SAP Treasury

SAP Treasury integration with financial accounting and cash management

Johan Dannestig

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

Fyrirlestrarheiti

1 december 2009 I 2 I

I.  Treasury Applications from SAP, an overview II.  Transaction Manager, integration to FI/CO and CM III.  Demo

09-12-01 I 2 I


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09-12-01 I 3 I


Gaining Efficiency in Finance

Optimizing Working Capital

  Free-up Working Capital   Decrease Day Sales Outstanding   Decrease Bad-debt write-offs

Driving Strategy and Growth

Supporting Excellence in Corporate Operations

 Manage Real-Estate  Manage Global Travel Policies   Develop Talents & Leadership

Ensuring Compliance and Mitigating Risks

 Measure Profitability   Control Costs   Define Benchmarks and KPIs   Link Strategy with Execution   Handle Mergers & Acquisitions

  Control Processes Efficiently  Manage Risks   Support Audits   Decrease Cost of Finance

  Accelerate Financial Close  Organize Finance Operations

Efficiently across the Enterprise

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


Financial Supply Chain Management and Treasury Applications from SAP

Issue invoice

Forecast cash

Finance working capital

Resolve disputes

Collect cash

Check credit- worthiness

Settle & pay Reconcile

Electronic bill presentment and payment

Dispute management

Collections management

Credit management

Cash and liquidity management

Treasury and risk management

In-house cash Bank Communication Management


Treasury Applications from SAP

SAP Treasury and Risk Management

Risk Analyzers

Transaction Manager

SAP Bank Communication Management

SAP Cash and Liquidity Management

SAP In-House Cash

Credit Risk Market Risk Portfolio Analyzer

Hedge Mgt Exposure Mgt

MM FX SEC COM DER DEB

Manage Financial Risk

Manage Financial Instruments

Manage Cash and Liquidity


SAP In-House Cash Core Functions and Benefits

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 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


SAP Cash and Liquidity Management Core Functions and Benefits

Benefits

  Single, reconciled financial data source

  Enables centralized treasury organization

  Flexible planning framework

  Natively integrated into SAP environment

  Adaptable to your organization‘s requirements

  Core SAP ERP component

SAP Cash Management

  Daily cash position

  Liquidity forecast

  Electronic bank statements

  Currency exposure

  Disposition

  Liquidity Analyzer as part of SAP ERP

  Mid- and long-term liquidity planning

  Decentralized access for data entry

  Central system for liquidity reporting

SAP Liquidity Planner


SAP Bank Communication Management Core Functions and Benefits

Benefits

  Improve control over payments

  Full auditability ensures compliance

  Real-time visibility of payment cycle

  Reduces time and cost of bank reconciliations

  Lower bank integration costs

  Complete transparency of payment status

SAP Bank Communication Management

  Batching of payments

  Payment approval rules

  Digital signature

  Payment Monitor

  Payment workflow

  Integration to SWIFTNet


SAP Treasury and Risk Management Core Functions and Benefits

Benefits

 Optimization of hedging and risk management processes through exposure management for operational FX and commodity exposures

 Increase transparency by having operational and treasury exposures evaluated for market risk

 Comply with legal regulations and compliance requirements

SAP Transaction Manager

  Support of standard financial instruments

  Integrated and automated straight-through processing

  State of the art risk management capabilities

  Credit Risk Analyzer

  Market Risk Analyzer

  Portfolio Analyzer

SAP Risk Analyzers


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SAP Treasury and Risk Management Portfolio Analyzer

Yield calculations: Money weighted, Time weighted, Modified Dietz method

Credit Risk Analyzer

Limit management: Limits freely definable, Multidimensional limits

Utilization: Formulas, Credit risk, Settlement risk

Market Risk Analyzer Price calculator: NPV, Prices, Sensitivities

Value at Risk: Varians/covarians, Historic, Monte Carlo

Simulate rates: What-if scenario, Relative, Absolute

Spot Forward Swaps Options Futures

FX Cap Floor FRA Swaps Options Futures

Derivat. Securities Bonds Warrants Stocks Certificates Repo Sec. lending

Debt Bonds Bank loans Commercial paper Facilities

MM Fixed deposits Deposits at notice CP Repo

Transaction Manager Front office: Position and deal reporting, Deal capture, Exercise, Dealer slip, Valuation tools, On-line limit check

