SAP S/4HANA Cash and Liquidity Management – Important aspects

I always like to explore available content before initiating any write-up and ask these questions what type of audience/reader I am addressing? and what benefit they can achieve? After reading through the available content, I am convinced that this new write-up should be helpful for people looking for below content: –

  • What are main functionalities of SAP cash management?
  • What are important configuration steps?
  • What should be considered while testing SAP cash management?
  • What are cutover tasks for deployment of SAP cash management?

Kindly note content in this blog is relevant for SAP S/4HANA Finance for cash management (Full Scope) for version 2020.

SAP Cash management in S/4H has undergone multiple change in terms of its scope and availability, kindly go through details in SAP Note #2270400 (S4TWL – Cash Management – General). Cash management in SAP S/4H has been bifurcated as ‘The basic cash management’ and ‘SAP S/4HANA Finance for cash management or Full Scope’. Let us name them as ‘Basic scope’ and ‘Full Scope’ for simplicity in this blog.

Below table will help you to understand the as main functionalities as well difference between ‘Basic scope’ and ‘Full Scope’ of cash management in brief: –

Main Differences Basic Scope Full Scope
Business function: FIN_FSCM_CLM Business function need not be activated Business function needs to be activated. Kindly note, this business function require license for SAP S/4HANA Finance for cash management.
Manage banks and house banks
  • Define (and manage) bank accounts and house bank accounts for enabling payment process.
  • Display bank accounts in a list view
  • Import and export bank accounts
  • Replicate house banks, house bank accounts, and bank accounts by using IDoc (Intermediate Document)
Basic Scope is included with addition to below:

  • Define payment approvers and overdraft limits for bank accounts
  • Display bank accounts in the bank hierarchy view, the list view, and user-defined views based on bank account groups
  • Implement workflow or dual control processes for opening, modifying, closing, reopening, and reviewing bank accounts
  • Import and monitor bank fee data
  • Initiate bank account reviews and monitor the review status
  • Keep track of foreign bank accounts
Monitor cash positions and liquidity forecasts Cash position help to perform short to medium term forecast and Liquidity forecast helps with medium to long term forecast. I have detailed this functionality as a subtopic within this blog.
Manage memo records Manage memo records using the app or transactions FF63 and FF65
Cash concentration Not available
  • Create cash pools based on bank account groups and perform cash concentration
  • Perform cash operation tasks such as monitoring cash positions, making bank transfers, and approving payments
Liquidity item and snapshot function Not available
  • Liquidity item helps to trace origin of the cash flow
  • Forecast the liquidity trend and analyze the actual cash flows using various dimensions
  • Develop and analyze liquidity plans to ensure payment obligations and assist funding decisions
  • Use predefined local BI Content to extract cash management data for analytical purposes
  • Enable the snapshot functionality to filter cash flows by the snapshot time
Integration
  • Memo Records
  • Financial Operations
  • Treasury and Risk Management (FIN-FSCM-TRM)
  • Consumer and Mortgage Loans (FS-CLM)
  • Contract Accounts Receivable and Payable (FI-CA)
  • Sales and Distribution (SD)
  • Materials Management (MM)
Integration with details in Basic Scope  column and below:

  • Bank Communication Management (FIN-FSCM-BNK)
  • Flexible Real Estate Management (RE-FX)
  • Initial Balance via Excel
  • Classic Cash Management
  • Manual Entry of Bank Cash Balances
  • SAP Liquidity Planner
  • Inbound SOAP Webservice for Cash Flows

For further details on difference between Basic and Full scope, kindly visit refer content at SAP help portal  Business Function: Cash and Liquidity Management.

In below sub-section, I have tried to elaborate functionality of cash position, liquidity forecast and liquidity item.

Monitor cash positions and liquidity forecasts

Businesses or in particularly treasury department will always in need to know current cash position and future liquidity needs, to take timely investment decision. Hence, it is not surprising to confirm that monitoring of cash position and forecast are one of the important reports for business.

Cash management relevant details are stored in One Exposure table (FQM_FLOW) as a single source of truth with a certainty level. All cash management relevant information is stored for operational activities (e.g., purchase order creation, sales order creation, finance postings, etc.). This table is then used by Fiori apps for reporting in real time. Let us look at examples with a screen shot for better understanding.

