Leverage Bank Account Management for Payment Signatories based Payment Approvals

By Chirag Chokshi, Senior Principal, Infosys Consulting

With globalization, Treasury function of large enterprises involves managing relationship with large number of banks in diverse geographies. Due to this, treasury managers have to manage many bank accounts and signatories. SAP S/4HANA Bank Relationship Management offers capability to maintain payment signatories and maximum payment amount in the master data of house bank account which helped to move control of maintaining payment signatories and amount to business users from IT department. Hence, S/4HANA Bank Account Management helped to simplify payment approval process and make it more efficient.

Note: SAP S/4HANA Bank Account Management module is also referred as Bank Relationship Management. However, we will use term Bank Account Management (BAM) in this article as SAP uses both names for this module. In SAP S/4HANA system, we will see “Bank Account Management” in the IMG menu path of SAP S/4HANA.

Key Concept: In today’s global and dynamic business environment, treasury department has to often deal with daunting task of managing and controlling large set of bank accounts across diverse geographies. Some of the challenges include maintaining optimum bank structure, manage large portfolio of bank accounts and signatories and maintain relationship with banks. Degree of automation as well as simplification of processes are essential to enhance efficiency of the organization in the fast-paced global business environment. SAP has revamped Cash & Liquidity Management functionality with advent of SAP S/4HANA. SAP aligned business processes to provide control to the actual owner of the processes. As a result, several settings which were traditionally configuration items in earlier SAP Releases i.e. SAP ERP became part of master data which usually own by business users. Payment approvals and signatories were managed through Bank Communication Management Release Strategy configuration in classical SAP ERP Central Component (SAP ECC) system while in S/4HANA Bank Account Management (submodule of Cash & Liquidity module), managing payment signatories and maximum payment amount is part of House Bank Account master data. This resulted to increase efficiency of payment approval process. This article explains the requisite configuration and house bank account master data needed for the Bank Relationship Management signatory-based payment approval process.

SAP has introduced several enhancements and simplification in the new and revamped S/4HANA Cash and Liquidity Management solution as listed below.

• Single Source of Truth: SAP has simplified data footprint in several module such as Universal Journal containing general ledger as well as various subledger data in one table (ACDOCA) and One Exposure from Operations containing Cash and Liquidity Management related data in one table (FQM_FLOW). This helped to have on the fly real-time analytics and reporting from transaction SAP S/4HANA ERP system.
• Simplification & Enhancement of Business Processes: Traditionally, in classic SAP ECC, some of the business relevant setup was an SAP configuration activity. Due to this, such system setup was done by IT department at the request of business users instead of business users themselves. With SAP S/4HANA, activities or system setup relevant for business is driven by master data instead of system configuration. This helped to enhance efficiency of the business operations/processes.

Bank Account Management (BAM) is the totally new function of SAP S/4HANA Cash & Liquidity Management through with SAP offers capability to create bank accounts as a master data and manage throughout their lifecycle such as open, close, modify, reopening of the bank accounts etc. Please refer to article “How to Use Workflow to Streamline and Control Bank Account Management Processes in SAP S/4HANA Finance”. SAP also added new tabs/fields on the house bank account master data. Payment Signatories and Cash Pool tabs helped SAP to simplify and enhance Payment Approval and Cash Concentration Processes respectively.

This article consists of step-by-step configuration required for BAM Payment Approval Process, “Payment Signatory” tab of House Bank Account master data, and sample payment approval process debriefing signatory-based payment approval.

Prerequisites

As S/4HANA Cash & Liquidity Management require additional license, SAP Offers “Full Scope” with full-blown function with license and “basic scope” to allow classic SAP ECC functionality such as maintain house bank/bank accounts. This process requires “Full Scope” of SAP S/4HANA Cash & Liquidity Management. For activating “Full Scope”, following settings are required.

1. Activate Business Function FIN_FSCM_CLM through transaction SFW5. Figure 1 displays that FIN_FSM_CLM is activated (Status tab; Bulb is lit).

   Figure 1: Activate Business Function FIN_FSCM_CLM

In SAP S/4HANA IMG (Configuration) for Cash & Liquidity Management, select option “Full Scope”. Menu Path: Finance Supply Chain Management -> Cash and Liquidity Management -> General Settings -> Define Basic Settings. This configuration can also be accessed through SM30 transaction, specify table/view FCLM_CONFIG2.

