SAP Solution in Detail

mySAP ERP

SAP IN-HOUSE CASH

WITH mySAP ERP

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CONTENTS
SAP In-House Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Integration of SAP In-House Cash in Your Payment Landscape. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
The In-House Cash Center. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Account Management Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Master Data of the Current Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Company Code and Bank Area. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Business Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Product Definition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Account Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Customer Payment Processes Supported by SAP In-House Cash. . . . . . . . . . . . . . . . . . . . 11
Automated Intragroup Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Example: Automated Intragroup Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
The Benefits of Automated Intragroup Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Automated Outgoing Central Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Example: Automated Outgoing Central Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
The Benefits of Automated Outgoing Central Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Automated Outgoing Local Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Example: Automated Outgoing Local Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
The Benefits of Automated Outgoing Local Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Automated Incoming Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Example: Automated Incoming Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
The Benefits of Automated Incoming Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Integration with SAP Cash and Liquidity Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Bank Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Bank Statements Sent to the Head Office by the House Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Bank Statements Sent to Subsidiaries from the In-House Cash Center . . . . . . . . . . . . . . . . . . . 16
Using Multiple In-House Cash Centers for Posting Across Bank Areas . . . . . . . . . . . . . . . . . . . . . 17
Example: Using Multiple In-House Cash Centers for Internal Payments . . . . . . . . . . . . . . . . . . 17
Account Management and Manual Post-Processing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Example: Central and Local Payments Using Multiple In-House Cash Centers . . . . . . . . . . . . 18
Currency Conversion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Periodic Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
System Architecture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SAP Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Communication Between Organizational Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Group Companies and the In-House Cash Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
The In-House Cash Center and the Financial Accounting System at the Head Office
and at the Executing Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

SAP IN-HOUSE CASH

If your company is like most in todays global economy with
a multinational customer base and a growing number of
subsidiaries you have probably experienced a sharp rise in
the number of intragroup and external payments you must
process, the number of bank accounts you use, and the costs
you incur for cross-border payments.
Internal Bank

Bank

Bank

Internal Bank

HEAD
OFFICE
(EUROPE)

Subsidiary

U.S.

Subsidiary

Subsidiary

Bank

Bank

Bank

ASIA

Subsidiary

Subsidiary

Bank

Integration of SAP In-House Cash in Your Payment

Landscape

Not all companies can centralize their payment processes. Your

company may be decentralized with individual subsidiaries processing transactions with their own business partners independently of the parent company. Or you may use a mixture of
centralized and decentralized models, making payments through
local banks and headquarters. SAP In-House Cash supports a
range of organizational designs, such as decentralized, centralized, and mixed organizations.
In a decentralized organization in which the subsidiaries and
the head office or holding company have separate accounts
with their respective house banks, the payment transactions for
the head office are processed through an in-house cash center.
The subsidiaries continue to make payments to external business partners with their own house banks.

Subsidiary

Bank
Bank

Bank
Region 1

business partners on behalf of your subsidiaries and to process

incoming payments from external business partners and
forward those payments to subsidiaries.

Bank

Region 2

Figure 1: Initial Scenario

To gain a competitive edge, you must efficiently manage the

flow of payments and the related risks. The SAP In-House Cash
application, one of the financial supply chain management
components of the mySAP ERP Financials solution, can help
cut the costs of processing transactions for internal payments,
external payments, and international payments while reducing
the number of external bank accounts you must handle.

In a centralized environment in which the parent company

assumes the role of head office and processes all payments for
the group through the head-office house bank, the subsidiaries
and the head office keep most of their bank accounts in the
in-house cash center. Other accounts with external banks play
a subordinate role. Your subsidiaries can replace all their local
bank accounts with the internal bank accounts of the in-house
cash center. The in-house cash center itself can have one or
more accounts with the house bank. Because the in-house cash
center and its house bank process all incoming and outgoing
payments on behalf of the subsidiaries, the subsidiaries can
dispense with their local bank account relationships. Credit
balances are also managed centrally by the in-house cash center.

SAP In-House Cash was designed for corporate groups that

operate internationally. It lets you settle the payables and
receivables of your group companies centrally using a reciprocal clearing process. You can also use these tools to pay external

Most corporate groups today operate in the mixed organization

form. In this environment, each subsidiary has one or more
accounts with its house bank, as well as one or more accounts
with the in-house cash center. The in-house cash center keeps
accounts for the head office and the subsidiaries. As a result,
you can process payments using either external house banks or
the in-house cash center. Given this open model, the corporate
group can process outgoing and incoming payments with
internal groups and external business partners in any way that
makes sense for the corporate group. For example, you can
process all internal group payments using the in-house cash
center and process only external payments to business partners
using your external banks. You can centralize outgoing payment processes by using the in-house cash center to handle
payments made between group companies and to external
business partners, while keeping incoming payments from
external partners decentralized.

House bank
of head office

in-house cash center account in the configuration. If you

expect internal payment clearing and central payments to play
a more significant role in the future, SAP In-House Cash offers
ideal support for these tasks. SAP In-House Cash makes it easy
to centralize your payment processes and to take advantage of
all the associated cost savings. For the corporate group, creating
an in-house cash center may require changes in the distribution
of tasks among the organizational units.
The following organizational entities can be involved in the
individual payment transaction processes:
Subsidiaries and affiliated companies
The head office (in-house cash center and the financial
accounting functions of mySAP ERP Financials)
House banks used by the head office
External business partners and their house banks (partner
banks)

Group

Head Office

Subsidiary A

Head office of
group/holding, incl.
in-house cash center

Subsidiary B

In-House Cash Center

Financial
accounting
system

Account
management

Subsidiary C

Subsidiary A

Subsidiary B

Subsidiary C
External business
partner

House bank of
subsidiary A

House bank of
subsidiary B

Partner bank

House bank of
head office

House bank of
subsidiary C

Figure 3: Organizational Entities

Figure 2: Mixed Organization

The in-house cash center supported by the application is

designed to integrate easily with a corporate groups payment
processes, enabling the standard bank account statement processing and payment program execution to remain unchanged.
The key is to replace the external house bank account with the

For a subsidiary, the in-house cash center is a virtual bank

that serves as a house bank. The subsidiary keeps an account
with the in-house cash center as if it were a house bank. The
head office manages the financial accounting system and the
in-house cash center.