  • Cash Position will provide details of current financial situation based on bank balance in main bank account and bank clearing account. It also contains the certainty level for the provided balance for example bank clearing account will be marked as ‘SI_CIT – Self Initiated Cash in Transit’ and main bank account balance will be shown as ‘Actual’. In addition, it contains liquidity item which we will further discuss in subsequent section. Below is the screen shot for the same: –

Further drilldown will help to check on details behind the balance, please find below screen shot for the same:

  • Liquidity Forecast helps in medium to long term forecast and details are based on the applicable sub-ledgers and memo records. With liquidity forecast details, business will be able to get details on the future receivable and payable which will help in timely decision on surplus fund (by investing of liquid fund for better return, negotiating with supplier to get early payment discount, etc.) or deficit fund (by requesting customer for early payment, engaging early on bank for overdraft to get better deal, etc.). I am sure business will have more usage then specified here. Please find below screen shot as an example: –

Liquidity item

Liquidity item functionality is one of the pivotal functions with ‘Full Scope’ of cash and liquidity management. As of drafting this blog, liquidity item is only supported in the full scope of cash management capability. Liquidity item helps to track the origin of the actual cash flow or project cash flow. For e.g., for vendor payment, liquidity items help to trace back origin from invoice line items. One of the alternatives which multiple clients uses in my experience was referring to offsetting account in vendor line-item report, example drawbacks of this alternative are, it does not give accurate information for invoice with multiple line item, it is time consuming, etc.

Cash flow analyzer report provide liquidity item and let you format report using desired hierarchy which give user flexibility to have multiple views as required. Let us look at the example from tracing of vendor invoice to payment and how it is reflected in cash flow (projected as well as actual): –

  1. Vendor Non-PO invoice posting

  1. Projected cash flow

Kindly note standard configuration options are provided for derivation of liquidity item. Below screen shot is referred as projected cash flow because invoice item is unpaid. If required, layout can be changed to add certainty level which showcase the current status of the line item.

  1. Vendor outgoing payment

  1. Projected cash flow

Even though invoice is paid but it still considered as projected cash flow till amount is reflected in main bank account. You can see invoice break up at liquidity item is still reflected after performing vendor outgoing payment.

  1. Clearing with Bank statement or manual clearing

As part of bank reconciliation or statement posting, outgoing payment GL account is cleared with main bank GL account.

  1. Actual cash flow

After bank reconciliation is performed cash flow analyzer report show liquidity items show with certainty level actual in ‘Actual Cash Flow’ report. You can still see the breakdown of line as per liquidity item which is tracing back to the origin (in this example from invoice).

Below are the details with accounting entries for better summarization: –

Event Accounting Entry with amount Liquidity item (example) with amount Projected/Actual Cash Flow
Invoice Posting

Dr. Expense: 15,929.21

Dr. Tax: 2,070.79

Cr. Vendor: 18,000

23 – Rental expense: 15,929.21

26 – Tax: 2,070.79

Projected
Payment

Dr. Vendor: 18,000

Cr. Bank outgoing: 18,000

23 – Rental expense: 15,929.21

26 – Tax: 2,070.79

Projected (origin invoice)
Bank Statement

Dr. Bank outgoing: 18,000

Cr. Main Bank: 18,000

23 – Rental expense: 15,929.21

26 – Tax: 2,070.79

Actual (origin invoice)

SAP cash management is subcomponent of SAP Financial Supply Chain Management (FSCM). Below are important configuration steps for cash position, liquidity forecast and liquidity item. Kindly note configuration steps and values will change based on individual requirement (and below is not an exhaustive list): –

# Configuration step and path Remarks (if any)
1

General Setting for Cash Management

(SPRO > Financial Supply Chain Management > Cash and Liquidity Management > General Settings > Define Basic Settings)

2

Create Planning Levels

(SPRO > Financial Supply Chain Management > Cash and Liquidity Management > Cash Management > Planning Levels and Planning Groups > Define Planning Levels)

3

Create Planning Groups

(SPRO > Financial Supply Chain Management > Cash and Liquidity Management > Cash Management > Planning Levels and Planning Groups >Define Planning Groups)

4

Assign planning levels to special G/L transactions

(SPRO > Financial Supply Chain Management > Cash and Liquidity Management > Cash Management > Planning Levels and Planning Groups > Special G/L Transaction Levels > Customer (or Vendor)..)

5

Create Liquidity Items

(SPRO > Financial Supply Chain Management > Cash and Liquidity Management > Cash Management > Liquidity Items > Edit Liquidity Items)

6

Define Queries for Liquidity Item Derivation

(SPRO > Financial Supply Chain Management > Cash and Liquidity Management > Cash Management > Liquidity Items > Derivation Rules for Liquidity Items > Define Queries for Liquidity Item Derivation)

The configuration in this Customizing activity cannot be transported to other clients.
7

Define Query Sequences

(SPRO > Financial Supply Chain Management > Cash and Liquidity Management > Cash Management > Liquidity Items > Derivation Rules for Liquidity Items > Define Query Sequences)