Back office: Standing instructions, Correspondence, Netting, Settlement, Rate fixing (interest, FX), References, Corporate actions, Process monitors

Accounting: Flexible accounting determination, Accounting according to many international accounting standards – in parallel, Hedge accounting

Reporting

Reporting tools: SAP Query, ABAP List, and other 3rd party providers, BI

Middle office: Risk exposure, Controlling, Compliance,

Management reports: Positions, Performance, Ratios, Compliance

Ad hoc reporting: Point & click, Unified databases, Position, P&L, Period, CashFlow

Results database: Portfolio Hierarchy, Drill-down, Historic results

Data export: Excel, Flat files, BI


  Postings   Payment activities   Reversals   Accruals/deferrals   Valuation

• Create order/contract • Exercise/expiration • Give notice • Rollovers • Exercise rights

User authorization User defined status codes

Limit management

Release

  Settlement/Control   Interest rate adjustment   Netting   References   Confirmation letters   Securities account transfers   Corporate actions

Trading Back office Accounting

Transaction Management Process


Concept of Cash Management

Cash Position Liquidity Forecast

Bank accounts in currency: Account 1 : Account n Total

Payment transactions in transit: - incoming - outgoing

Financial investments and borrowings

Subledgers: - A/R - A/P - Purchase orders - Orders

Trading Cash

management decision

Market information


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


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


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

Deposit

Final repayment

D 1,000,000

C

1,000,000

Interest earned 273100

Nominal interest

D C 3,750

Bank clearing acct 113100

FT deposit Nominal int. Final repayment

D C 1,000,000

3,750

1,000,000

Debit Bal.sht Credit Bank

Debit Bank Credit Bal.sht

Debit Bank Credit Int. earned

Flow type

Posting details

1100 -

1120 +

1200 +

Sept 1st 1100 - Fixed-term deposit 1,000,000 Oct 1st 1120 + Final repayment 1,000,000 Oct 1st 1200 + Nominal interest 3,750 Balance sheet account acc. to

account assignment reference

Posting: Account Determination

Fxd-term dep. acct 113113


TRM Transaction Manager

Treasury Ledger

Integration between TRM and GL using Parallel Accounts

General Ledger

Number range 1 Position 1311044

…

Costs 1118500

Unreal. 1112200

90 1

Bank Acc. 1220155

91

3 3

Bond purchase

Valuation


…

Costs 2118500

Unreal. 2112200

91

Dummy Bank 2299999

91

1 1

Bond purchase

Valuation

Valuation Area 001 Valuation rules for bonds: Post fees to P/L Mark-to-Market valuation

Valuation Area 002 Valuation rules for bonds: Activate fees Amortize costs

Valuation Area 003 Valuation rules for bonds: Post fees to P/L Lowest value principle



…

Costs 3118500

Unreal. 3112200

Dummy Bank 3299999

90 1 91 Bond purchase

Valuation

Example: Purchase of new zero interest bond at the cost of 90€ with a fee of 1€ At year end the MtM value of the bond is 93€, amortized cost is 1€ at year end

Doc. # 1

Doc. # 4

Doc. # 2

Doc. # 5

Doc. # 3

Transaction Management

Purchase of new bond at the cost of 90€ with a fee of 1€


TRM Transaction Manager

Treasury Ledger

Integration between TRM and GL using Parallel Ledgers

General Ledger

Ledger 1 Position 311044

…

Costs 118500

Unreal. 112200

90 1

Bank Acc. 220155

91

3 3

Bond purchase

Valuation


…

Costs 118500

Unreal. 112200

91

Dummy Bank 299999

91

1 1

Bond purchase

Valuation


Valuation Area 002 Valuation rules for bonds: Activate fees Amortize costs

Valuation Area 003 Valuation rules for bonds: Post fees to P/L Lowest value principle



…

Costs 118500

Unreal. 112200

Dummy Bank 299999

90 1 91 Bond purchase

Valuation

Example: Purchase of new zero interest bond at the cost of 90€ with a fee of 1€ At year end the MtM value of the bond is 93€, amortized cost is 1€ at year end

Doc. # 1

Doc. # 4

Doc. # 2

Doc. # 5

Doc. # 3

Transaction Management

Purchase of new bond at the cost of 90€ with a fee of 1€


Fyrirlestrarheiti



09-12-01 I 20 I

Documents

SAP Treasury