How SAP FSCM Complements Standard FI-AR to

Reduce Days Sales Outstanding

by Mark Chalfen, Finance Capability Lead, Bluefin Solutions
October 25, 2010 Share
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Standard accounts receivable (AR) functionality is split among many transactions, taking extra time
from a busy AR team. By performing the whole customer contact process using a single transaction
within SAP Financial Supply Chain Management (SAP FSCM), you can reduce the time spent by the
AR team, ensuring more customers are contacted. The business can make better decisions, reducing
potential bad debt. This includes having a complete dispute management system and prioritized
worklist process in place. Walk through processes in AR, and then see how they work as compared
to SAP FSCM to see the benefits, including a reduction in working capital and a reduction in days
sales outstanding.

Key Concept

SAP Financial Supply Chain Management (SAP FSCM) provides more convenient access to the
processes you normally perform in your FI-AR system. It is a licensable product, but comes with
certain SAP ERP 6.0 implementations. Two important submodules of SAP FSCM are Collections
Management and Dispute Management.

Over the past few years there has been a great deal of interest around SAP Financial Supply Chain
Management (SAP FSCM). SAP has invested a great deal of time and effort in designing and improving the
product. This can be seen by the various business function sets — collections of new functionality within an
enhancement package — that have been released:

FIN_FSCM_CCD
FIN_FSCM_CCD2
FIN_FSCM_INTEGRATION
FIN_FSCM_CCD_INTEGRATION

Many articles have focused on what SAP FSCM actually does and delivers (see the note for specific
references). They are useful if you are aware of the current SAP accounts receivable (AR) functionality;
however, some of the functionality is new within SAP FSCM and does not replace actual AR functionality.

Note
For some SAP FSCM references, see the articles, “Improve Your Receivables Management with SAP
Collections Management” (/Articles/2007/November/Improve-Your-Receivables-Management-with-SAP-
Collections-Management) and “Adapt and Automate SAP Dispute Management.”
(/Articles/2007/September/Adapt-and-Automate-SAP-Dispute-Management)

I’ll review the current SAP AR transactions and then compare them to the new functionality that has been
delivered so far within SAP FSCM.

What Does the AR Team Actually Do?

What Does the AR Team Actually Do?
A company’s customer base is normally split across the AR team, providing a single team member to a
customer, with the team member having many customers to manage. The AR team performs three commonly
used processes:

1. Chasing outstanding balances

2. Logging, processing, and resolving disputes
3. Confirming and allocating payments

The diagram in Figure 1 shows the steps within these processes and is color coded to show which step
relates to which process.

Figure 1 Standard steps performed within the AR process

To achieve these business processes, a team member may need to take some of the following actions:

Contact the customer prior to the debt becoming due

Confirm that the customer received all of its invoices
Confirm if the customer has a dispute on any of its invoices
Chase the customer for payment once the debt is overdue
Obtain details of pending payments recording value and date of payment

You can see the interaction among the various actions in Figure 2.
Figure 2 A typical cash collection cycle

The key behind the process is to ensure the correct customer is contacted at the correct time in the
collection process cycle. Some customers do not require any contact, as they will always pay their
outstanding invoices when they are due.

However, for various reasons some customers do not pay according to the agreed payment terms. Some delay
payment intentionally to improve their cash position, and others may want to pay on time but have issues
with outstanding invoices.

How Does Standard AR Work?

Now I will look at how the standard SAP AR tools assist the team in performing key tasks. As with most AR
teams and processes, the core process used is the aged debt report.

Many standard reports within AR show the outstanding debt of a customer. To access one of the most
commonly used reports, follow SAP Easy Access menu path SAP menu > Accounting > Financial Accounting >
Accounts Receivable > Reports for Accounts Receivable Accounting > Customers: Items > S_ALR_87012178 –
Customer Open Items Analysis by Balance of Overdue Items (Figure 3).
Figure 3 Top selection screen of the standard aged debt report

Figure 4 shows some important settings you need to consider. The Due Date Sorted List field box is where
you control the various aging buckets. In this example, the first box shows items due from 0-30 days, the
second is for 31-60 days, and so on. The Summarization Level controls the level of detail that is provided in
the report. Six, which sorts the list by accounting clerk and company code, is one of the most commonly used
values. The Sort by Bal. of Overdue Items check box affects how customers are shown on the report. If this is
checked, the customers with the highest overdue balances appear at the top.