8

Assign Queries to Query Sequences

(SPRO > Financial Supply Chain Management > Cash and Liquidity Management > Cash Management > Liquidity Items > Derivation Rules for Liquidity Items > Assign Queries to Query Sequences)

The configuration in this Customizing activity cannot be transported to other clients.
9

Define Liquidity Item Derivation Settings for Company Codes

(SPRO > Financial Supply Chain Management > Cash and Liquidity Management > Cash Management > Liquidity Items > Derivation Rules for Liquidity Items > Define Liquidity Item Derivation Settings for Company Codes)

The derivation rules that you define here only work for new postings. To generate liquidity items against existing posting data, you must run the rebuild program.
10

Define Default Liquidity Items for G/L Accounts

(SPRO > Financial Supply Chain Management > Cash and Liquidity Management > Cash Management > Liquidity Items > Derivation Rules for Liquidity Items > Define Default Liquidity Items for G/L Accounts)

The configuration in this Customizing activity cannot be transported to other clients. If the query sequence configured above fails to determine a liquidity item, default liquidity item defined in this step is used and recorded in accounting document line item table.
11

Regenerate Condition Strings

(SPRO > Financial Supply Chain Management > Cash and Liquidity Management > Cash Management > Liquidity Items > Derivation Rules for Liquidity Items > Regenerate Condition Strings)

12

Activate Individual Source Applications

(SPRO > Financial Supply Chain Management > Cash and Liquidity Management > Cash Management > Data Setup > Activate Individual Source Applications)

13

Generate and Assign Loading Class

(SPRO > Financial Supply Chain Management > Cash and Liquidity Management > Cash Management > Data Setup > Customize the Flow Builder)

Helpful SAP notes:

  • 2369432 – Flow Builder: Generate and Assign Loading Class
  • 2530138 – FAQ: S/4 Hana Cash Management and data setup
14

Activation of Scope-Dependent Background Job Definitions

(SPRO > SAP Netweaver > Application Server > System Administration> Activation of Scope-Dependent Background Job Definitions)

Helpful blog:

Flow Builder: Understand the difference in trigger mechanisms: manually created job, event based job and technical job

Alternatively, refer SAP Best Practices Explorer (Link) for scope items Advanced Cash Operations (J78) and Basic Cash Operations (‏BFB‏) to get further details.

All projects are different and likewise its scope of testing. Based on the business requirement solutions are designed and need to be tested accordingly. SAP cash management is integrated with multiple business processes (considering the scope activation, as well depend upon basic and full scope). In general testing should involve below and tester should check impact of each transaction on cash management reports/apps: –

  • Creation/update of Master data with planning level and planning group
  • New house bank master creation
  • Bank statement and reconciliation
  • Post Memo Records
  • Procure to Pay process
  • Order to Cash process
  • Other integrated business process example below
    • Treasury and Risk Management (FIN-FSCM-TRM)
    • Contract Accounts Receivable and Payable (FI-CA)
    • Flexible Real Estate Management (RE-FX)

Special consideration should be given to different type of payments for example creation of supplier down payment using outgoing vendor payment of note item. This is important as incorrect configuration will stop the payment processing to vendors.

Below are some of the significant cutover tasks for deployment of SAP cash management, please note some tasks are relevant when cash management is activated in already live system: –

# Description
1 Import transport request
2 Define liquidity item queries
3 Assign queries to query sequences
4 Define default liquidity items for G/L accounts
5 Import liquidity item hierarchy
6 Assign planning levels in G/L accounts
7 Assign planning groups to business partners
8 Rebuild planning levels, groups, dates in accounting documents
9 Rebuild flow types in accounting documents
10 Load trans. data from source appl. into one exposure from operations hub
11 Build cash flows from operations
12 Check Fiori reports

Below are some useful links for further study: –

Below are some useful SAP’s notes for reference: –

  • 2270400 – S4TWL – Cash Management – General
  • 2461437 – House bank (HBKID) and Account Id (HKTID) is not updated in table FQM_FLOW (One Exposure)
  • 2530138 – FAQ: S/4 Hana Cash Management and data setup
  • 2580031 – FAQ: Liquidity item assignment into one Exposure (FQM_FLOW) in S4 Hana Cash management
  • 2369432 – Flow Builder: Generate and Assign Loading Class

Hope after reading this blog, you got information on main functionalities, difference of basic and full scope, working of cash position, liquidity forecast and liquidity item, general testing scope, important cutover tasks, and some links to other important information/source.

Contents in this blog are based on my view and experience, I have tried to justify the content with help of reliable sources. All screen shots are from test systems and any resemblance is purely coincidence. While writing this blog I am truly convinced with T.S. Eliot observation:

“We shall not cease from exploration and the end of all our exploring will be to arrive where we started and know the place for the first time.”