www.sap-press.com 1 Cash Accounting and Cash Flow Planning with SAP Liquidity Planner Stephan Kerber, Dirk Warntje Content Introduction .............................................. 3 Structure of the Book ..................................... 3 Acknowledgments .......................................... 4 1 Business Overview .................................. 5 1.1 The Concept of Cash Accounting .......... 5 1.2 Tasks of Cash Accounting and Liquidity Planning ................................. 6 1.3 Recipients and the Need for Information .......................................... 7 1.4 Financial Accounting and Cash Accounting ................................... 8 1.5 Differences to Cash Management ......... 9 1.6 Conclusion ........................................... 11 2 Case Scenario: Implementing Cash Accounting and Liquidity Planning .... 13 2.1 Conclusion ........................................... 15 3 SAP Liquidity Planner: Liquidity Analysis Using SAP Actual Calculation ................................................. 17 3.1 Overall Process and System Integration ............................................ 17 3.2 Technical Settings in SAP Actual Calculation ........................................... 17 3.3 SAP Actual Calculation (Cash Accounting) ................................ 19 Data Model and Master Data ............... 19 Functionality—Overview ..................... 21 Customizing SAP Actual Calculation ... 21 Tools .................................................... 26 Tables ................................................... 27 3.4 Cash Accounting Processes ................... 28 Information Acquisition from Assignment Mechanisms ...................... 28 Information Acquisition from Bank Statement Information ................ 29 Information Acquisition from Financial Accounting ............................ 31 Manual Assignment and Manual Transfer Posting ................................... 36 Analysis Reports ................................... 36 3.5 Conclusion ........................................... 37 4 SAP Liquidity Planner: Liquidity Planning and Reporting Using SAP BW/SEM ............................... 39 4.1 Modeling in SAP BW/SEM .................... 40 SAP Business Content ......................... 40 Master Data ......................................... 45 Characteristics ..................................... 53 Planning Layout in SAP SEM-BPS/BW-BPS ........................ 54 4.2 The Liquidity Planning Process .............. 63 4.3 Extracting Actual Data .......................... 64 4.4 Reporting in SAP BW ............................ 67 4.5 Conclusion ........................................... 69 5 Liquidity Planning and Reporting Without SAP BW/SEM .......................... 71 5.1 Overview .............................................. 71 5.2 Customizing .......................................... 71 5.3 Master Data and Actual Data ................ 75 5.4 Planning ............................................... 76 5.5 Reporting ............................................. 77 5.6 Conclusion ........................................... 78
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Cash Accounting and Cash Flow Planning with SAP Liquidity PlannerStephan Kerber, Dirk Warntje
Ensuring creditworthiness, particularly with regard
to the requirements of rating agencies For investors and lenders (equity providers and pro-
viders of external capital)
Assessing the ability to pay dividends, interest, and
amortization For suppliers
Evaluating the creditworthiness and solvency and
forecasting the payment behavior based on these
evaluations For employees
Evaluating the creditworthiness, solvency, and future
existence of the company For customers
Assessing the delivery reliability and the consistency
of conditions
The different recipients—and therefore varying informa-
tion needs—demonstrate the importance of cash ac-
counting and liquidity planning.
1.4 Financial Accounting and Cash Accounting
The data source (see Figure 1.1) for cash accounting is the
posting material in financial accounting. In financial ac-
counting, cash accounts, balance sheet accounts, and
profit and loss accounts (P&L accounts) are interrelated;
therefore, we can also speak of a threefold accounting
system. This account-based integration1, as shown in Ta-
ble 1.1, enables you to determine the cash flow required
in cash accounting.
Chart of accounts
Cash accounts Balance sheet accounts
P&L accounts
Cash accounting Balance sheet Profit and loss statement
Reve-nues
Expen-ditures
Assets (without liquid funds)
Liabili-ties
ExpenseProfit
Cash balance P&L account
Table 1.1 The Three Parts of Accounting
Investors
Lenders Suppliers
Company
Employees Customers
Activity Cash Flow
Investment Dividends and Withdrawals
Payment of Activity
Payment of Activity
Payment of Activity
Amortization and Interest Payments
Loan
Figure 1.4 Cash Inflow and Cash Outflow from a Company‘s Perspective (according to Geuppert 2003, p. 10)
1 Accounting and consequently ERP systems are structured according to the principle of double-entry accounting. A triple-entry accounting sys-tem hasn’t been implemented yet.