Figure 4 Output control selection parameters for standard aged debt report

Figure 5 shows the output of the report with the settings made in Figures 3 and 4.
Figure 5 Output of the aged debt report

The report provides the AR resource a clear breakdown of the customer’s account. The downside is that users
cannot drill into the detail of the account, nor can they record any notes. Lastly, and probably the biggest
issue, is that there is no way of recording if contact has been made with the customer, so a customer could
be contacted more than once or not at all. This is one way that SAP FSCM differs, which I’ll discuss later.

In practice, the aged debt report is printed at the start of each period. Assuming a client offers its customer
net monthly payment terms, no new invoices raised should fall due in the monthly period. The printout allows
the user to write notes and see the starting point. This frees up the user to access more detailed information
with standard SAP functionality.

The main report used is transaction FBL5N — the customer open item list (Figure 6). To access this report,
follow SAP Easy Access menu path SAP menu > Accounting > Financial Accounting > Accounts Receivable >
Account > FBL5N – Display/Change Line Items.
Figure 6 A standard customer open item report

As you can see, there is now more detailed information regarding the customer’s account. This transaction
provides full drilldown into the document, allowing, where applicable, access to the billing document, scanned
image, and sales order or sales contract.

The benefit of the customer open item list is that it provides a single screen that breaks out the customer
items. You can filter the report to just show overdue items, or items within a certain date range and number
range. There is also the possibility to enter some text against line items. The issue here is that the field is
only 50 characters, and you would have to copy the entries to the various line items if you wanted to add the
same comment to many lines.

Occasionally, the user wants to record a generic message against the customer rather than the line items.
This is not achievable in the aged debt report as it is just a static report, and cannot be done against the
customer open items. This is another area that SAP FSCM satisfies, which I’ll discuss later.

A frequently used area to record notes against a customer is the credit master in transaction FD33. To access
this, follow SAP Easy Access menu path SAP menu > Accounting > Financial Accounting > Accounts
Receivable > Credit Management > Master data > FD33 – Display (Figure 7).

Figure 7 Detail of a credit master and the Texts button where the text is held

Double-click the Texts button in the credit master to see the notes that have already been entered (Figure 8).
You can also enter more notes if necessary (Figure 9).
Figure 8 The pop-up screen that appears after clicking the Texts button in the credit
master

Figure 9 Actual text held within the credit master

It is simple to add the relevant text into the credit master and over time this can provide the user a detailed
history of the contact made. The issue with these notes is that they can be deleted accidentally and cannot
be accessed directly from the customer open line item report. There is a transaction (the credit master sheet)
that provides access to the notes. However, it can be cumbersome navigating between the various linked
screens. With Collections Management in SAP FSCM, you won’t need to do this.
screens. With Collections Management in SAP FSCM, you won’t need to do this.

One of the main objectives of the standard tasks for the AR team is to contact the customer at agreed upon
times in the collection cycle. A way to automate this is via dunning. A customer needs to be assigned to a
dunning procedure, and then it follows the dunning cycle, either sending notifications to the customer to chase
for payment, or prompting the AR user to contact the customer based on the dunning cycle.

The issue with dunning is that some customers cannot follow a generic route. Therefore, they are seen as
exempt from dunning and the AR team need to manage their contact manually. Use transaction XD02 to
change the customer master, so you can add a new dunning procedure to the customer master (Figure 10).
Transaction FBMP is the basic configuration screen for dunning (Figure 11).

Figure Details where the dunning procedure is held within a customer master
10
 Figure Show the various configuration options available for dunning
11

Now that I’ve reviewed some standard processes and tasks within FI-AR, refer back to Figure 1 for
comparison to Figure 12. Figure 12 shows an updated version of Figure 1, detailing which tasks can be
performed by standard FI-AR, compared with the boxes in blue, which cannot be fulfilled by standard FI-AR.
Now let’s look at how SAP FSCM works as a complement to FI-AR over these processes.

Figure Tasks that can be achieved as standard with FI-AR against the standard ones
12 in Figure 1

How Does SAP FSCM Tackle These Issues?

SAP FSCM enhances the standard capabilities in FI-AR. The two main submodules of SAP FSCM that the AR
team should use are SAP Collections Management and SAP Dispute Management.

