posting is being made.

After creating the payment details, you must not forget to assign them. This allows you to direct the postings for different products or payment directions to separate

accounts.

The system supports multiple payment methods levels. By entering a bank chain, you can process payments using several banks. Up to three intermediate banks are supported.

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Transaction: Correspondence

Example: Confirmations by fax, e-mail, SWIFT

Fax

Example: dealing slips

External InternalConfirmation Confirmation

Correspondence serves to document and match concluded financial transactions. You can define correspondence as internal correspondence types (such as dealing slips) and external

correspondence types (such as confirmations). By performing a correspondence run, you can confirm all the financial transactions you have concluded with a partner in a given period. You can print the generated data or have it sent directly from the system by fax. You can also use e-mail and IDoc. To send e-mails, you must set up the communication interface SAPconnect. For money market and foreign exchange transactions, you can generate SWIFT files MT320 (fixed-term deposits) and MT300 (forex). A user exit allows you to use the FX Match function for outgoing confirmations (MT320 only).

You can control external correspondence types with partner-specific standing instructions for correspondence. Control of internal correspondence types is not partner-specific.

You can determine when correspondence is carried out with the Customizing settings for product and transaction types and activities. You can also specify whether correspondence should be generated automatically when a transaction is created, changed, or reversed (that is, as soon as the transaction is saved). All correspondence is recorded in the financial transaction data.

The system also keeps a record of the confirmation status in the transaction. This includes information about when the confirmation was sent/received, the relevant activity, the user, the form used, and the output type of incoming or outgoing confirmations.

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Business Partner Standing Instructions: Correspondence

Correspondence

Counterconf. Print Fax SWIFT IDoc E-mailCFMCFMMoney marketMoney market

Fixed-term deposit

51 A Fixed-term deposit100 Investment200 Borrowing

Deposit at notice

51 B Call money100 Investment200 Borrowing

Correspondence type: External

Assign

BP ABP A

You control the (external) correspondence with a business partner by defining standing instructions for correspondence. In the standing instructions for correspondence, you assign correspondence media and parameters to the external correspondence types for a business partner. You can make this assignment at several levels: contract type, product category to transaction type.

You can choose between different correspondence media. You can also print, send by fax or SWIFT external correspondence directly from the R/3 system.

Correspondence parameters: Correspondence is automatically sent to the business partner's standard address. If you want to use a different address for a business partner, save it in the 'Alternative address' field. If you require counterconfirmation from your business partner, flag the Counterconf. field. (Prerequisite: Customizing is set up to allow automatic correspondence).

Correspondence that has been generated is stored in the financial transaction data.

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Transaction: Derived Flows

Derivation ruleInterest income

tax

z Depending on certain flows, you can generate new flows by defining derivation rules

z Flow 1200 Interest rate EUR 1,000

Flow 1800 Tax 1 EUR 300

Flow 1801 Tax 2 EUR 16.50

You use derivation procedures to generate certain flows automatically. These flows are calculated on the basis of other financial flows in the system.

When you process the original flow, the system generates the dependent (or derived) flows automatically.

Example: Interest income tax of 30% (tax 1) is deducted from the nominal interest (flow type 1200), and a local tax of 5.5% (tax 2) is deducted from tax 1 (that is, 1.65% of the nominal interest amount).

The interest condition of the transaction generates an interest flow of type 1200. At the same time, the system adds other derived flows to the cash flow:

- Interest income tax (flow type 1800)

- Tax 2 (flow type 1801)

You can then process all flow types (original and derived). For example, you could offset the appropriate amounts when you make the interest posting.

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Business Partner Standing Instructions: Derived Flows

CFMCFMMoney marketMoney market

Fixed-term deposit

51 A Fixed-term deposit100 Investment200 Borrowing

Deposit at notice

52 A Call money100 Investment200 Borrowing

Assign

TAX1

Derivation procedure

BP ABP A

In the application, you specify when a particular derivation procedure should apply for a certain business partner. You can assign the derivation procedure at different levels (from contract type to transaction type).

If you create a transaction with a business partner, to which you have assigned a derivation procedure (at the corresponding level), the system generates additional flows on the basis of the derivation rules you have defined.

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Banks: Payment Details

BP Bank Detailsbankaccount

House bankH bank account

Conclusiontransaction with

business partner A

Posting/Payment

entered manually in transaction

+ payment details

BankBankdatadata

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Banks: Master Data

Bank country DEBank key:Bank key: 200 500 00200 500 00Address

Deutsche BankRegionStreetCity Bank Branch

Control dataSWIFT codeBank groupPostbank AcctBank number

Banks: General Information

Bank country DE

Bank keyBank key 200 500 00200 500 00

AddressFinancial instituteBank CRegionStreetCity .... ..

(Account 889613262)

(Account 12345678)

Partner bank

House bank

... Function

BankBankdatadata

Bank details, which are required for your own and the business partner bank, are maintained centrally in a bank data pool.

Entered bank data is maintained in the Financial Accounting bank directory, that is, automatically or manually stored and accessible throughout the system. The bank directory contains the bank master data. This includes bank address data and control data, such as swift codes and bank groups.

The bank directory must contain the master data of all banks required for processing payments. These include your own house banks and the business partner banks.