THE IN-HOUSE CASH CENTER

You draw up balance sheets for the in-house cash center using
the standard mySAP ERP Financials accounting functions. The
in-house cash center is located and maintained centrally by the
parent company or an organizational unit assigned to the head
office. Therefore, this organizational unit manages the current
accounts. In the financial accounting system, the receivables
and payables of the subsidiaries are displayed in general ledger
accounts in summarized form.
You set up the in-house cash center as a bank for the whole
group to manage the current accounts of the head office and
the subsidiaries that are maintained as subledger accounts in
SAP In-House Cash. The in-house cash center can handle one
or more current accounts for group companies and regularly
dispatch the bank statements that correspond to those accounts.
Individual account items represent payables or receivables
between the in-house cash center and a subsidiary. A receivable
of the head office represents an obligation of the subsidiary to
the head office.
Like a house bank, the in-house cash center creates and dispatches bank statements to the subsidiaries. This reduces the
float or transfer time it takes for a payment from the ordering
party to reach the recipient, eliminating value-date differences
related to payments between subsidiaries.
With this application, the house banks of the head office process
all incoming and outgoing external payments for the in-house
cash center. External business partners use their own house
banks to process transactions with the group and its subsidiaries.

Account Management Functions

The in-house cash center is the heart of the SAP In-House Cash
application. It serves as a virtual bank for group companies and
looks after their financial interests.
The in-house cash center manages one or several current
accounts for each of the groups subsidiaries. It represents an
additional bank that can process both internal and external payments and can keep accounts in any currency. The in-house
cash center also provides account management functions, such
as calculating and debiting interest and charges, granting
current account overdrafts, and generating bank statements
for the subsidiaries. You can flexibly configure the features and
conditions of each account.
The in-house cash center controls the automated processes for
payment transactions such as internal payments within the
group, payments made by subsidiaries to external partners, and
incoming payments for subsidiaries from external partners,
which are initially credited to the house bank accounts at the
head office (central incoming payments).
During the payment process, the in-house cash center supports
automatic creation as well as direct manual entry of payment
orders. Automated and manual payment orders can have the
following statuses:
Parked, meaning no posting has taken place yet on any
current account
Provisionally posted, which means posting has taken place on
the current accounts, but the exchange rate can be changed
before the final posting takes place, for example
Finally posted, which means the final posting has taken place
on the involved current accounts and the account holder is
informed by statement about the posting

Provisionally and finally posted payment orders are included in

limit checks. You can reverse provisionally posted payment
orders to parked payment orders and change data in the orders.
Parked payment orders can be deleted, while provisionally
posted and finally posted payment orders can be reversed.
Post-processing options are available for the provisional
payment order created either by the automatic or the manual
payment process.
Other functions of the in-house cash center let you monitor
payment orders and aggregate current account balances, as well
as plan and forecast the incoming and outgoing payments of
your group companies over the medium term. This makes the
process of controlling payment flows far more efficient.

Conditions

Bank
statements

Limits

In-House
Cash
Center

Account
Subsidiary A
Business
partners

Financial
accounting
system
GL

General-ledger (GL) transfer

Blocks

+ 100
- 120
...

Turnovers
Currency
conversion

Reporting

No.

Post. date Val. date

12/30/00 12/31/00 USD 100.00 C

Curr. Amount1

12/31/00 12/31/00 USD

9.58 D

Figure 4: Account Components

Business Partners

Master Data of the Current Account

Company Code and Bank Area

In SAP solutions, a company code is a legal unit within a group

for which you draw up a complete self-contained set of
accounts, including a balance sheet and income statement. The
company code represents the financial accounting system at
the head office, which is responsible for managing the general
ledger accounts that are reconciled with the subledger accounts
in SAP In-House Cash. A bank area is a central, self-contained
organizational unit that manages and processes all the accounts
for an in-house cash center. There is a bank area for each
in-house cash center. If you want to use several in-house cash
centers, you must set up several bank areas.

Master data for the in-house cash center includes information

on the various business partners related to accounts in the
center. A business partner can be an affiliated company, an
external business partner, another bank, the head office, another in-house cash center, or an internal organizational entity.
When you maintain accounts, you enter key business partner
data, including the partners name and address and related
bank details (such as the account number and sort code). You
can map relationships between business partners to suit your
particular needs.
Each business partner can have more than one role. The application recognizes standard roles, such as account holder,
authorized drawer, bank statement recipient, contact person,
and account maintenance officer. A subsidiary, for example,
could have several roles and act as account holder, bank statement recipient, and contact person. You can create your own
roles if the standard roles do not cover all your requirements.
Business partner data is stored centrally, so if a particular business partner already exists, you can just create the partner in a
new role. Instead of entering all the business partner data each
time, you merely add any role-specific data that is missing.

Product Definition

Conditions

The nature of an account in the in-house cash center depends

on the characteristics of the product that is assigned to it. You
enter the product details once using a product configurator and
assign a predefined product each time you create a new
account. This greatly simplifies the process of account creation.
For example, you could set up a product for subsidiaries named
account for subsidiaries and specify that accounts created for
this product are managed only on the credit side, with interest
calculated on the balance. If you want slightly different conditions for a particular account, you merely change the default
settings for the product in the account itself.

You can configure account features and conditions according

to your individual requirements. This allows you to map profitoriented in-house cash centers, for example. The flexible
condition model lets you define standard conditions, individual
conditions, and markup conditions based on the condition
groups for interest, charges, and value dates.

Account Data

Each subsidiary participating in the in-house cash process must

keep at least one account with the in-house cash center. Basic
data for the account is stored in the account master record.
This information includes the date the account was opened,
the currency used for the account, the account holder, and any
notes related to the account. Accounts are always assigned to
an account holder. For account settlement (account balancing),
you enter the conditions, the account balancing periods, and
the settings for cash concentration. The account balance is displayed directly in the account, along with withdrawal limits
that have been defined for the account and the bank statement
frequency.
The account master record is where you maintain control data,
such as information about the general ledger transfer. The payment transaction view of account data provides information
about any account blocks that prevent certain functions from
being used. If, for example, a subsidiary ceases to be part of the
group, an account block can prevent further processing of payment items.

Interest

You can calculate credit and debit interest based on value-date

balances. The interest calculation can reflect absolute interest
rates or reference rates with markups or markdowns. You can
also specify minimum and maximum rates. When you create
interest rate conditions, you can choose from a range of interest
calculation methods and opt for either an interval or scaled
interest calculation. In addition, you can apply interest rate
conditions for a given period or account balance.
Extra-credit interest that you earn from the external money
market as a larger group can be passed on to your subsidiaries.
You can opt to charge debit interest at a lower rate than the
house bank, thereby improving the net interest income of the
subsidiaries, and apply an overdraft interest rate if the balance in
an account exceeds the internal overdraft limit. You can choose
to charge such overdraft interest in addition to or instead of the
debit interest.
Charges

The application distinguishes between periodic account charges

(such as maintenance fees and mailing expenses), item charges,
and transaction charges. You can use direct charges to recoup
costs for services that do not automatically lead to item postings
in the account. All charges are subject to a validity period.