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1.5 Differences to Cash Management
In addition, business transactions related to accounting
can be classified as affecting net income and not affecting
net income, and as having an effect on liquidity and having
no effect on liquidity (Gebhardt 1999, pp. 21). The pay-
ment of a dividend, for instance, is a transaction that af-
fects the net income and the liquidity; therefore, it is rel-
evant for both cash accounting and the profit and loss
statement. The depreciation of an asset merely affects the
net income, but not the liquidity. This distinction makes
it easier to determine the source of funds and their appli-
cation. Figure 1.5 illustrates the relationships between
the individual accounts in financial accounting.
Here you can see that there are 14 different account
assignment types available to post business transactions
in accounting. For each account assignment type, we
have provided an example (the following numbers corre-
spond to the posting example used in Figure 1.5):
1. Cash payment for office equipment
2. Revenue from cash sales
3. Depreciation of tangible assets
4. Posting of supplier invoice
5. Invoicing of an activity
6. Dissolving of provisions
7. Revenues from invoices
8. Borrowing
9. Payment of supplier invoices
10. Cash payment for material purchases
11. Accounting exchange on the assets side
12. Contribution in kind from shareholders
13. Clearing of receivables and payables
14. Accounting exchange on the liabilities side
It is apparent that the connection between two account
assignment types demonstrates the source or application
of funds. This is because the central task of cash account-
ing is the “What for” search: “What have funds been re-
ceived or paid for?” Let‘s try to clarify this with another
example.
In the accounting department of a company, a sup-
plier invoice (1) is posted. The posting displayed in Figure
1.5 affects the net income, but has no effect on liquidity.
This is further clarified by the posting example in Table
1.2.
Bank VendorOffice equipment
$ 100 (2) (2) $ 100 $ 100(1) (1) $ 100
Table 1.2 Vendor Payment
Then the open item is paid (2). According to Figure 1.6,
this transaction has an effect on the liquidity, but not on
the net income.
Only when these two postings haven been linked with
each other can you determine the cash flow according to
its application. One hundred dollars ($ 100) was used for
office equipment. This posting is a simple example of the
direct determination of a cash flow.
1.5 Differences to Cash Management
In this section, we’ll describe the primary differences
between Cash Management and Liquidity Planner. SAP
Cash Management is focused on short-term cash manage-
Figure 1.5 Accounting-Relevant Linking of Cash Accounts, Balance Sheet Accounts, and P&L Accounts
ment, whereas SAP Liquidity Planner considers medium
to long-term liquidity planning.
Cash Management provides information on the cur-
rent bank account status and it contains a liquidity fore-
cast regarding incoming and outgoing payments from the
perspective of payments for accounts receivables and for
accounts payables (or write: payments to customer and
to vendor). The bank accounts in the general ledger con-
stitute the data basis for the bank account status. If a
bank account shows a current status of $ 500, this status
is displayed in the bank account status in Cash Manage-
ment. The liquidity forecast uses accounts receivable and
accounts payable as a basis. It evaluates the open items
of suppliers and customers, and the terms of payment
stored with the respective documents, and displays this
information in the liquidity forecast. A cash flow is not
determined, because only the open items are evaluated
and displayed. In addition, the cash flows to be expected
can be displayed only with regard to specific customers
and customer groups, or suppliers and supplier groups
respectively. The only information that can be deter-
mined is “From whom” and “For whom.” What the funds
are paid for cannot be identified. Conversely, cash ac-
counting refers to real cash flow and the source and ap-
plication of funds can be identified. Unlike Cash Manage-
ment, cash accounting requires all general ledger ac-
counts that have an effect on liquidity, as described in
Section 1.4.
Moreover, cash accounting is part of an overall process
that consists of cash accounting and liquidity planning,
which will be described in further detail in Chapters 3
and 4.
Table 1.3 contains a list of the most important differ-
ences:
Cash Management Cash Accounting
No consideration of cash flow Real cash flow consideration
No identification of source and application of funds
Identification of source and application of funds
Cash Management Cash Accounting
Customer Group XCustomer Group Y
Vendor Group XVendor Group Y
…
…
RevenueLiquid Tangible AssetsOther…
MaterialPersonnelTaxes…
Opening BalanceCash Management and
Forecast
Closing Balance Closing Balance
Revenues Revenues
Expenditures Expenditures
Figure 1.6 Distinction Between Cash Management and Cash Accounting
Table 1.3 Differences Between Cash Management and Cash Accounting
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1.6 Conclusion
Cash Management Cash Accounting
Accounting as the data source, but only bank accounts and subledgers
All relevant accounts of cash accounting chart of accounts as data source
Liquidity forecast (based on open items)
Forecast of revenues and expen-ditures possible (based on open items)
View: Vendors and customers (groups) and bank account status
View: Revenue and expenditure items
No integration in planning process
Integrated planning process (SAP BW/SEM)
Table 1.3 Differences Between Cash Management and Cash Accounting (cont.)