Figure 2: Select Full Scope in Cash and Liquidity Management Configuration

Step-by-Step Configuration 

Once the Full Scope for Cash & Liquidity Management is configured, the next step is configuration of Bank Account Management (BAM) and Bank Communication Management (BCM). Prior to BAM Payment Signatory function was introduced by SAP, BCM release strategy configuration was used for payment approval process. BCM release functionality is still available but using Bank Account Management signatory-based payment approval helps to transform control to the business users. Before explaining master data setup of the House Bank, I explain configuration required to enable BAM Payment Signatory based payment approval process.

Step 1: Define Settings for Bank Account Master Data

Configuration of Settings for Bank Account Master Data is required to support Payment Approval Process, Define Sensitive Fields for the House Bank Account Master Data and Define import methods for bank statements. This article explains the configuration settings required for payment approval process.

IMG Menu Path for configuration of Bank Account Master Data Settings: Finance Supply Chain Management -> Cash and Liquidity Management -> Bank Account Management -> Basic Settings -> Define Settings for Bank Account Master Data

• Account Type Definition: Account Types represents type of Bank Accounts i.e. Checking Account, Savings Account, Disbursement Accounts, Lockbox etc. Account Types are primary useful for two purposes. 1) As a filter or selection criteria for reporting, 2) Assigning payment approval patten to account types. SAP has pre-delivered account types and additional account types can be configured per specific requirements. Figure 3 below depicts the Account Type Configuration.

  Figure 3: Account Type Configuration

• Define Signatory Groups: Signatory Groups and Payment Approval patterns would help specify the payment signatories in the House Bank Account master data. SAP offers one step payment approval or multistep payment approvals. Multistep payment approvals can be sequential or non-sequential. Figure 4 shows the Signatory Group configuration.

  Figure 4: Signatory Group Configuration

• Define Approval Patterns: Payment Approval Patterns defines the rules of the payments i.e. approval would be sequential or nonsequential, sequential approval would be single step or multi step approval, assignment of signatory group to the approval step of approval pattern. Additionally, minimum approval amount and currency can also be configured but I recommend specifying minimum approval amount in the house bank master data. Figure 5 shows the configuration of payment approval pattens P001- two step payment approval, P002- one step payment approval, and S001- non sequential approval. Signatory Groups are assigned to approval steps of P001 and P002 respectively. As S001 is nonsequential approval pattern, signatory groups are assigned through “Maintain Non-Sequential Approval Patten”. Figure 6 shows assignment of signatory group to S001.

  Figure 5: Payment Approval Patterns

  

  Figure 6: Signatory Group Assignment to Non-Sequential Pattern

Assign Approval Patterns with combination of Company Code/Account Types: Assignment of approval pattern with combination of company code and account type drives which signatory group(s) would approve payments made from specific house bank account. Figure 7 shows the configuration of assignment of approval patterns. Multiple approval patterns can be assigned to Company Code/Account Type. Priority sequence would decide which approval pattern would be applicable first for payment approval.

Figure 7: Assignment of Approval Patterns

Step 2: Enable Signatory Control

This configuration step would enable the users defined as signatories in House Bank Account master data to approve or reject the payments. Signatories information in the House Bank Account master data does not take effect without this configuration.

IMG Menu Path for configuration of Bank Account Master Data Settings: Finance Supply Chain Management -> Cash and Liquidity Management -> Bank Account Management -> Enable Signatory Control.

Figure 8: Enable Signatory Control Configuration

Figure 8 shows configuration of Enable Signatory Control. For BAM Payment Signatory approval process, following configuration (circled in the figure) should exists.

• Process 0BANK002, Function Module FCLM_BAM_BCM_AGT_PRESEL, Product BAM
• Process 0BANK004, Function Module FCLM_BAM_BCM_REL_PROC_CTRL, Product BAM

Following Configuration in the Bank Communication Management is required for enabling BAM Signatory Control.