Limits on Drawing from Accounts

Interest

Debit
interest

Credit
interest

Overdraft
interest

Transaction
interest

Subsidiary A
Account charge:
US$5

Item
charges

-5.00
+100.00

Mailing
charges

Account
charges

Credit interest
0.5%

Periodic
charges

Value
Date

Direct
charges

Charges

Figure 5: Conditions
Value Dates

Process automation in the in-house cash center allows same-day

accounting of payments without the losses that can be incurred
through delayed value dates. However, you can still use valuedate conditions for the respective turnover type to determine
the value date based on the account, a time limit, and the public
holiday calendar entered in the account. The value date is calculated from the posting date and the number of value-date
days, which can extend into the future or the past. When you
specify the value date, the application checks the tolerance days.

10

The application lets you define drawing limits on accounts for

specific periods and subject those limits to a release procedure
requiring that changes are checked by another employee. When
the specified amount is exceeded due to a liquidity bottleneck
at a subsidiary, for example a corresponding message appears.
You can choose from the following standard categories:
The internal account limit controls the drawing limit for
payment transactions.
The overdraft limit controls the calculation of overdraft
interest. If the limit is exceeded and an overdraft condition
(such as an interest rate charge) has been defined, an overdraft condition is applied to the account.
The external credit limit is for reference only. The external
limit must be lower than or equal to the internal account
limit.

CUSTOMER PAYMENT
PROCESSES SUPPORTED
BY SAP IN-HOUSE CASH
The following scenarios provide an overview of classic payment
transaction processes supported by SAP In-House Cash using
the organizational units described in the previous section.

Group

Head Office
In-House Cash Center

Automated Intragroup Payments

The process of clearing payables and receivables between

subsidiaries is referred to as internal (intragroup) payment
clearing.

2b

Subsidiary A

Account
management

2a

Subsidiary B

Example: Automated Intragroup Payments

Bank statement

In this example, subsidiary B delivers goods to subsidiary A.

After receiving and posting the invoice, subsidiary A starts the
payment program in mySAP ERP Financials to settle the invoice.
The solution determines the open items, taking into account
the payment terms and the specified bank details, and proposes
a payment run. Because the in-house cash center has been
identified as the vendors house bank, it is instructed to make
the payment to subsidiary B. During the payment run, the
payment program posts the payment documents and simultaneously creates an intermediate document, known as an IDoc
(which is a type of data interface), that contains all the relevant
payment information. This IDoc is then sent to the in-house
cash center (step 1 in Figure 6).

Payment

In the in-house cash center, the incoming IDoc triggers provisional or final postings to the respective current accounts.
Whether postings should be executed provisionally or finally
depends on the configuration settings. The payment is debited
from the account of the ordering party, subsidiary A, and
credited to the account of the beneficiary, subsidiary B. The inhouse cash center has a receivable position owed from subsidiary A and a payable position due to subsidiary B. This clears
payables between group companies without the need for physical payments (such as checks or bank transfers) by an external
bank. The in-house cash center then generates and sends bank
statements to subsidiaries A and B using IDocs (step 2 in Figure
6). The IDocs are imported automatically by each of the subsidiaries. This triggers corresponding postings to the clearing
accounts and settles the open items.

Financial
accounting
system

Figure 6: Internal Payment Clearing

In-House Cash Center

Subsidiary A

Subsidiary B

-200 (to B)

+200 (from A)

Financial Accounting System

General Ledger
Payment clearing
200 (2)

200 (1)

IHCC receivables IHCC payables

200 (2)
(1) Internal outgoing payment

(debit account A)

(2) Internal incoming payment

(debit account B)

200 (1)

IHCC = in-house cash center

Figure 7: Posting Logic for Internal Payment Clearing

The Benefits of Automated Intragroup Payments

The financial accounting system at the head office manages

current account data in a summarized form. The end-of-day
processing function in the in-house cash center summarizes the
account turnovers and transfers the totals to the general ledger.
The corresponding postings in financial accounting are
triggered automatically. Because internal accounts are used
to clear the payable items, no physical cash is transferred.
The liquid funds remain within the group, and no losses are
incurred due to value-dating payments.

11

You also save on charges for external bank transfers. The inhouse cash center can invest the accumulated credit balance
from the accounts for all the individual group companies,
which lets you benefit from better interest rates offered for
larger investments. You can also grant account overdrafts to
subsidiaries that need financial assistance. By using any surplus
cash for financing within the group, you save the margin
between the interest rates for borrowing and lending and
improve your overall interest revenue.
Classical netting arrangements typically require the group companies to agree on a set credit period, after which all items are
due. With in-house cash, you have broad flexibility in choosing
different payment terms.
Automated Outgoing Central Payments

Payments made by the in-house cash center to external business

partners to settle amounts payable by subsidiaries are referred to
as central payments. The in-house cash center can greatly simplify the workflow of the subsidiaries by making such payments
on their behalf.
Example: Automated Outgoing Central Payments

In this example, an external partner delivers goods to subsidiary

A, which posts the vendor invoice as a payable item. It then runs
the standard mySAP ERP Financials payment function to settle
the payment. This clears the open items on the vendor account
and generates a corresponding offsetting entry in the clearing
account. Because the in-house cash center has been identified as
subsidiary As house bank, it is instructed to make the payment
to the external partner via the in-house cash center. During the
payment run, mySAP ERP Financials automatically creates an
IDoc, which transfers the payment information to the in-house
cash center (step 1 in Figure 8).
Having received the IDoc, the in-house cash center debits the
current account of subsidiary A provisionally or finally and
forwards the payment information to the financial accounting
system at the head office, which is the party that executes the

12

payment to the external business partner (step 2 in Figure 8).

The current account of the party that executes the payment
on behalf of subsidiary A is credited. In this accounting system,
a second payment program creates a payment order using the
information from the original payment IDoc. This triggers the
actual payment. The outgoing payment is posted to a bank
clearing account, and the head offices house bank is instructed
to make the payment to the external partner (step 3 in Figure 8).
The in-house cash center generates the bank statement for subsidiary A and the executing party and sends it to both as an IDoc
(step 4 in Figure 8). Subsidiary A and the executing party import
the bank statements, which triggers a clearing posting on the
clearing account. The financial accounting system at the head
office (executing party) imports a bank statement from its
house bank and posts the items to a bank clearing account (step
5 in Figure 8). This clears the account.
Once the head offices house bank receives the payment information, the payment is transferred to the house bank of the
external partner (step 6 in Figure 8). The external business
partner receives a corresponding bank statement from its own
bank (step 7 in Figure 8).