1.6 Conclusion
In the following chapters, we define the concepts of
cash accounting and liquidity planning and introduce
them in the context of different accounting types.
Moreover, we describe the group of recipients and
their need for information regarding cash accounting,
and we highlight the interdependencies with account-
ing by clarifying how you can use the information from
accounting to determine your cash flow situation.
Finally, we describe the differences between SAP
Liquidity Planner and SAP Cash Management to out-
line the tasks performed by SAP Liquidity Planner
within the FSCM product portfolio.
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2 Case Scenario: Implementing Cash Accounting and Liquidity Planning
Based on a specific real-life situation that we’ve encoun-
tered several times, we will build up a scenario for imple-
menting SAP Liquidity Planner. In the subsequent chap-
ters, this case scenario will be further developed in parts.
This example is used to support your understanding of
the functionality and the technical concept of SAP
Liquidity Planner, but it will also serve as an aide in help-
ing you to implement this component.
The initial situation looks as follows: We’ll consider an
international corporation, the IDES Group, which is struc-
tured as follows: The corporate headquarters is in Germany. The cen-
tral departments of corporate accounting and global
treasury are also located in Germany. Legally independent production sites exist in Ger-
many and Eastern Europe. The sales and distribution network stretches across
Europe and the US, with legally independent sales
companies in the respective countries. Research and development is located at corporate
headquarters in Germany. IDES uses SAP as its standard business software with
the currently implemented applications: SAP FI for accounting SAP CO for controlling SAP SD for sales and distribution SAP MM for materials management SAP PP for production
Concerning office applications, IDES uses a standard
off-the-shelf office software.
The current business situation of the IDES group can be
described as follows: Existing products have been introduced and distri-
buted throughout the markets and will continue to
be distributed at the same high level for the next two
or three years. However, the company expects a de-
crease in prices in the long run. This means that the
revenues from its core business will go down (cash
inflow reduction). At the same time, the company
forecasts a strong increase in raw material prices and
rising labor costs at the production sites. This will
lead to a situation in which the expenditures in pro-
duction will increase dramatically (increase in cash
outflow). Consequently, net cash flow will be strongly
reduced in the coming years. Furthermore, company management expects product
imitations to enter the market in two or three years,
which could lead to price wars and further aggravate
the situation. For this scenario, corporate manage-
ment expects an even stronger reduction of net cash
flow. In the preceding year, the company acquired a US-
based competitor in order to strengthen its market
position abroad. This acquisition was financed with a
large bank loan that will be amortized within the next
10 years. So, for a period of 10 years, there will be
payments for amortization and interest (increasing
cash outflow).
Corporate management realizes that a continued pursuit
of its existing strategy can quickly lead to a negative cash
flow situation; however, since the company is expected
to remain sound, the management decides to develop a
comprehensive strategy that should include the factors
mentioned above: Future competitors will be met with a product offen-
sive at an early stage. For this reason, investments
should be made for the research and development of
new products. At IDES, the development of a prod-
uct takes two years. To cover R&D for this period, the
2 Case Scenario: Implementing Cash Accounting and Liquidity Planning
company needs liquid funds (cash outflow for research
and development in the coming two years). The existing range of products will be introduced into
new markets, especially in Asia. For this expansion,
the company needs additional funds (cash outflow for
expansion to new markets). At the same time, man-
agement expects additional revenues from selling ex-
isting products to the new markets (cash inflow from
selling existing products to new markets). The company wants to maintain the production sites
in Germany. Therefore, corporate management will
develop new work and production models with its
personnel, which are intended to reduce costs and
expenditures (reduction of cash outflow in production
for the coming years). In addition, the company checks whether the existing
bank loan can be converted into a maturity loan. This
measure would lead to a reduced cash outflow for a
period of 10 years (reduction of cash outflow by re-
scheduling the existing loan).
Until now, liquidity planning has been conducted by the
global treasury department. The policy unit receives
spreadsheets from the individual subsidiaries and inte-
grates them into a central liquidity planning document.
This planning process proves to be too complicated,
time-consuming, and rigid.
