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Yaroslav Subbotin
Yaroslav Subbotin

SAP Liquidity Planner: How to Create and Manage Cash Accounts and Cash Flows in SAP

Confidence is key when optimizing costs associated with bank services, planning future cash flows, and getting long-term guidance on treasury operations. With SAP solutions, you gain real-time access to global bank balances, centralized management of bank accounts, and comprehensive controls for account opening, closing, and signatory management.

Cash Accounting and Cash Flow Planning with SAP Liquidity Planner.pdf

With SAP S/4 HANA, the classic SAP cash and liquidity management has been replaced by the new SAP Cash Management. So, if you are using the classic SAP cash and Liquidity management, you can migrate the related master data to the new SAP cash Management.

Further, you can navigate into the cash position Detailed app, where you now get a line item level view of your cash balances. To clarify any doubts, you can drill down into the source document by navigating to the Check Cash flow items app.

The main job of SAP Liquidity Management is to manage the planned cash flows and find actual values. For this job, there is a Liquidity Planner under Liquidity management. This Liquidity Planner provides various tools to input, adjust, aggregate and evaluate the cash flows.

Cash flow forecasting is the process of estimating the flow of cash in and out of a business over a specific period of time. An accurate cash flow forecast helps companies predict future cash positions, avoid crippling cash shortages, and earn returns on any cash surpluses they may have in the most efficient manner possible.

To ensure you see actionable business insights from a cash flow forecast, you should start with determining the business objective that the forecast should support. We find that organizations most commonly use cash forecasts for one of the following objectives.

No finance or treasury function could run without spreadsheets. But automating the entire cash flow management process can save upward of 90% of the manual effort required to build and analyze a forecast using a spreadsheet.

Cash flow is the lifeblood of your business. And when it stops moving, rigor mortis sets in. In fact, according to Jessie Hagen of US Bank, when companies fail for financial reasons, poor cash flow is to blame 82% of the time.

If your business uses the cash accounting method, then your books will pretty closely match the cash reality of your business. But if you use the accrual accounting method, then measuring your cash flow is doubly important.

Remember, the first step to managing your cash flow is getting your bookkeeping under control. If you need a good crash course (including options on how to outsource it), check out our Bookkeeping Basics for Entrepreneurs.

A cash flow statement is one of the most important financial statements for a project or business. The statement can be as simple as a one page analysis or may involve several schedules that feed information into a central statement.

A cash flow statement is a listing of the flows of cash into and out of the business or project. Think of it as your checking account at the bank. Deposits are the cash inflow and withdrawals (checks) are the cash outflows. The balance in your checking account is your net cash flow at a specific point in time.

A cash flow statement is a listing of cash flows that occurred during the past accounting period. A projection of future flows of cash is called a cash flow budget. You can think of a cash flow budget as a projection of the future deposits and withdrawals to your checking account.

Working capital is an important part of a cash flow analysis. It is defined as the amount of money needed to facilitate business operations and transactions, and is calculated as current assets (cash or near cash assets) less current liabilities (liabilities due during the upcoming accounting period). Computing the amount of working capital gives you a quick analysis of the liquidity of the business over the future accounting period. If working capital appears to be sufficient, developing a cash flow budget may not be critical. But if working capital appears to be insufficient, a cash flow budget may highlight liquidity problems that may occur during the coming year.

Most statements are constructed so that you can identify each individual inflow or outflow item with a place for a description of the item. Statements like Decision Tool Cash Flow Budget (12 periods) provides a flexible tool for simple cash flow projections. A more comprehensive tool for a Farm Cash Flow (Decision Tool) is also available. A more in-depth discussion of creating a cash flow budget is Twelve Steps to Cash Flow Budgeting.

Some cash flow budgets are constructed so that you can monitor the accuracy of your projections. These budgets allow you to make monthly cash flow projections for the coming year and also enter actual inflows and outflows as you progress through the year. This will allow you to compare your projections to your actual cash flows and make adjustments to the projections for the remainder of the year.

By creating a cash flow budget you can project sources and applications of funds for the upcoming time periods. You will identify any cash deficit periods in advance so you can take corrective actions now to alleviate the deficit. This may involve shifting the timing of certain transactions. It may also determine when money will be borrowed. If borrowing is involved, it will also determine the amount of cash that needs to be borrowed.

People often mistakenly believe that a cash flow statement will show the profitability of a business or project. Although closely related, cash flow and profitability are different. A cash flow statement lists cash inflows and cash outflows while the income statement lists income and expenses. A cash flow statement shows liquidity while an income statement shows profitability.

Many income items are also cash inflows. The sales of crops and livestock are usually both income and cash inflows. The timing is also usually the same as long as a check is received and deposited in your account at the time of the sale. Many expense items are also cash outflow items. The purchase of livestock feed (cash method of accounting) is both an expense and a cash outflow item. The timing is also the same if a check is written at the time of purchase.

However, there are many cash items that are not income and expense items, and vice versa. For example, the purchase of a tractor is a cash outflow if you pay cash at the time of purchase as shown in the example in Table 1. If money is borrowed for the purchase using a term loan, the down payment is a cash outflow at the time of purchase and the annual principal and interest payments are cash outflows each year as shown in Table 2.

In Table 2, where the purchase is financed, the amount of interest paid on the loan is included as an expense, along with depreciation, because interest is the cost of borrowing money. However, principal payments are not an expense but merely a cash transfer between you and your lender.

A cash flow statement is only one of several financial statements that can be used to measure the financial strength of a business. Other common statements include the balance sheet or Net Worth Statement and the Income Statement, although there are several other statements that may be included.

A Complete set of Financial Statements (Decision Tool), including the beginning and ending net worth statements, the income statement, the cash flow statement, the statement of owner equity and the financial performance measures is available to do a comprehensive financial analysis of your business.

In a banking institution, the term Cash Management refers to the day-to-day administration of managing cash inflows and outflows. Because of the multitude of cash transactions on a daily basis, they must be managed.

If you fully integrate your business with online banking, it will provide you with greater control of your cash flows and accessibility. This is typically customizable, as each business is different and might require a different suite of cash management options and services.

When you need more business cash management help than online and mobile banking can deliver, choose a la carte from our treasury management services such as remote deposit capture, merchant services, sweep accounts, multi-user access, wires, ZBAs, payroll, direct deposit, and more. All of these Treasury Management services can be integrated with your existing business checking and savings accounts.

A global view of the cash forecast helps companies to plan ahead and assess all options to ensure that sufficient liquidity will be available when needed. It also gives companies the information they need to minimize unnecessary costs that might otherwise arise. For example, inadequate visibility over future cash flows might result in a higher cost of funding. Or a breach in loan covenants could result in a costly penalty that could have been avoided with better planning.

However, cash flow forecasting can be a challenging exercise. For one thing, internal stakeholders are not always prompt in providing the information needed to build the forecast. In addition, companies that lack suitable tools and rely on manual processes may find it difficult to create a forecast that is sufficiently accurate and timely.

With this BAdI, you can introduce additional details to how liquidity items are assigned to forecasted cash flows from financial transactions in the Transaction Manager in SAP Treasury and Risk Management.

For the financial accounting Flow Builder to work, the system uses loading classes for financial accounting and materials management. A loading class is an ABAP class built with ABAP-managed database procedures (AMDP) technology. The loading class encapsulates the logic for processing the source documents from a specific source application (currently the system supports integration of financial accounting and materials management) into corresponding flows in table FQM_FLOW. The standard logic of the loading class has been delivered via templates.


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