You can use entered bank data (name, address, bank code) - as "Partner bank" to maintain business partner bank details

and

- as "House bank" to maintain your own bank details with the appropriate link to Financial Accounting.

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Business Partner Central Data: Bank Details

Central dataCentral data

Coun-try Bank key

Bank account

Partn. bank

DE 600 501 01 5214561 A1

DE 100 500 00 18889 B1

Bank A

Bank B

DE 200 500 00 889613262 C1Deutsche Bank

Business partner A

BankBankdatadata

Bank details

The bank details of each business partner are maintained by entering the country, appropriate bank key and account, a.o. Each individual bank detail is identified with the partner bank key (Partn. bank).

Example: Entering "B1" encodes that: business partner A has account number 18889 with bank B with bank key 100 500 00.

When maintaining business partner bank details, you can enter the bank country and key to draw the bank description from the bank data pool, if this data has already been created. If in bank details, a bank (country and bank key), which has not yet been created in the bank data pool, is entered, a pop-up enabling the creation of general bank data appears automatically, so that the new bank can be added to the pool.

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House Banks: Master Data

Corresponding bank accounts:12345678. . .

Bank country DEBank keyBank key 200 500 00200 500 00Address

Deutsche FinancialRegion instituteStreet Dt. BankCity Branch

Control dataSWIFTBank group

House banks

Bank dataBank data

BankBankdatadata

Company code 1000

BankBankdatadata

Banks, with which you have current accounts, should be entered as house banks. When maintaining business partner bank details, you can enter the bank country and key to draw the bank description from the bank data pool, if this data has already been created. If data (country and bank key) is entered for a bank, which is not in the bank data pool,. a pop-up enabling the creation of general bank data appears automatically to add the bank to the bank data pool.

House bank accounts are to be assigned accordingly.

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House Banks: Creating Master Data

Chart of accounts

Bank account data

G/L account: 113100Account IDCurrency

Company code 1000

Corresponding bank accounts

House bank

Bank countryBank key

GIRUN12345678EUR

DEUBA

DE200 500 00

House banks identified with a specific house bank ID are maintained in the company code. Each account held at a house bank must be created. Each bank account is identified by a unique key of the account ID to be assigned. This account identification is unique to each each company code, house bank and account. These short names help to simplify use of your own bank details in transactions.

As a rule, an internal general ledger is kept in Financial Accounting for each house bank account. The link between the (external) house bank account and the (internal) general ledger is created by the appropriate assignment.

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House Banks: G/L Accounts

FIFI-- General LedgerGeneral Ledger

Company code 1000

G/L acct 113100Chart of accountsChart of accounts EUREUR

Description Dt. Bank

:Account currency EUR

::

Bank/Financial dataHouse bank DeubaAccount ID GIRUNCash management level F0

Create the master data of the house bank general ledger in FI to maintain it. Here, you can set definitions, such as account currency and the cash management level on which the amounts posted to this account are displayed in Cash Management.

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Cash Management Account Name: Definition

CoCd

1000...

CM acc. name

DB Dollars

G/L acc. no.

113150

Bank account

110113150

Description

DeubaDollar account

Cash position/Group

Account CoCd 04/04/YY

DB Dollars...

1000

04/03/YY

1,000.- 1,011.-

IMG: Cash management

In Cash Management, the amounts posted to general ledger accounts are displayed on the cash management levels assigned in the FI Accounts master data. The relevant account is indicated in CM either by the (general ledger) account number or when maintaining a cash management account name for this account with the cash management account name. In cash management, the cash management account name replaces the account number with a proper name. It is used here in all transactions and reports, such as cash positions, instead of the account number.

Example: Amounts in G/L account 113150 are displayed in Cash Management: a.) without maintaining the cash management account name: Account Amount 113150 1.000 b.) with maintaining the cash management account name

Account Amount DB Dollars 1,000

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Transaction: Payment Details Data

PaymentdetailsID

Regu-lar

Partner ?bank ID

Payment method

Paymentprocess

House?bank

Account? ID

01 DB Checking

01 DB USD

Company Code 1000 Product type 51A Fixed-term depositTransaction type 100 Investment

R Crcy Eff. FType HBank Account ID Pmnt Regular Part. Bank- EUR Deuba GIRUN + EUR Deuba GIRUN

Transaction: Payment details

ConclusionFinancial trans. withbusiness partner A

Posting

+ Payment details

Example: fixed term deposit

In addition to business data entries, Transaction and Position Management also processes payment details, that is, data required for processing payments:

y R: Payment flow direction ("+": incoming payments; "": outgoing payments)

y H bank: Enter house bank, with which the payments for this transaction are to be processed, in the form of the defined house bank ID

y Account ID Enter account of house bank, with which the payments for this transaction are to be processed, in the form of the defined account ID

y Partner bank: Enter bank account (bank key and account) of the business partner, with which the payments for this transaction are to be processed, in the form of the defined partner bank ID

The system supports multiple payment methods levels. By entering a bank chain, you can process payments using several banks. Up to three intermediate banks are supported.