Group

Head Office
In-House Cash Center

Subsidiary A
Subsidiary B
Payment program

External
business partner

4b
4a

Account
management

2
3

1
7

Bank statement

Figure 8: Outgoing Central Payments

Financial
accounting
system

Partner
bank

House bank of
head office
Payment

The Benefits of Automated Outgoing Central Payments

Automated Outgoing Local Payments

When payments are made to an external partner, payment

instructions are only made by the in-house cash center to the
business partner's bank, and cash only flows from the bank used
by the in-house cash center to the business partner's bank.
Because the subsidiaries make their payments via the central
accounts of the in-house cash center, they no longer need to
keep accounts abroad. As a result, you can save on currency
translation charges, reduce the number of international
payments, and optimize your foreign-exchange positions.

Payments made by a subsidiary to external business partners

to settle amounts payable on behalf of another subsidiary are
referred to as local payments.

With SAP In-House Cash, you can run a precise financial analysis
within your group at any time. Functions for automatic postprocessing and automatic data transfer to the financial accounting system can significantly reduce the staff required for manual
processing. Because the accounts are managed centrally in the
in-house cash center, you have a direct view of all payment
transactions in your group and of the liquid funds that are
available in the accounts of your subsidiaries. If cash is tight for
individual subsidiaries, the in-house cash center can still ensure
that payment obligations are met. The center can grant generous current-account overdrafts at short notice, ensuring that
the individual subsidiaries are solvent at all times.

Example: Automated Outgoing Local Payments

In-House Cash Center

Subsidiary A
-400 (1)

External
business
partner

Clearing Partner
(head office)
+400 (1)

Partner
bank

House
bank of
head
office

Financial Accounting System

Head Office
Intercomp.
Subsidiary A

Clearing Partner
(head office)

400 (2)

400 (2)

IHCC Clearing

Clearing
Partner Bank

400 (2) 400 (2)

400 (3)

House Bank

Outg. Payment
clearing

400 (4)

400 (1) 400 (3)

Bank Clearing
IHCC = in-house cash center

400 (4) 400 (1)

The automated outgoing local payment scenario is similar to

the outgoing central payment scenario. The only difference is
that all local house banks of all in-house cash center participants can be included in this scenario to achieve local payments
instead of foreign payments to avoid cross-border costs.

In this example, an external partner in the United Kingdom

delivers goods to subsidiary A, which is located in Germany.
Subsidiary A posts the vendor invoice as a payable item. It then
runs the standard mySAP ERP Financials payment program to
settle the payment. This clears the open items on the vendor
account and generates a corresponding offsetting entry in the
clearing account. Because the in-house cash center has been
identified as subsidiary As house bank, it is instructed to make
the payment to the external partner in the United Kingdom by
the in-house cash center. During the payment run, mySAP ERP
Financials automatically creates an IDoc, which transfers the
payment information to the in-house cash center (step 1 in
Figure 10).
Having received the IDoc, the in-house cash center checks
which legal entity is the executor of the payment, meaning
which local house-bank account can be used to execute the
foreign payment as a domestic payment. Criteria can be the
transaction amount, the transaction currency, and the bank
country of the recipient. The executing party can be the head
office (as with automated outgoing central payments) or a subsidiary. In this example, subsidiary B in the United Kingdom is
determined as the executing party.

Bank statement
Payment
(1) Transfer payment information to financial accounting system and generate
payment request (payment order to house bank)
(2) Transfer to general ledger
(3) Import and post bank statement for clearing partner from in-house bank
(4) Import and post bank statement from house bank

Figure 9: Posting Logic for Outgoing Central Payments

13

After the determination of the executing party, the in-house

cash center debits the current account of subsidiary A, provisionally or finally, and credits the current account of subsidiary
B, which executes the payment on behalf of subsidiary A either
provisionally or finally. The in-house cash center forwards the
payment information to the financial accounting system at subsidiary B (step 2 in Figure 10). In this system, a second payment
program creates a payment order, using the information from
the original payment IDoc. This triggers the actual payment.
The outgoing payment is posted to a bank clearing account,
and subsidiary Bs local house bank is instructed to make the
payment to the external partner in the United Kingdom (step 3
in Figure 10).
The in-house cash center generates the bank statement for
subsidiaries A and B and sends it to them as an IDoc (step 4 in
Figure 10). Subsidiaries A and B import the bank statement,
which triggers clearing postings on the clearing accounts. The
financial accounting system at subsidiary B imports a bank
statement from its house bank and posts the items to a bank
clearing account (step 5 in Figure 10), which clears the account.
Once subsidiary Bs house bank receives the payment information, the payment is transferred to the house bank of the external partner (step 6 in Figure 10). The external business partner
receives a corresponding bank statement from its own bank
(step 7 in Figure 10).

The Benefits of Automated Outgoing Local Payments

In-House Cash Center
Subsidiary A
(Germany)

Subsidiary B
(United Kingdom)

-400

+400

Financial Accounting System

Subsidiary A (Germany)
IHCC clearing

Financial Accounting System

Subsidiary B
(United Kingdom)
IHCC receivables

Outgoing
payment clearing

400 (3)

400 (2) 400 (3)

House Bank

Bank clearing

400 (4)

400 (4) 400 (2)

External
business partner

400 (3) 400 (1) 400 (1)

IHCC receivables
400 (3)

(1)
(2)
(3)
(4)

External
business
partner
(United
Kingdom)

Partner
bank

House
bank of
subsidiary
B

Generate payment order to in-house cash center

Generate payment request, payment order to house bank
Import and post bank statement from in-house cash center
Import and post bank statement from house bank

IHCC = in-house cash center

Bank statement

Payment

Figure 11: Posting Logic for Outgoing Local Payments

When payments are made to an external partner, all existing

banks in the corporate group, including subsidiaries and head
office, can be used to make local payments. The in-house cash
center offers a flexible, rule-based determination of the executing party. Because the subsidiaries are responsible only for the
execution of local payments, they no longer need to keep
accounts abroad.

Group
In-House Cash Center
Subsidiary B
(Germany)
(United Kingdom)
Subsidiary A
(Germany)
Payment program

External business partner

(United Kingdom)

4a

2
4b

Bank statement

Figure 10: Outgoing Local Payments

14

Account
management

Financial
accounting
system
3

Partner
bank

House bank of
subsidiary B
Payment

Because the subsidiaries are responsible only for the execution

of local payments, they no longer need to keep accounts
abroad. Consequently, all subsidiaries can keep only one local
external bank account for their local currency. As a result, you
can save on currency translation charges, reduce the number of
international payments, and optimize your foreign-exchange
positions.