• Rules Maintenance
• Additional Criterions for Payment Grouping

Step 3: Bank Communication Management Configuration- Rules Maintenance

Payment Grouping configuration contains rules of merging different payment documents to create a batch of payment document which would be sent to bank for making payments. Payment grouping configuration contains the rules that generates payment batches and priorities in case multiple rules satisfy the criteria. Figure 9 displays configuration of payment grouping rules and associated priorities. Rule “CC1710_11” has priority over “FIDO” and other rules as value of Priority for “CC1710_11” is 0 which lower than other rules.

IMG Menupath: Financial Supply Chain Management -> Bank Communication Management -> Payment Grouping -> Rules Maintenance

Figure 9: Bank Communication Management Payment Grouping Rules Configuration

Double Click on “RI. Maint” opens up the rules maintained for payment grouping. Figure 10 displays the Rules maintained for Rule ID “CC1710_11”. This rule generates payment batch for the payment documents posted for company codes 1710 and 1711.

Figure 10: Payment Grouping Rules for Rule ID CC1710_11

Step 4: Configuration of Additional Criterions for Payment Grouping

This configuration allows two additional criterions for creating a batch for the payment group. As Bank Account Management, payment signatories are specified in the House Bank Account, it may be possible that different House Bank Accounts for given company codes may have different signatories. So, one of the requirements is to have first criterion for additional grouping should be House Bank Id (Field Name: HKTID). Figure 11 displays the additional criterions for payment grouping.

IMG Menupath: Financial Supply Chain Management -> Bank Communication Management -> Payment Grouping -> Additional Criterions for Payment Grouping

Figure 11: Additional Criteria for Payment Grouping

Now I explain how Rule CC1710_11 rule groups payment to create batches.

• As Rule ID configuration contains paying company codes 1710 and 1711, payment documents for those two company codes are selected.
• As a next criteria, HKTID (House Bank Account) is grouping field 1 I and VALUT (Value Date) is groping field 2, payment documents of those two company codes first grouped by House Bank Id and then by value date of payment documents.
• Each batch is created by company code, house bank account and value date.

This configuration would help to create batch by house bank account and hence, batch would go to right approving user(s) specified in House Bank Master data. Assignment of Approvers to House Bank Account is specified in the next section on House Bank Master Data. Please note that Grouping Field 1 of Additional Grouping Criteria must he HKTID.

Once above configuration is maintained, next step is maintaining House Bank Master data. SAP S/4HANA Cash & Liquidity Management is FIORI APP based solution. Next section displays “Payment Signatories” tab of Manage House Bank Account APP.

Process Flow of Payment Approval by Signatory Assigned in House Bank Master Data

Once the requisite Bank Account Management (BAM) and Bank Communication Management explained in Step-by-Step configuration section, Payment Approval is done using BAM Payment Signatory. In this section, I explain House Bank Master data as well as Payment Approval process using Cash & Liquidity Management FIORI APPs.

Step 1: Assign Payment Signatories to House Bank Account Master Data- “Manage Bank Account” APP- Payment Signatories tab

Figure 12 shows FIORI APP- Manage Bank Accounts which is used to create House Bank with S/4HANA Cash & Liquidity Management. This figure also displays the “Payment Signatories” tab of House Bank Account. In this tab, Signatory Group G001 (configuration explained in Step 1b to Step 1d) is assigned to User id “MANAGER2” and he can approve maximum USD 1,000.  This is one-time setup being a master data. This is a significant improvement as with SAP ECC, this setup was done through Release Strategy configuration in Bank Communication Management module. Now, as it is part of House Bank Account master data, Business can make changes without involvement of IT and it helps with increased flexibility and agility in Payment Approval process.

Figure 12: Payment Signatories Assignment with House Bank Account

Step 2: Fund Transfer Request between Bank Accounts using “Make Bank Transfer” APP

Using Make Fund Transfer FIORI APP, I crated Payment Request for Fund Transfer USD 400 from Bank Account 12345678 (House Bank HBNK1/Account HCUR1) to Bank Account 87654321 (House Bank HBNK1/Account HSAV1). Figure 13 contains

Figure 13: Bank Transfer Request Initiation between House Bank Accounts using “Make Bank Transfer” APP

Clicking “Save” button created Payment Request 53 as shows in Figure 14.