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Transaction Manager: Money Market Overview


Unit 3 Transaction Manager: Money market

Unit 4 Transaction Manager: Foreign Exchange, Derivatives





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Back office functions (example: fixed-term deposit

Accounting functions (example: fixed-term deposit)

111

222

Introduction to Money Market

333

444

555 Special functions

Trading functions Fixed-term deposit Deposit at notice Commercial Paper/Master agreement Interest rate instrument Cash flow transaction Facility

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By the end of this unit, you will be able to:

z Carry out Money Market trading and back office activities

z Use the support tools for back office processingz Understand integration with Accounting

Money Market: Unit Objectives

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Money Market: Business Scenario

z After having familiarized yourself with the general information and created business partners in the system, you want to get an overview of the functions in Money Market.

z What do you need to enter the trading area to create a financial transaction?

z How can you map your back office department in the SAP R/3 system?

z What additional functions are there?z How can you ensure integration of the transactions in

Financial Accounting and Cash Management?

You are a member of a project team, which will make both basic and all other settings required for mapping financial transactions in Corporate Finance Management.

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Money Market 1: Introduction

Definition/Characteristics

Product types in Money Market

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Money Market: Product Types

Fixed-term deposits

Deposits atnotice

Commercialpaper



Facility

Product Types

DerivativesForeign ExchangeSecuritiesMoney Market

Hedginginstruments

Investment/Borrowinginstruments

Money market transactions are for short- to medium-term investments or borrowing capital. On the basis of surpluses or deficits determined in Cash Management, you can implement the planning decisions in Money Market. In Cash Management, you can see the immediate impact your transactions have on your company's liquidity (by value date at the time of the investment/borrowing and on the due date).

Interest rate instruments are used to map money market transactions, which include different forms of interest payments and repayments.

Cash flow transactions in Money Market enable you to represent a wide range of transactions. You enter the term manually and also the cash flow that results from the particular structure of the transaction. This includes position changes, expenses, revenues, and payments.

Facilities enable you to map master credit lines between a lender and a fixed business partner for a series of withdrawals against credit.

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510 Fixed-term deposit Fixed-term dep. (overnight)?520 Deposit at notice Fixed-term dep. (term)?530 Comm. Paper?540 Cash flow

Product CategoriesProduct CategoriesFinancial InstrumentsFinancial Instruments Product TypesProduct Types510 Fixed-term deposit Fixed-term dep. (overnight)520 Deposit at notice Fixed-term dep. (term)530 Comm. Paper Paper540 Cash flow trans.550 Interest rate inst.560 Facility

600 Foreign Exchange External forexInternal forex

Production Categories and Types: Examples

Money Market

Foreign Exchange

Product categories are predefined by the system. The user can define product types for each of the product categories.

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Term Deposits

z Fixed-term deposits Due date arranged from the outset

Fixed interest for the whole term (at least 30 days)

Rollover facility

z Overnight money Term only lasts one day (current practice until further notice)

z Deposit at notice Concluded for an unspecified period

Due date depends on the period of notice

Fixed-term deposit trading (including overnight money and Euro money) incorporates the transaction types, fixed-term deposit investment and fixed-term deposit borrowing. If the authorized business partners and corresponding payment details are already defined in the system, the only necessary entries are structure characteristics and conditions.

When trading with deposits at notice, you make investments and borrow without defined due dates. The amounts, conditions, periods of notice, payment dates, and interest payment patterns are entered.

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Commercial Paper

z Short-term, discounted bearer bondz No interest payments during the termz Term: 1 week to 1 year (on average 2 months)z Issuer and investor enter into a business relationship directly

and agree on a repayment amount, which the debtor pays to the creditor at the end of the term.

z This repayment amount is discounted to the start of the term using the required yield. The investor pays the amount calculated to the debtor at the start of the term.

z Banks act as 'DEALERS' without assuming the placing risk.

Commercial Paper trading includes the purchase and sale of individual Commercial Paper tranches. A characteristic of commercial papers is that no interest payments arise during the term. By entering a nominal amount and the target yield, the payment amount that the investor has to pay to the debtor at the start of the term is determined by means of deducting accrued interest. Interest can also be determined on the basis of a given rate.

At the start of the term, the cash flow shows the principal increase as the nominal amount together with the discounting amount. At the end of the term, the repayment of the nominal amount is displayed. As a second variant, you can show the discounted principal increase at the start of the term, and the repayment of the cash value and the interest rate flow at the end of the term.

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Money Market 2: Trading Functions

Commercial paper/Master agreement

Deposit at notice


111

222

Fixed-term deposit

333

444

555

666


Facility

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Transaction and Position Management Process: Fixed-Term Deposit

PostingsPayment transactionsAccrual/DeferralValuationsReversals

Create order/contractRolloversReversalsTransaction history

Settlement/ControlNettingConfirmation LettersReversalsTransaction historyInterest rate adjustment

User authorizationLimit management

Release


The organizational processes of transaction management can be split up into several steps:

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Trading: Creating a Fixed-Term Deposit

Financial transactionsz are assigned to the related organizational unit

(company code) within your company Diverse organizational structural options for corporate groups

z are concluded with a business partner Internal and external (banks) business partners

z are concluded for a specific product/transaction type Product and transaction types can be defined according to company

z can be created with different processing methods

In the Trading area, the main functions for entering and changing financial transaction data are consolidated. To map financial transactions efficiently, you first have to make basic settings:

In which organizational unit (company code) is the financial transaction concluded? This assignment enables you to distinguish between different corporate areas, particularly in more complex organizational structures, such as treasury headquarters.