Automated Incoming Payments

When incoming payments are processed centrally, the in-house

cash center directs payments from external business partners to
subsidiaries.
Example: Automated Incoming Payments

In this example, subsidiary A delivers goods to an external business partner. Subsidiary A instructs its external business partner
to make payment to its head office. The external business partner makes the payment to subsidiary A via the in-house cash
center. The external business partner instructs its bank to make
the payment (step 1 in Figure 12). Once the payment amount
has been debited from the business partners account, the business partner receives a bank statement from its house bank
(step 2 in Figure 12).

Group

Head Office
In-House Cash Center

Subsidiary A

Financial
accounting
system

Account
management

Subsidiary B

External
business partner
Payment program

4
2
1

Bank statement

Partner
bank

House bank of
head office

Payment

Figure 12: Central Incoming Payments

The Benefits of Automated Incoming Payments

The business partners house bank transfers the payment to the

house bank of the head office (step 3 in Figure 12). The financial
accounting system at the head office imports the bank statement
from the house bank and posts the items to a bank clearing
account. All the items listed in the bank statement are examined
using internal algorithms to establish whether they are intended for the in-house cash center and which current account is
affected. Once the items have been identified, the system automatically transfers them to the in-house cash center for posting
to the relevant current accounts (step 4 in Figure 12).

The central processing of incoming payments reduces the number of bank accounts your group needs, while fully supporting
international payment transactions. Incoming liquid funds are
instantly available to the in-house cash center, and payments
are credited automatically to the appropriate accounts.

The in-house cash center credits the current account of

subsidiary A, debits the current account of the head office that
has received the payment from the external business partner
on behalf of subsidiary A, generates the corresponding bank
statements of subsidiary A and the head office, and sends the
IDocs containing the relevant information to subsidiary A and
the head office. Once subsidiary A and the head office receive
the bank statements from the in-house cash center (step 5 in
Figure 12), their financial accounting systems automatically
clear the clearing accounts and the open customer item for
subsidiary A.

Incoming payments reside in the house-bank accounts of the

head office under this model. By managing these funds centrally,
you can optimize your liquidity planning and generate higher
investment returns.

If you process incoming payments centrally, your subsidiaries

no longer need to maintain accounts abroad. The in-house cash
center processes payments for any foreign accounts as it would
for domestic payments.

15

In-House Cash Center

Subsidiary A

Clearing Partner
(head Office)

+400 (2)

-400 (2)

External
business
partner

Partner
bank

House
bank of
head
office

Financial Accounting System

Head Office
Bank clearing

Subsidiary A

400 (4) 400 (1)

400 (3)

Clearing Partner
(head Office)

Clearing Partner
Bank

400 (3)

400 (4)

House Bank

Incoming
payment clearing

400 (1)

400 (3) 400 (3)

Bank statement
Payment
(1)
(2)
(3)
(4)

Import and post the bank statement from the house bank
Forward the incoming payment to the in-house cash center
Transfer to general ledger
Import and post the bank statement for clearing partner from in-house bank

Figure 13: Posting Logic for Central Incoming Payments

SAP In-House Cash includes numerous manual postprocessing

functions for current accounts. You can post and reverse
payment items or orders, reject ordering-party payment items,
transfer payment items to another account, and return the
posted payment items. You can also change or delete payment
items or orders that have been parked pending release for
further processing.

In cash management reporting of subsidiaries, the receivables

and payables balances with the head office are shown in the cash
position in real time. Outgoing and incoming payments in cash
clearing accounts are also visible in the cash position in real
time.
The in-house-cash current accounts integrate into the head
offices cash management before the general ledger transfer
takes place at the end of a day. The different postings on the
current accounts can be grouped in the cash management view
as account balances that are finally posted or as either internal
or external provisional turnovers.
Bank Statements
Bank Statements Sent to the Head Office by the House
Bank

The financial accounting system (mySAP ERP Financials) at the

head office imports the bank statements sent by the house
bank. Relevant items are then transferred to the in-house cash
center. A search algorithm specifies how the application interprets information (such as a customer number) that appears in
the payment notes accompanying the statement items. The
application can also use the external bank and account
numbers to determine the appropriate bank area and account
number. All information included by the external business partner in the payment notes can be transferred to the subsidiaries.

Integration with SAP Cash and

Liquidity Management

Bank Statements Sent to Subsidiaries from the In-House

The SAP Cash and Liquidity Management application offers

the following tools, designed to give clear visibility to corporate
cash flows:
The cash position, which illustrates short-term movements
in bank accounts
The liquidity forecast, which illustrates medium-term
movements in subledger accounts

Cash Center

16

The in-house cash center can create and forward bank

statements either periodically or on request by subsidiaries.
You can set default values for bank statement frequency and for
administrative data, such as the name of the relevant business
partner, the statement format, and options for creating duplicate statements. You can define several bank statement recipients for each account. This is useful if the subsidiary has several
account holders. You can generate a bank statement as part of a
mass run or in a single run and then have it sent automatically
to the relevant subsidiary.

Electronic bank statements created in the in-house cash center

are imported and processed by the financial accounting systems
of the subsidiaries using standard mySAP ERP Financials functions. The payment notes in the electronic bank statement contain the information necessary for settling open items, such as
an invoice number from an external business partner.
In addition to generating an electronic bank account statement
(FINSTA IDoc type), it is possible to create paper bank statements with SAPscript and send them to subsidiaries that do not
have a secure electronic connection with the in-house cash center and who must receive bank statements in paper form. The
bank statements of the accounts of these subsidiaries can be created as paper statements and then sent by fax directly from the
in-house cash center application.
Using Multiple In-House Cash Centers for Posting
Across Bank Areas

Internal payment clearing and central payments can involve

more than one in-house cash center, which helps you optimize
the routing of payments and save on transaction costs.

proposes a payment run. The European in-house cash center is

defined in the vendor bank details. The U.S. in-house cash center, which serves as the house bank for subsidiary A, is instructed to make the payment to subsidiary E via the European inhouse cash center.
The payment program posts the payment documents and generates an IDoc, which is sent to the U.S. in-house cash center.
This IDoc contains all the relevant payment information. Each
in-house cash center then generates a payment order. Upon
receiving the IDoc, the U.S. in-house cash center verifies
whether the bank number of the ordering party differs from
that of the recipient and determines the relevant payment
route. The route specifies the next in-house cash center that
will be instructed to make the payment (the European in-house
cash center in this case), the current account of the European
in-house cash center in the U.S. in-house cash center, and the
current account of the U.S. in-house cash center in the
European in-house cash center. Subsequently, a second IDoc
will be created.