Figure 14: Payment Request Creation

System prompts to create Payment document or not once the Payment request is created. Clicking “Pay” button creates payment document (Clearing Document # 2000100008), Payment Run id 00003R. Figure 15 depicts the payment document creation as stated above.

 Figure 15: Payment Document Creation for the Funds Transfer between two bank accounts

Step 3: Review Status of Payment through “Track Bank Transfers” APP

FIORI APP “Track Bank Transfers” displays status of Payments posted in the system. In figure 16, header of Track Bank Transfer displays that 4 payments are in “New” status and 4 payments are “Approved” status. Clicking on “New” button displays all the payments in “New” status. Figure 16 displays payments with “New” status. Payment made in previous step through Run id 00003R for USD 400 appears in second line of the report displayed. System assign status “New” once payment is created and it goes to Approver (MANAGER2 for House Bank Account) for approval.

Figure 16: Payments with “New” Status – “Track Bank Transfer” APP

Step 2: Approval of Fund Transfer by Manager2 through “Approve Bank Payments”

Payment Signatory assigned as an approver (MANAGER2 for this use case) logs on to SAP S/4HANA and open FIORI APP “Approve Bank Payments” for reviewing payment batches requiring approval. Figure 17 displays the FIORI TILE of “Approve Bank Payments” tab and Report generated once Payment Signatory double click on this FIORI TILE. This APP being one of the SMART FIORI APP displays “3” on TILE indicating that three payments are awaiting approval.

Report contains two tabs: “For Review” and “Reviewed”. Payment awaiting approval appear in “For Review” tab. Payment posted in step 2 for USD 400 appears in 3^rd line of “Fore Review” tab. In the Right top, there is a button called “Submit Reviewed” tab which contains number of payments which are reviewed and can be approved in the parenthesis. At present, there are no payments reviewed by him and hence, count in parenthesis is 0 i.e. Submit Reviewed (0).

Figure 17: Approve Bank Payment FIORI TILE and REPORT

Double clicking on the payment line opens up the details of the Payment Batches (Figure 18) which contains buttons for action/decision for the payment batch i.e. Approve, Reject, Defer at the top right and payment details in tabs like Batch Details, Payments, Approval Flow, Attachments etc.

Figure 18: Payment Batch Details with Buttons for Approval Actions

Clicking “Approve” button opens Screen for Approval Note as in and once payment is approved, Payment Batch status changes from “For Review” to “Reviewed”. Figure 19 shows Approval Note screen and clicking OK approves the payment. Figure 20 displays that Submit Reviewed Batches button count increased to 1 from 0.

Figure 19: Approval Note and Confirmation of Approval of Payment

Figure 20: Payment Batch Status changed to “Reviewed” upon Payment Approval

As a final action of payment approval, Double clicking button “Submit Reviewed Batches” brings dialog box asking submitting reviewed batches as displayed in Figure 21. Clicking on Submit would make approved payment ready for sending instruction to bank for further disbursement.

Figure 21: Submit Reviewed Batches of Payment for Disbursement

STEP 5: Review Status of Payment through “‘Track Bank Transfers” APP after Approval

After Payment Signatory (MANAGER2) approved payment as explained in step 4, FIORI APP “Track Bank Transfer” displays payment under “Approved” status. Track Bank Transfer APP report in Step 2 had 4 payments in New Status and 4 payments in Approved Status. With approval of payment in Step 4, New status count decreased to 3 while Approve Status count increased to 5.

Figure 22

In summary, Bank Account Management Payment Approval process offers following improvements.

• Payment Signatory and Maximum Approval Amount is now part of House Bank Account Master Data which was earlier part of Bank Communication Management Release Strategy configuration. This shift allowed freedom to Treasury Managers to change signatories and amount reflecting cash positions/personnel with the department and help make this process more agile.
• SAP S/4HANA Cash & Liquidity Management is a revamped solution and offers Smart FIORI APPs providing high level information on TILE itself (i.e. Number of Payments on “Approve Bank Payments”) with exhaustive details in the report generated. The process flow of the payment approval is explained with example of some available FIORI APPs like Make Bank Transfer, Approve Bank Payments and Track Bank Transfer.