Which financial transaction is being carried out? Here, you specify the product and transaction types along with the relevant processing rules.

With whom are you concluding a certain financial transaction? Each financial transaction is linked to a business partner. The data stored for the business partner offers considerable scope for rationalization. For example, if the same business partner bank and payment details are always used, these details can be automatically linked to the financial transactions. You can also choose other options for a business partner, such as restricting the type of products which can be traded.

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Trading Support

Entry and processing aids- Standing instructions- Copying functions- Abbreviations- Fast entry- Collective/Fast processing

Field selection control

Market DataPartner

Business partner Business partner managementmanagement

Standing Instructions

Transaction authorizations Payment details Correspondence Derived Flows

Automatic checks- Working day checks- Trader and partner

authorizations Valuation tools

- NPV calculator- Option price calculator etc.

Dealing slips Change documents

Optional: OfferOptional: Offer ContractContract

MarketMarketdatabasedatabase

SimulationSimulation

Transaction Management offers various support tools. Using the Field selection control you can control many of the visible fields. You can adapt the

"look" of Corporate Finance Management Transaction Management to suit your business

You group the visible fields into field groups according to different business criteria. Each of the field groups available can be assigned an attribute, which determines the appearance of the screen. This means that you can specify whether you want field groups to be suppressed, displayed, or to be defined as required entries.

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Creating a Financial Transaction: Initial Screen

Company Code 1000 IDES AG

Product type

Transaction type

Partner

51A Fixed-term deposit EXTERNAL100 InvestmentDeuba Deutsche Bank

SpecificationsCurrency

External number assignment

Transaction

Portfolio

instead of currency of comp. code

MasterAgreement

To get to the Money Market start menu choose Accounting > Corporate Finance Management > Transaction Manager > Money Market in the menu.

When you create a Money Market transaction, you represent a contract for the investment/borrowing of short term funds. You enter which trading object (product type) should be invested or borrowed with which partner in which currency.

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Creating a Fixed-Term Deposit: Structure

Structure StatusAdminis-tration Other flows Payment Details Cash Flow Memos

1000

51A100

1100

1M EUR -

08/10/YY

++2

2.6Act/360

Tabs fornavigation

Business partner

Flow type

Interest structurePercentage

...

...

Company code IDES AG

Product type Fixed-term deposit ExternalTransaction type Investment

Term

StartInvestment/IncreaseAmount End

Int.calc.method

Investment

Flows are automatically generated when a financial transaction is created. For example, principal increase, nominal interest, and final repayment are generated following the creation of a fixed-term deposit.

The structure contains only product type-specific information, such as the amount, term and interest structure. Here, you can use various key codes for entering amounts and dates (for example, M = million, T = thousand, 0 = today, ++2 = 2 months).

From here. you can branch to the entry screens of general transaction management. Tabstrips help you navigate between the screens Administration: Information on portfolio assignment, account assignment references for position bookings, general valuation classes Other Flows: You can add add other flows to the automatically generated flows manually (charges, commission etc.). Status: Information on correspondence, process, release status ...

Under Payment Details, you enter the relevant payment details for this transaction. If the payment methods are maintained as standing instructions for a specific business partner, they appear as default values and can be modified manually.

You can also use the date check to establish whether a particular due date falls on a working day or not.

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Interest Structure

Interest structureAt end of termAt end of monthMonthly freq.Daily freq.

360E/360Act/360

:360 / 360

Percentage

Int. calc. method

Frequency

Trans. due date

Calc. period

With rollover

; Shift due date to end of termEvery

Calc. trans. due date

Rounding

Capitalize interest

2.6000

Act/360

Monthly Day/Month

Customizing

The SAP system includes the most widely used international interest rate calculation methods for trading.

When defining the product type, you can make a corresponding Customizing entry for the interest rate calculation method.

The frequency specifies the time of the interest payment. When you choose "Daily" or "Monthly" frequencies, you must also specify the frequency in days or

months (example: monthly frequency = every three months).

You can capitalize interest by checking the appropriate field. However, this checkbox is only displayed if a condition of the type "interest capitalization" has been assigned to the relevant transaction type.

Optional suppression and displaying of detailed information as necessary. (Suppress/display interest structure)

You can also calculate interest amounts exponentially. The payment rate describes a percentage rate that is applied to the calculated condition amount. The

cash flow, therefore, does not show the calculated condition amount, but rather the condition amount multiplied by the payment rate and shown as a percentage.

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Payment Details

Currency Payt. Details ID

Payer/Payee

Partner Bank ID

Payt. Method

Payt.Process

HouseBank

Ac-count ID

EUR 01 DB GIRUN

USD 02 DB GIRUS

......

......

......

Company codeProduct typeTransaction type

R Crcy. Eff. Flow HBank Account ID Payment. Pmnt. req.+ EUR DB GIRUN - EUR DB GIRUN

Fixed-Term Deposit: Payment Details


The bank or bank clearing account which are to be posted are determined using the house bank and the account ID stored in the business partner's payment details.

The system supports multiple payment method levels. By creating a bank chain, you can process payments using several banks.

There is a Repetitive Code column in the transaction payment details and the Standing Instructions. This is used (primarily in the USA) for simplification of recurring payments.