Example: Using Multiple In-House Cash Centers for

Internal Payments

In this example, subsidiary E in Europe delivers goods to

subsidiary A in the United States. Subsidiary A instructs the
U.S. in-house cash center to make the payment to subsidiary E.
The process is depicted in Figure 14.
The following prerequisites apply to this scenario:
The subsidiaries have defined different in-house cash centers
as their respective house banks.
The U.S. in-house cash center keeps current accounts for
subsidiary A and for the European in-house cash center.
The European in-house cash center keeps current accounts
for subsidiary E and for the U.S. in-house cash center.
To pay the invoice, subsidiary A runs the standard payment program. Based on the payment terms, the financial accounting
system (mySAP ERP Financials) determines the open items and

In-House Cash Center

(U.S.)

Subsidiary C
Subsidiary B

Financial
accounting
system

Account
management
2

Subsidiary A

In-House Cash Center

(Europe)

Subsidiary G
Subsidiary F
Subsidiary E

Bank statement

Financial
accounting
system

Account
management
4

Payment

Figure 14: Internal Payments Using Multiple In-House Cash Centers

17

The first IDoc received by the U.S. in-house cash center generates postings on the following current accounts:
The U.S. in-house cash center debits the payment amount
from the account of the ordering party (subsidiary A) and
credits it to the account of the European in-house cash
center.
Consequently, the U.S. in-house cash center has a receivable
position due from subsidiary A and a payable position that is
owed to the European in-house cash center.

to the payment recipient and to the mySAP ERP Financials

solution at company headquarters. The in-house cash centers
generate and send bank statements to subsidiary A and subsidiary E at predefined intervals. Subsidiary A and subsidiary E
import the bank statements, and the functions for bank
statement processing automatically identify and clear the
corresponding open items.
Example: Central and Local Payments Using Multiple
In-House Cash Centers

As a result of the second IDoc received by the European inhouse cash center, the European in-house cash center debits the
payment amount from the account of the ordering in-house cash
center in the U.S. and credits it to the account of subsidiary E.

In this example, an external business partner in Europe delivers

goods to subsidiary A in the United States. Subsidiary A
instructs the U.S. in-house cash center to make a payment to
the external business partner.

Account Management and Manual Post-Processing

The prerequisites for this scenario are as follows:

Subsidiary A has defined the U.S. in-house cash center as its
house bank.
The U.S. in-house cash center keeps current accounts for subsidiary A and for the European in-house cash center.
The European in-house cash center instructs its house bank
to make the payments to external business partners in
Europe.

Accounts are managed on the basis of the payment items

(account turnovers), which are posted to the accounts
automatically by the respective processes. Payment orders may
be initiated externally or internally. Externally initiated
payment orders are transferred to the in-house cash center by
the subsidiaries and then posted. Internally initiated payment
orders are entered manually in the in-house cash center; for
example, the in-house cash center receives a telephone order
from a subsidiary. You can set up a release procedure for these
payment orders and items that would require approval by
another employee for payments above a given amount.
Continuing with the example above, the European in-house
cash center has a payable position owed to subsidiary E and a
receivable position due from the U.S. in-house cash center.
Payables between subsidiary A and subsidiary E are thus cleared
without the need for physical payments. The data for the original ordering party and recipient are stored with the payment
items in the payment order. The payment notes are passed on

18

To pay the invoice, subsidiary A runs the standard payment

program. Based on the payment terms, mySAP ERP Financials
determines the open items and proposes a payment run. The
payment function posts the payment documents and automatically generates an IDoc that contains all the payment information. This IDoc is sent to the U.S. in-house cash center
(subsidiary As house bank), instructing it to make the payment
to the external business partner. The U.S. in-house cash center,
serving as the house bank for subsidiary A, makes the payment
to the external business partner in Europe via the European inhouse cash center. This is steered by the route determination in
SAP In-House Cash.

Each in-house cash center generates a payment order. The U.S.

in-house cash center first checks to see whether the bank number of the ordering party differs from that of the recipient. If
this is the case, it determines the appropriate payment route.
This route indicates the next in-house cash center that will be
instructed to make the payment, as well as the current account
of the party that finally executes the payment. Also the current
account of the U.S. in-house cash center in the European inhouse cash center is determined. The IDoc received by the U.S.
in-house cash center triggers the postings to the respective current accounts.

In-House Cash Center

Subsidiary C
Subsidiary B

Account
management
2

Subsidiary A

In-House Cash Center

External
business
partner

Financial
accounting
system

House
bank of
head
office

Partner
bank
5

Bank statement

Financial
accounting
system

Account
management
4

Payment

The U.S. in-house cash center debits the payment amount from
the account of subsidiary A (the ordering party) and credits it to
the account of the European in-house cash center. Consequently, the U.S. in-house cash center has a receivable position due
from subsidiary A and a payable position that is owed to the
European in-house cash center.
The U.S. in-house cash center generates and sends the bank
statement to subsidiary A. Subsidiary A imports the bank statement, and the bank statement processing functions automatically clear the open items on the clearing account. The second
IDoc received by the European in-house cash center triggers
postings to the respective current accounts. The European inhouse cash center recognizes that the bank number of the
recipient belongs to an external partner and automatically generates a payment order for an outgoing payment.
The European in-house cash center debits the payment amount
from the current account of the U.S. in-house cash center and
credits it to the account of the party that executes the payment
to the external business partner. The European in-house cash
center, therefore, has a receivable item owed from the U.S. inhouse cash center and a liability towards the executing party.
The executing party makes the payment to the external
partners bank. This can either be the European in-house cash
center (comparable with the scenario for automated outgoing
central payments) or another subsidiary (comparable with the
scenario for automated outgoing local payments).

Figure 15: Central Payments Using Multiple In-House Cash Centers

19

CURRENCY CONVERSION
In the case of automated outgoing central payments, the interface for outgoing payments is in the financial accounting
system of the head office (mySAP ERP Financials) or in the subsidiarys financial accounting system (mySAP ERP Financials).
Either the head office or the subsidiary runs the program for
payment requests, which selects the relevant requests and generates the payment media for the house bank. The house bank
makes the payment to the partner bank. The external business
partner is informed of the payment in a statement from its own
bank. The financial accounting system at the head office or at
the subsidiary also receives a bank statement from its house
bank.