A cash accounting based on value-date dependent
documents from SAP FI is not carried out because Cash
Accounting in SAP Liquidity Planner is currently not be-
ing used.2 The corporate accounting department merely
performs an indirect analysis of actual data (indirect cash
flow statement).
The company management wants to use a tool that
can measure (actual data) and plan (planned data) the in-
dividual cash flows. Based on the new strategy, corporate
management realizes that a powerful tool is required for
cash accounting and liquidity planning, but also for con-
trolling the corporation in general. In addition, the de-
centralized planning process will become more efficient
and less time-consuming. Furthermore, it must be possi-
ble to easily and quickly map the various planning sce-
narios. The tool should also be used as a central reporting
platform.
SAP Liquidity Planner is precisely the tool that meets
the company‘s requirements (see also Section 3.1). As
mentioned in the introduction, SAP Liquidity Planner
consists of two components: SAP Actual Calculation (cash accounting) SAP BW/SEM (planning application and reporting)
Cash accounting enables you to identify and evaluate the
cash flows in the company with regard to their value
dates. As SAP Actual Calculation accesses the data pro-
vided by SAP R/3 Accounting (cf. Section 1.4), manage-
ment can ensure the quality of the actual data because of
this integration. This data forms the basis for qualified
plan/actual analyses.
Since the planning and reporting functions in SAP Li-
quidity Planner are based on the functionalities of SAP
BW/SEM, the company can optimize the advantages of
this product.
Corporate management benefits from using SAP Li-
quidity Planner in the following ways: Direct determination of cash flows Quality of actual data by integrating SAP R/3 Ac-
counting Extraction from the SAP R/3 systems into SAP BW Flexible planning functionalities to map different
planning scenarios in SAP BW/SEM Successful implementation of an efficient corporate-
wide planning process due to the use of SAP BW/
SEM as a central planning platform (this is particularly
efficient for decentrally organized companies) Central reporting tool for all parts of the company Use of SAP BW/SEM for the planning aspects of SAP
Liquidity Planner; this enables you to establish a rela-
tionship with other plannings (for example, sales and
distribution plans, investment plans) and an integra-
tion with liquidity planning.
In various implementation projects, we’ve seen many
companies struggling to survive with ever-changing mar-
ket environments, similar to the initial situation described
above. The companies need reliable and up-to-date in-
formation, as well as the ability to run through various 2 As already described in Chapter 1, you cannot use the SAP Accounting module to directly determine your cash flow situation.
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2.1 Conclusion
planning scenarios. Often, the focus was on improving
the planning process.
Our experience has shown that these or similar situa-
tions, carrying out cash accounting and liquidity planning
with SAP Liquidity Planner can be very useful. In the re-
mainder of the book, we’ll describe the functionality of
SAP Liquidity Planner and how you can implement it.
In the next two chapters, we’ll only marginally refer to
the above example and provide a detailed description of
the technology and functionalities of SAP Liquidity Plan-
ner.
When working in Chapters 3 and 4, you should use
the IDES system provided by SAP with the following
data: Company code 1000 for IDES AG, company code
2200 for IDES France, and company code 2600 for
IDES Italia. Use the international chart of accounts, INT.
Use the general ledger account, “100000 cash” as an
additional cash account. You should use the information and assignments pro-
vided in the following table (see Table 2.1).
2.1 Conclusion
SAP Liquidity Planner is the ideal tool for analyzing
and planning cash flows. By using this tool, you can
identify imminent bankruptcies due to insolvency and
counteract them with the appropriate measures.
Liquidity item (LI) Account number
Summarization item 100000 Cash flow from operating activities ------------
LI 110000 Revenues from product sales 800002
LI 120000 Revenues from services sales 800001
LI 130000 Raw materials 170000
Summarization item 140000 Personnel ------------
LI 141000 Payments of wages and salaries 449000 and 430000
LI 142000 Payments of social insurance contributions 440000
LI 150000 Payments for rents 471000
LI 160000 Payments for materials 476100; 476000
LI 170000 Payments for raw materials 300000
Summarization item 200000 Cash flow from investing activities ------------
LI 210000 Expenditures for financial assets 133000
LI 220000 Expenditures for tangible assets 11000
LI 230000 Revenues from enterprise transfers 11000
LI 240000 Capital gains 133000
Summarization item 300000 Cash flow from financing activities ------------
LI 310000 Revenues from borrowing 62110
LI 320000 Expenditures for loan amortization 62110
LI 330000 Revenues from interest 273100
LI 340000 Expenditures for interest payments 220000
Table 2.1 Case Scenario: Liquidity Item and Account Numbers