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Nominal int. 4% interest / Frequency: 6 months

Final repayment

Example: Fixed-Term Deposit

Payt. date Int. Amount

Nominal int. 10/31/YY 4% 3,333.33Nominal int. 04/30/YY+1 5% 4,166.67

Changing conditions:

Financial Transaction Conditions

Financial transactions in SAP Corporate Finance Management are mapped on the basis of the flow and condition concepts. Conditions are contractually agreed components of a financial transaction. Condition types include different interest, dividend or repayment terms, which ensure that each product type is assigned its appropriate structure characteristics. Condition types thus control which structure characteristics are displayed when you create transactions of a specific product type.

Depending on its type, a condition position is characterized by amounts or percentages and calculation bases, as well as calendar data and date updates.

The principal task of conditions is the automated generation of flows. Therefore, the flow types that you assign to condition types should show changes in the payment flows and should be elements of the cash flow.

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Pmnt. Pmnt. amount Crcy. Flow typedate

10/01/YY 1,000,000.00 - EUR 1100 Principal increase12/31/YY 225.00 - EUR 1801 Tax 212/31/YY 3,000.00 - EUR 1800 Interest income tax12/31/YY 10,000.00 + EUR 1200 Nominal int.12/31/YY 1.000,000.00 + EUR 1120 Final repayment

ExampleExample: Fixed-term deposit 1M4% interest

Dir

Select layout

Variant Name

1SAP01 Basic view

1SAP02 Due date view

1SAP03 Invoice view

1SAP04 Local currency view

1SAP05 Payment view

1SAP06 Posting view

(1SAP07 Int. rate adj. view)

Fixed-Term Deposit Cash Flow

The cash flow provides the basis for - Postings

- Effective interest rate calculations

- Accrual/deferral of expenses and revenues.

Displaying the cash flow: y Flow direction y Sorting flows according to preferred criteria y Search and selection functions y Totaling y Export functions y Direct selection of the preferred view y Facility to save layouts y Direct editing of flows in the cash flows

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Financial Transactions: Cash Flow

ACTUALACTUAL

Investmt. 4/1/YY 1M EUR invested

Interest 07/01/YY 10T EUR expected

Repmnt. 07/01/YY 1M EUR expected

Cash Flow (example)

Transaction Amnt invested/borrowed

ConditionPLANPLAN

Basis for

Updating Cash Management

Updating Financial Accounting using flexible account determination

Payment triggering

Updating positions

Interest accrual/deferral

Foreign currency valuation

Yield calculations

The cash flow of financial transactions forms the basis for all trading, transaction and position management processes as well as evaluation activities within CFM.

CFM uses financial mathematics to determine cash flows. The system provides a set of formulas, which put into practice the "building block principle" of the

free and flexible CFM structure.

In Transaction Manager, application-specific control programs call up financial mathematics building blocks, which are stored centrally, to calculate interest and repayment schedules etc.

These FiMa building blocks generate or calculate a series of activities known as cash flows (payment flows) for a financial transaction in the application (such as a stock purchase or swap). Flows are generated for a specified calculation period on the basis of the conditions assigned to the financial transaction.

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1901 Charges

1902 Commission

...

z Flow typez Namez Directionz Payment amountz Currencyz Payment datez Posting status and

description

Additional Flows

Flow types allow you to define additional flows, such as charges and commissions (as absolutes or percentages) for individual product types. These are then recorded for the individual transactions.

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Collective Processing: Money Market

z Overview of money market transactions which correspond to the relevant selection criteria

z Conducting relevant transactions Creation Change Display Rollover Termination Settlement Reversal History

z Branching directly to the specific transactionz Link to the SAP List Viewer

Collective Processing enables systematic transaction management. This facility displays all the business activities you select on the basis of shared criteria in a list with brief descriptions of each transaction and provides the necessary processing functions.

From the processing list, you can branch directly to an individual transaction at any time. The connection to the SAP List Viewer provides you with a range of display options. You can

determine the columns or rows to be displayed, sorted and consolidated and save these layouts for later use.

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OfferNo.12.4%

OfferNo.22.7%

OfferNo.32.5%

OfferNo.22.7%

Contract

Sorting according to quality

Offers for Fixed-Term Deposits and Foreign Exchange

Using the "Offer" activity category, you can group and store quotations from different banks with a reference.

This sorts offers according to quality. You can create a contract directly from an offer entry. You have to create a separate number range for transactions in the "Offer" activity category. The

number range for the corresponding transaction type is allocated in the number range for offers field in Customizing for transaction types.

You can use this function in the Money Market area for fixed-term deposits and in the Foreign Exchange area for forex spot transactions and forward exchange transactions.

A special Evaluation Report for Offers, which you can configure individually, tells you how many offers were submitted, and how many resulted in a contract.

You can display simulations using the Journal.

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Simulation of Fixed-Term Deposits/Foreign Exchange Transactions

z Creating simulated financial transactions

z A business partner is not required for simulation

z Management with a separate number range

z Create a contract from a simulation

Add a business partner

You can simulate foreign exchange transactions and fixed-term deposits with the Simulation activity category.

You can create a contract from a simulated transaction using the change function. Before you can do this, you must add a business partner, as you are simulating a transaction without a business partner.