The in-house cash center manages accounts as subledger

accounts. Each current account in the in-house cash center is
managed in a particular currency that you define. The currency
of the payment orders sent to the in-house cash center is the
transaction currency. If the transaction currency of a payment
order differs from the account currency, the application
converts the currency automatically through a currency swap.
The payment order can be settled when it is posted with a final
posting or with a provisional posting. As soon as the actual
exchange rate is available, the payment order is finally posted
using this rate.
You can define spreads between the rate achieved by the inhouse cash center (primary rate) and the internal rate (secondary rate). The difference (spread) can be posted on a specific inhouse cash profit-and-loss account. The items on these
profit-and-loss accounts are transferred individually to the
mySAP ERP Financials general ledger.

Group

Head Office

Subsidiary C
Subsidiary B
Subsidiary A

In-House Cash Center

Account
management

Financial
accounting
system

Currency
conversion

Local
currency
GBP

Transaction
currency
JPY

Account
currency
USD

Payment program

Payment order
- 100 JPY Acct 1
+100 JPY Acct 2

Figure 16: Currency Conversion

20

PERIODIC ACTIVITIES

The manual currency conversion function is relevant for all the

payment orders entered manually in the in-house cash center
(internally initiated payment transactions). If you create a
manual internal payment order with a transaction currency
that is different from the account currency of either the ordering party or the recipient, the application automatically displays
the defined exchange rate for this currency pair and gives you
the option of changing it manually. In the case of an internal
payment order, both the ordering party and the recipient have
current accounts with the in-house cash center. In the case of
an external payment order, the recipients current account is
held at an external bank. Therefore, when you create an external payment, you can change the exchange rate for only the
ordering party since the currency in the recipients account,
which is managed by the external bank, is unknown. With the
manual currency conversion function, you have the option to
post provisionally before posting finally.

SAP In-House Cash provides central account settlement functions for activities that must be executed at regular intervals.
You can run the functions manually, or you can create a job
chain for automatic scheduling and execution. For example,
end-of-day processing can involve periodic settlement activities
such as cash concentration, account balancing, interest
compensation, as well as a general ledger transfer that includes
updating the relevant accounts.
Posting cutoff for
payment transactions

Cash concentration

End-of-Day Processing

The automatic currency conversion function is relevant for all

payment orders. If the transaction currency of a payment differs
from the account currency, the payment amount is converted
into the account currency using the current exchange rate
defined in the system. The payment order can be posted provisionally to the in-house cash account in the account currency,
and the transaction currency and exchange rate are stored for
reference. When the final exchange rate is communicated by
the external bank, the payment order is posted finally, either
with or without a spread. As a result, you work with the latest
exchange rates. This standard scenario is shown in Figure 16.

Account balancing

Interest compensation

Set next account

balancing date

Interest accrual/deferral

Balance sheet
preparations

Transfer to general ledger

Figure 17: End-of-Day Processing

Posting Cutoffs For Payment Transactions

Before you settle the accounts, you set the posting cutoff time.
Any payment transactions after the cutoff time will have the
next posting date. This ensures that no additional postings fall
into the account-balancing period. However, you can still
process postings with value dates in the past.

21

Cash Concentration

The cash concentration feature of the application lets you

maintain or clear balances for accounts within an account
hierarchy that you have defined. You can specify, for example,
that an account should always have a certain minimum balance
or that the remaining credit balance should be transferred to a
different account at the end of each month. Payment orders for
debiting or crediting accounts are generated automatically.

stored in the account master record is then set to the next

period closing date. If necessary, you can correct the closing
data for past periods to accommodate postings with past value
dates or returns. In addition, you can execute account balancing
for a single account or for a group of accounts using a mass run.
You can also simulate an account-balancing run prior to
executing the posting.
Interest Compensation

To use the cash concentration function, you must create an

account hierarchy (shown in Figure 17) in which you establish
superior accounts and subaccounts to reflect account relationships. The hierarchies are configured so that a superior account
can have multiple subaccounts. In these subaccounts, you can
specify the minimum and maximum balances that are
appropriate for current business conditions.
Hierarchy Relationships
Root account
(Hierarchy level 1)

Settlement sequence
Cash concentration

Act 1100

Act 1101

Act 1104

Act 1102

Act 1103

Hierarchy level 2

Act 1105

Hierarchy level 3

Act 1106

Hierarchy level 4

The interest compensation function lets you group accounts

into a logical account pool. As a result, you can add debit and
credit balances for grouped accounts to produce a fictitious
total balance from which you can calculate the overall interest.
This function maximizes the interest received by the account
pool and minimizes the pools interest expenses.
As with cash concentration, you create an account hierarchy
to execute the interest compensation function. After the
account balancing and the interest compensation run, the date
for account-balancing postings is moved forward.
Interest Accrual and Deferral

Interest that is accrued or deferred on an account is calculated

and prepared for transfer, together with the posting date, to the
mySAP ERP Financials general ledger.
Balance Sheet Preparation

Figure 18: Account Hierarchy

Account Balancing

Accounts are balanced when you close the accounting period.

This may occur on a daily, monthly, quarterly, half-yearly, or
yearly basis or at any other point in time, depending on the
specifications for the current account. The in-house cash center
calculates the interest and charges for the accounts based on the
defined conditions, posts them to the current accounts, and
determines the closing balances. The account-balancing date

22

Balance sheet preparation involves getting the balances in the

current accounts of each company ready for transfer to the
mySAP ERP Financials accounts for payables and receivables.
You can execute balance sheet preparation for either the
current date or for a posting date in the past.
Transfer to General Ledger

Accounts in the in-house cash center are managed as a

subledger. The corresponding general ledger is kept at the head
office. Account turnovers in the current accounts are updated
to the general ledger. You define to which general-ledger
accounts the provisional or final turnovers should be posted.

Balance sheet
preparations

Determine account
balances

Interest
accrual/deferral

Transfer to general
ledger (GL)

Determine accrual
deferral amounts
Prepare for GL
transfer

Generate financial
accounting system
document
Post in general
ledger

All reports in SAP software have a standard interface and

format, and there are easy-to-use tools for creating your own
display variants. You can create reports that run online and in
the background. All central online functions can be modified to
meet your individual requirements, and you can select various
criteria (such as account numbers) to restrict the scope of your
reports.