Other articles address other aspects of SAP Collections Management (including the one I referenced in the
note at the beginning of this article), but the main area I am going to focus on is the creation of the worklist.
An SAP Collections Management worklist is a prioritized list of customers that the AR team needs to contact.
The list is displayed in order of importance. The way that this is achieved is that every customer receives a
score based on a client-specific set of rules.

Follow SAP menu > Accounting > Financial Supply Chain Management > Collections Management >
UDM_SUPERVISOR – All Worklists to see a typical worklist (Figure 13). You can view all worklists by using
this transaction, or you can run an individual collections worklist by the following menu path SAP menu >
Accounting > Financial Supply Chain Management > Collections Management > UDM_SPECIALIST.
 Figure A typical worklist within SAP FSCM
13

The worklist is similar to the standard aged debt report, but with some enhancements:

Drill-down functionality in the customer record

Each customer is assigned a collection score and the list can be sorted by this to prioritize customers
to contact
Summary information regarding disputes, promises to pay, and a To Be Collected column, which is
configurable

All customers are linked to a collection strategy. To access a collection strategy, follow SAP Easy Access
menu path SAP menu > Accounting > Financial Supply Chain Management > Collections Management > Current
settings > UDM_STRATEGY – Strategies (Figure 14). Within the strategy, collection rules have a valuation.
This then allows the customer to get a score based on a number of client-defined rules.
 Figure Definition of the collection strategy and the rules linked behind the strategy
14

When defining the strategy there is the functionality to simulate the strategy against a customer so you can
see the score different customers receive. Simulating the collection strategy provides the score the customer
would get based on the criteria in the collection strategy. It is also a way of testing the strategy to ensure it
meets the company’s requirement. Click the display logs icon to see the pop-up screen shown in Figure 15.

Figure Simulation of a customer for a collection strategy

15

You can provide whatever values you think are relevant to ensure the correct customers are contacted. This
could mean all customers with the highest overdue debt are contacted first, or customers who are at a
specific dunning level. This provides the client a uniformed approach to contacting customers, so if a team
member was away, a temporary worker could step in and perform their daily duties without too much effort.
Further, the AR team can actually monitor its productivity by seeing the number of customers contacted in a
day.

Figure 16 shows that there are various tabs available for further processing. You can reach this screen by
double-clicking the appropriate customer in the worklist in Figure 13. The main part of this screen details the
customer open items. Figure 17 shows the information available for previous payments in the Payments tab. It
shows that the customer made a payment on August 1, 2010. You also have the ability to create a promise to
pay and or a dispute case.
 Figure A list of previous payments made against the customer
17

The Cust. Contacts tab shows all the contacts that have been made since the date specified in the Cust.
Contacts Since field (Figure 18). You can drill into this to see the detail at the bottom of Figure 18.
 Figure Details in the Cust. Contacts tab
18

You can also highlight an item and click the Dispute Case button to see the pop-up screen in Figure 19. Here,
you can create a customer dispute, which you can view when you access the customer again. You can assign
this to various business users, as well as different reason codes and statutes.

Figure Create a customer dispute via Collections Management

19

Similar to creating a dispute, when you create a promise to pay you need to select the line items that are to
be included. After doing this, click the Promise to Pay button, which produces the bottom half of the screen in
Figure 20, where you can fill in information. You can enter the amount that has been promised, some notes,
and a reference, which could be the check number.
 Figure Create a promise to pay from Collections Management
20

With these functionalities, the AR team now has one single transaction in which it can perform three major
tasks: chasing for payment, logging and resolving disputes, and making scheduled customer contacts, which is
illustrated in Figure 21.

Figure Tasks that can be achieved as standard with FSCM against the standard ones
21 in Figure 1

Mark Chalfen
Mark Chalfen is the finance capability lead at Bluefin Solutions, a niche SAP consultancy in the UK, and
an SAP mentor. Mark has more than 12 years’ experience in SAP FI/CO in a number of industries. Mark’s
core skills include Financial Supply Chain Management (SAP FSCM) and the new GL. He is currently
advising a wide variety of clients on maximizing their SAP landscape either in the current R/3 version or
upgrading to SAP ERP.

See more by this author (/Financials/search?q=Mark+Chalfen&exact=1)

You may contact the author at mark.chalfen@bluefinsolutions.com

(mailto:mark.chalfen@bluefinsolutions.com?cc=editor@financialsexpertonline.com).

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