You manage simulations using a separate number range. You assign the number range to the relevant transaction type in the simulations number range field in Customizing for the transaction types.

You can display simulations using the Journal.

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Money Market: 2 Trading Functions


Deposit at notice


111

222

Fixed-term deposit

333

444

555

666


Facility

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Flow typeAmount

Start

...

...

Notice period

...

Notice

06/07/YY06/30/YY

3 Days

Notice

Giving Notice (Deposit at Notice)

Termination

Interest structure

Investment Term

For deposits at notice, there are functions for giving notice or rolling over deposited funds. Rolling over means an increase or decrease in the amount of the original deposit at notice with, where applicable, different conditions under the same transaction number.

With deposits at notice, the cash flow can only be generated for a set period, since the end of term is only fixed when notice is given. For deposits at notice for which no notice has been given, it is therefore necessary to update the cash flow periodically.

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Deposit at notice


111

222

Fixed-term deposit

333

444

555

666


Facility

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1/1/YYYY to 12/31/YYYY

1000

IDES AG; Deuba; FUXX

Investment

Eur

1M10M500M

Commercial Paper program from 12/31/Y-1

Example: Master Agreementz Term of contractz Permitted company codesz Permitted business partnersz Permitted transaction typesz Minimum and maximum

transaction terms

z Currencies: Tranche Minimum amount Total volume

Master Agreement

Setting agreements and conditions effective for all transactions under the master agreement

You can store master agreements in the system and use these to define company standards for concluding Money Market transactions. These contain specific information on company codes, business partners, terms, as well as minimum and maximum volumes by currency.

You either specify the master agreement when you create a transaction, or you can subsequently assign a transaction to a master agreement. The system checks the following master agreement restrictions:

Is the transaction amount a complete multiple of the tranche? Checking the minimum amount

Determination and evaluation of the degree of usage of the master agreement limits by the assigned transactions.

For each specific master agreement, you can determine to what degree transactions are utilized in terms of assets and liabilities.

You can use the relevant tabstrips to navigate between the different displays of master agreement data.

While processing, you can directly call up an overview of the degree of usage of the master agreement limits.

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Deposit at notice


111

222

Fixed-term deposit

333

444

555

666


Facility

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Interest Rate Instruments

fixed

with interest rate adj

Interest forms

Installment Finalrepmnt.

Repmnt. schedule

Interest rate instruments

Interest rate instruments are used to map money market transactions, which include different forms of interest

payments and repayments.

non-variable annualrepayment

variable

The interest rate instrument supports the entry and calculations of forms of fixed and variable interest as well as installment-based and 'full payment on maturity' repayment schedules.

The instrument supports the entry and processing of these transactions in the Front Office, Back Office and Accounting.

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Interest Structure

Int. rate instr.Perc.Int. calc. methodFreq.Every

fixed4.0

360/360End of month

1 Months

Cond. type 1200

Repayment Structure

Repmnt. formRepmnt. amountFreq.Every

Repmnt. installment

10,000.00On first day of month

1 Months

Cond. type 1130EUR

Example: Interest Structure Repayment Structure

To enable the different interest and repayment calculation procedures, you must describe the financial mathematical structure of the interest rate instrument. Descriptions of interest rate instruments must include the following: - Transaction amount, currency, and flow type - Term - Interest rate structure: Interest form, interest calculation method, frequency, interest period update etc. In interest structure, some of the described attributes are dependent on the selected interest form. For example, you can enter an interest reference for variable interest or a percentage rate for a fixed interest form. - Repayment structure: In Repayment structure, some entires are dependent on the selected repayment form. No additional details are required for final repayments.

To process an interest transaction, particularly details of the interest and repayment structures, which constitute the basis of the financial mathematical calculation of the cash flow, must be specified.

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Deposit at notice


111

222

Fixed-term deposit

333

444

555

666


Facility

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Cash Flow Transactions

z Flexible representation of a wide range of transactions

Manual entry of Term Cash flow from position changes, expenses,

revenues, payments etc.

z The application supports: Entering and processing cash flow transactions and subsequent management in back office and

accounting

Note that flow types must be assigned to the appropriate product type/transaction type.

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Deposit at notice


111

222

Fixed-term deposit

333

444

555

666


Facility

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Facility: Definition and Objective

Definition

Facilities enable you to map master credit lines between a lender and a fixed business partner for a series of withdrawals against credit (drawings).

Facilities management and processing

Objective

Confirmed facility Unconfirmed facility

Facility

A facility is used by a lender and a borrower to agree general terms (= credit line) for a series of drawings against credit. The lender can name more than one borrowing party entitled to draw on the credit line. These borrowers may have variable drawing rights as far as time limits and amounts are concerned, right up to the agreed credit limit.

Any utilization of this credit facility is called a drawing.

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Facility

Creating and Settling a Facility

Assigning Financial Transactions Checking that a facility adheres to the master agreement Manual exchange rates for foreign currency transactions Checking that credit lines are not exceeded Updating facility usage Updating facility charges

Assignable Financial Transactions Cash flow transaction Fixed-term deposit

Deposit at notice Interest rate instrument

If you use a certain portion of a facility's credit line, this is represented by a financial transaction in Transaction Management.

The financial transaction is assigned to the facility as it is entered or processed. During the assignment process, the system checks that the transaction characteristics correspond with

the master agreement stored for the facility.