The results of each step are displayed in corresponding application logs

Figure 19: Process Flow for General-Ledger Transfer

During the general-ledger transfer, mySAP ERP Financials

documents are created from records of totals prepared in
previous steps and posted to the mySAP ERP Financials general
ledger of the head office.
In-House Cash Center
Subsidiary A

Subsidiary B

-50

+200

Financial Accounting System

General Ledger
Payment clearing
50 (1)
Receivables
200 (2)

200 (2)
Payables
50 (1)

Figure 20: General-Ledger Transfer

Reporting

You can access numerous in-house cash reports, including

overdraft lists, balance lists, and a list of account turnovers. You
can generate a list of account blocks and display payment items
(through the posting documents in mySAP ERP Financials) as
well as payment orders. In addition, a variety of reconciliation
reports can be created, such as comparison of payment items
with posting amounts or comparison of posting amounts in
in-house cash accounts with posting amounts in mySAP ERP
Financials. The reporting function also includes overviews of
account limits and individual conditions.

23

SYSTEM ARCHITECTURE
SAP Technology

SAP In-House Cash is an integrated e-business application that

is supported by the SAP NetWeaver platform.
Application Link Enabling

Application link enabling (ALE) is the SAP integration technology for setting up and operating distributed applications. It provides the infrastructure for message exchange, and it ensures
that the data is stored consistently in SAP solutions that are
linked together. ALE supports both synchronous and asynchronous message exchanges and uses IDocs as the standard format
for electronic data interchange (EDI).

between group companies and the in-house cash center.

PAYEXT (message type PEXR2002) contains information for
making payments. It is sent to the in-house cash center
automatically when subsidiaries run the payment program.
DIRDEB (message type PEXR2002) contains information for collecting payments. It is sent to the in-house cash center
automatically when subsidiaries run the payment program for
collection. The IDoc type FINSTA (message type FINSTA01)
contains information for the bank statement and is sent by the
in-house cash center as it generates internal statements for subsidiaries at the predefined intervals.
The In-House Cash Center and the Financial Accounting

BAPI Programming Interface

System at the Head Office and at the Executing Party

The BAPI programming interface in mySAP ERP is currently

implemented as a function module. The software processes
BAPI function modules without sending back screen dialogs to
the calling application.

For outgoing payments, the in-house cash center uses an IDoc

to communicate with the mySAP ERP Financials solution of the
party that executes the external payment. This can either be the
head office or another subsidiary (local payment scenario). The
IDoc automatically transfers the payment items relevant for the
payment program for payment requests to mySAP ERP Financials of the executing party, where the items are entered in the
payment request table.

Remote Function Call

A remote function call (RFC) is a communications protocol

that enables synchronous communication between two
systems.
Communication Between Organizational Units
Group Companies and the In-House Cash Center

The in-house cash center is part of the SAP Financial Supply

Chain Management set of applications, which is part of the
mySAP ERP Financials solution. A participating group company
can use any software (such as applications from SAP partners,
an external system, or other non-SAP solutions) without the
need for external EDI converters by using the SAP NetWeaver
Exchange Infrastructure component.
Communication with the in-house cash center is based on
IDocs, which are supported by SAP R/3 software 4.0B and
higher. Earlier releases of SAP software and all other configurations require the use of an IDoc converter. The PEXR2002 and
FINSTA01 IDoc message types are used for communication

24

If the head offices financial accounting program is located in

the same system as the in-house cash center, end-of-day processing takes place via BAPI. If financial accounting runs on a
different system from the in-house cash center, an IDoc can
be used in end-of-day processing for communication between
the in-house cash center and financial accounting. The IDoc
FIDCC2 (message type FIDCCP02) contains all the balances that
have been grouped together during balance sheet preparation so
that the balances can be posted at a later time to the general
ledger.

SUMMARY
SAP In-House Cash is a flexible solution that international
enterprises can use across national boundaries. It has all the
prerequisites for centralized processing of worldwide payment
transactions.

Subsidiary A
Subsidiary B
Subsidiary C
Electronic bank statement

F110 payment program

IDoc
FINSTA

EDI

EDI
IHCC

IDoc
PAYEXT
Incoming payments
BAPI

Bank statement
IHCC
account
management
Outgoing payments

Financial
accounting
system at
head office

End-of-day
processing

Bank statement
BAPI
programming
interface

House bank
of head
office

Figure 21: System Architecture: Interfaces

IDoc
FIDCC1

RFC

General ledger

Electronic bank
statement

Payment
request
F111
payment
program

The automated in-house cash functions make it easier to standardize, integrate, and control business processes for the group
as a whole. Managing your accounts in the in-house cash center
gives you a clearer and more immediate overview of the liquid
funds available in the individual accounts of your subsidiaries.
This helps prevent you from simultaneously borrowing money
for one subsidiary and investing money for another, and it
eliminates related interest-rate gaps and markups. By concentrating your activities in the in-house cash center, you gain
direct access to group-wide payment transaction information
and have optimum liquidity control.
By centralizing your external transactions, such as those related
to foreign exchange, you minimize the number of external
transactions required. You also increase the deal size, which
helps reduce the volume of foreign exchange transactions, as
well as the currency risks and administration charges associated
with those transactions. As a result, you increase your annual
return or the interest you receive on invested capital and reduce
the interest you pay on short-term loans. In addition, you can
trim the number of bank accounts you need and minimize
losses due to exchange-rate fluctuations.
Eliminating the physical transfer of cash normally associated
with intercompany payments significantly reduces transaction
costs. You can avoid the value-date losses and bank charges
related to internal netting, particularly in settling residual
payment amounts, and keep the cash in the accounts of the inhouse cash center. With links to all group entities, the in-house
cash center leads to far greater efficiency in international payment transactions. Because payments to external transaction
partners are bundled through external netting, bank charges
are minimized particularly for foreign transactions.

25

In contrast to the rigidity of classical netting procedures, process

automation gives internal trading partners more flexibility in
setting terms of payment during invoicing. Group companies
no longer have to agree on a fixed credit period.
By carrying out payment orders when individual subsidiaries
experience financial bottlenecks, the in-house cash center helps
assure continued solvency for group companies. At the same
time, the greater efficiency gained through central cash
management reduces costs and gives you a size advantage in the
external money market. With larger credit amounts in the
accounts of the in-house cash center, you can tap investment
strategies that make the most of more attractive interest rates,
which can have a very positive impact on net interest income.
Greater efficiency can also improve your financial ratios and
positively influence your external credit ratings. The lean bank
account structure helps reduce charges and cuts down on overhead costs related to liquidity analyses, posting transactions,
sweeping, cash concentration, account reconciliation, and
account management. You need fewer banks to process transactions with numerous business partners, which can significantly
reduce your annual charges. In addition, the capability greatly
simplifies netting processes a major bonus for users. As the
primary bank for your enterprise, the in-house cash center also
handles the groups internal financial transactions, further
reducing your processing costs. In todays increasingly
globalized, highly competitive economy, SAP In-House Cash
can provide a clear advantage in your bottom line.

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