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Money Market 3: Back Office Functions (Fixed-Term Deposit)

Correspondence

Settlement = Checking

Netting

Transaction process

Reference number

Interest rate adjustment

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Transaction and Position Management: Fixed-Term Deposit





Release


Depending on the way in which your company is organized, financial transactions can be forwarded to the Back Office area once they have been created in Trading. Back-office processing contains control and change functions, so that any entries made can be checked here and changed as necessary. Post-processing includes the following functions:

Augmenting transaction data, for example, adding information that is relevant for the Back Office.

Preparing postings and payments, for example, checking the accounts to be used later in the automated processes. If you have not already done so, you must now assign an account assignment reference and payment details to the financial transaction. Without this information, the CFM flow cannot be posted in Financial Accounting (see account assignment reference).

Generating correspondence in the form of dealing slips, letters of confirmation, or confirmation files.

By saving the settlement activity, the system changes the activity category of the transaction in order to document that it has been checked and processed in Back Office-processing.

If a transaction has activity category "WITH settlement activities", the contract can only be posted after the settlement.

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Assigning position indicators:Account assignment reference

DB000001 Deutsche BankFixed-term deposit

PaymentdetailsID

Payer/Payee

Partner ?Bank ID

Pmnt. Method

Pmnt.Process

House?Bank

Account ID

01 DBChecking

01 DB USD

Company code 1000 Product type 51A Fixed-term depositTransaction type 100 Investment

R Crcy. Eff. FType HBank Account ID Payment Pmnt. req.- Eur Deuba GIRUN + Eur Deuba GIRUN

Transaction: Payment Details

Settling/Checking Transactions and Position Indicators

Just as in Trading, you can call up and correct information on entered transactions. You can check, change, or add information that is relevant for posting and payment. If you have not

already done so, you must now assign an account assignment reference and payment details to the financial transaction. Without this information, the flow cannot be posted in Financial Accounting (see account assignment reference).

You can have the account assignment reference or the payment details of the particular business partner appear as default values. You can add to or change these default values. Account assignment references are created independently of valuation area. You can assign account assignment references to positions variably and independently of valuation area, and/or control account determination variably according to valuation area and account assignment reference.

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Controlling with Position Indicators

This indicator specifies the position management and valuation parameters on the level of the valuation area, and allocates the account assignment reference to a position.

The position indicator can be created manually or automatically by the system.

This indicator specifies the position management and valuation parameters on the company code level, and allocates the account assignment reference to a position.

The position indicator can be created manually or automatically by the system.

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Transaction history

History: Activity SequencesHistory: Activity Sequences

Activity Activity Type Date Active Status

SettlementSettlement

Management dataCoCdPTypTType

000151a100

SAP AGTransactionActiv ityAct. cat Order

47111Basic data

CoCdPTypeTType

000151a100

SAP AGTransactionActiv ityAct. cat. Order

47111

Management dataCoCdPTypeTType

000151a100

SAP AGTransactionActiv ityAct. cat. cont.

47111Basic data

CoCdPTypeTType

000151a100

SAP AGTransactionActiv ityAct. Cat. Cont.

47111


000151a100

SAP AG TransactionActiv ityAct. cat. Roll.

47111Basic data

CoCdPTypeTType

000151a100

SAP AG TransactionActiv ityAct. Cat. Roll.

47111


000151a100

SAP AGTransactionActiv ityAct. cat. Settl.

47111Basic data

CoCdPTypeTType

000151a100

SAP AGTransactionActiv ityAct. Cat. Settl.

47111

10/01/YY10/02/YY

10/31/YY

12

43

OrderContract

RolloverSettlement 10/02/YY

replacedreplaced

replaced5 Settlement activ

e

replaced

11/30/YY5 Settlement active. . .. . . . . . . . .

OrderOrder ContractContract RolloverRolloverSettlementSettlement


000151a100

SAP AGTransactionActiv ityAct. cat. Settl.t

47111Basic data

CoCdPTypeTType

000151a100

SAP AGTransactionActiv ityAct. Cat. Settl.

47111

The History function enables you to view the previous activity sequence for a selected transaction. You can call up a list of the activities and these are either active, reversed, or have been replaced by a subsequent activity.

The transaction history allows you to trace each activity and its corresponding details. The system also stores significant changes to transactions in change documents. This provides a

record of how and when a user corrected or changed the structure characteristics of any transaction.

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Correspondence

e.g. confirmations by fax, e-mail, SWIFT, IDoc

Fax

e.g. dealing slips

External InternalConfirmation Confirmation

Correspondence serves to document and match concluded financial transactions. You can define correspondence as internal correspondence types (e.g. dealing slips) and external

correspondence types (e.g. confirmations). By performing a correspondence run, you can confirm all the financial transactions you have concluded with a partner in a given period. You can print the generated data or send it directly from the system by fax. You can also use e-mail and IDoc. To send e-mails, you must set up the SAP Connect communication interface. For money market and foreign exchange transactions, you can generate SWIFT files MT320 (fixed-term deposits) and MT300 (foreign exchange).

You can control External Correspondence Types with Partner-specific standing instructions for correspondence. Control of internal correspondence types is independent of the business partner.

The system also keeps a record of the confirmation status in the transaction. This includes information about when the confirmation was sent/received, the relevant activity, the user, the form used, and the output type of incoming or outgoing confirmations.

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Confirmation Management

z Difference between outgoing confirmation and counterconfirmation

z View confirmation status for transaction correspondence in Status

z Status management for counterconfirmation can be controlled according to the business partner in the Standing Instructions + Customizing

z Monitoring overdue counterconfirmations

z Optical archiving of correspondence

z Correspondence overview and correspondence monitor

You can determine whether or not counterconfirmation is required for external correspondence for each business partner (in the Standing Instructions).

The system updates the confirmation status of the business transaction in Status: executed, reconciled (that is, counterconfirmation has been received and matched).

You can archive correspondence letters optically. To do this, you must set the "Optical Archiving" indicator in Customizing (choose "Define Correspondence Types") for the correspondence type you require. However, you need to use an external optical archiving for this. You can access archived correspondence from the transaction display. If you are in the display/change mode for a transaction, you can display correspondence activities by choosing Goto. By double-clicking a line, you can activate the Archive Link monitor and display the document.

The Correspondence Monitor provides the following additional processing and monitoring functions, which build on existing correspondence overviews: Overview of the current processing status Setting the counterconfirmation status to matched directly from the (manual match) monitor Option to execute planned correspondence directly from the monitor Option to repeat previously generated correspondence ...

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References Between Financial Transactions

Trans. 1Trans. 1 Trans. 2Trans. 2

BID OfferCON Swift-confirmation filesEUR Euro transaction currency conversion KMP NettingMIR Mirror deal linkOPT Option reference derivativesPRL Rollover of foreign exchange transaction REF General referenceSWP Forex swap

To document the connections between Treasury transactions or objects, you can define links in the administrative data of a transaction. To do this, you use fields in which you can enter any reference terms or numbers and then select these for subsequent evaluations.

A reference between transactions documents a relationship between "n" transactions. A reference category provides the purpose of a reference.

Some references are created automatically. These include relationships between transactions resulting from processing activities (rollover) or which are elements of a transaction (currency swap).

There are also references which are created by the user (netting). You can set up and process all references under Reference - Collective Processing. Using the SAP

List Viewer, you can flexibly modify the layout and sorting and, if necessary, store it as your own layout.

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Eff. fromInt. RateStatusRef. Int.Int. Fx. Dte.

Back Office: Interest Rate Adjustment

Manual

Prerequisite:Ref. int. rate

must be maintained

Automatic

Interest rate adj.

11/30/YY

03/03/YY

EURIBORD03

EURIBORD03

3.00

0.00

11/30/YY

03/01/YY

For financial transactions with variable interest, you must periodically carry out an interest rate adjustment, with which the interest rate is set at the current value of a reference interest rate.

The interest rate adjustment can be done either manually or automatically. With manual interest rate adjustment, use the reference rate to enter the interest rate value for each transaction. With automatic adjustment, the system checks in a table whether the current interest value is available for a reference interest rate.

Use the Interest Rate Adjustment tab page to get an overview of all the adjustment data that has been entered for the transaction.

A function is available for reversing interest-fixing. For variable interest rates, you can enter the interest rate for the first period as soon as you enter

interest conditions. This means that the interest rate need not be adjusted for the first interest period.

The Information System provides a Money Market Interest Rate Adjustment Plan to monitor deadlines.

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Automatic/Manual Posting Approval

Product typeTransaction type

Posting approval X

Trading Back Office Posting

Approval

Automatic!

For organizational reasons, manual posting approvals can only be given by a second user. If "x" is flagged, the posting approval is given automatically, that is, a transaction does not have to

be approved by a second user.

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Money Market 4: Accounting Functions (Fixed-Term Deposit)

Addendum: integration in cash management

Posting logic

Posting overview/Posting journal

Transaction process

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Transaction and Position Management: Fixed-Term Deposit





Release


After the transactions have been entered in Trading, checked and completed in Back office, they are accounted. Functions for the transfer to Financial Accounting - such as posting reports or postings in position management are consolidated here. Corporate Finance Management relies on some Financial Accounting functions. Financial transactions and positions must be handled accurately to guarantee the correctness of the final processes. Accounting, therefore, incorporates tasks, such as the periodical accrual/deferral of expenses and revenue and valuation activities.

You can only post transactions which have reached contract or settlement status (depending on the processing category) on the internal level (system level).

If you do not yet wish to post certain financial transaction flows, you can block the posting of these flows.

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Accounting

Fixed-term deposit 1 month 4.5%

Financial AccountingFinancial Accounting

FI interfaceSelection of thetransactions and flows to be posted

Sep 04 1100 - FT deposit 1.000.000

Oct 04 1120 + Final repmnt. 1.000.000

Oct 04 1200 + Nom. int. 3.750

The CFM information required for posting is transferred to Financial Accounting with an interface. The posting logic is based on the flow types generated, the account assignment reference of the financial transaction, and the account determination defined by the user.

You can post individual flows either to G/L accounts or to customer accounts. Payment transactions are generally posted to corresponding clearing accounts. You can then process the items on these clearing accounts using the functions provided by Cash Management (account statements) or Financial Accoun

Documents

FSC010 Treasury & Risk Mgt