Inefficient Financial Processes: Uncovering Hidden Treasures (Part 1)

When a conversation turns to supply chain management, most business people think of the physical logistics chain in a company. But the term “supply chain” more and more refers to the flow of funds among business partners. This area has many inefficient processes that lead to significant costs, especially in the areas of customer creditworthiness or customer complaints. SAP estimates that efficient financial supply chain management (FSCM) can reduce a company’s working capital by 20% to 25%. An FSCM solution helps to optimize existing financial processes in a company. It ties up less capital, enables accurate cash management for the first time, and reduces the volume of accounts receivable. Increased efficiency with an FSCM solution reduces the costs of creating invoices, simplifies incoming and outgoing payments, and improves customer relationship management.
The SAP Financial Supply Chain Management (SAP FSCM) set of applications offers an opportunity to uncover these hidden treasures. The individual applications of SAP FSCM apply consistently to all areas of the financial supply chain:

  • The debit-side order-to-cash process (SAP Credit Management)
  • The credit-side purchase-to-pay process (SAP Biller Direct and SAP Billing Consolidation)
  • Payment and collection factories (SAP Dispute Management and SAP Collections Management)
  • In-house cash and banking (SAP In-House Cash)
  • Cash and liquidity management (SAP Cash and Liquidity Management)
  • Treasury and risk management (SAP Treasury and Risk Management)

Keeping an eye on credit lines

Architecture of SAP Credit Management
Architecture of SAP Credit Management

SAP Credit Management lets companies centrally process and control credit lines. This ability is especially important for companies with a large customer base. SAP Credit Management merges all data relevant to customers – from internal systems and from external suppliers. This integration eliminates the risk of customers using various distribution channels to broaden their credit limit with a group.
The application immediately checks new sales orders against a company’s credit limit. It also processes credit limit requests directly from various sales systems. To determine the creditworthiness of a customer, SAP Credit Management immediately draws upon data from the SAP data tables – such as a customer’s previous payment behavior, dunning statistics, or information from external solutions. SAP Credit Management can use SAP Exchange Infrastructure (SAP XI) or an XML interface to connect to SAP and non-SAP systems. Users can freely define a set of rules to calculate credit lines. They can define their own formulas and access information from their own software or from external suppliers.
If desired, all of these processes run in real time so that users can determine creditworthiness as often as desired and react without delay. In a timely manner, they can prevent delivery of goods to customers who might not be financially strong enough to deserve credit. SAP Credit Management therefore accelerates credit management processes, which lets companies efficiently implement a companywide credit policy and eliminates missing payments. If SAP Business Intelligence (SAP BI) is also connected directly, a company can create complex reports that involve the data from all participating systems and solutions. A further enhancement with SAP Enterprise Portal (SAP EP) gives credit managers a tool that presents all data relevant to decision making at a glance.

Billing processes for individual and corporate customers

SAP Biller Direct offers individual customers self-service information on account and billing information over the Internet. Along with mySAP ERP Financials, it can be used with traditional accounts receivable from SAP R/3 and with contract accounts receivable and payable. SAP Billing Consolidation offers companies an opportunity to exchange invoices with dealers, suppliers, and business partners across systems on one platform and in accordance with the requirements of value-added taxes.

Disputes and accounts receivable management

Example of Dispute Management: Workflow
Example of Dispute Management: Workflow

Disputes occur at various places in a company. Customers might withhold payment or pay less than the invoiced amount because the goods were damaged or delivered late. In some cases, specific data in the address or banking information might have been maintained incorrectly. The list can go on and on and still not cover all the cases that occur during day-to-day business.
SAP Dispute Management can’t prevent disputes from occurring. But the application does help to process disputes related to accounts receivable more quickly. Employees create disputes in SAP Dispute Management without leaving the corresponding financial transactions, such as the creation of incoming payments or the processing of open items. All the documents relevant to the dispute can be assigned to the case in an electronic file. All documents linked to the original document (the invoice) are created automatically. Users can also manually insert additional documents into the file, such as a scanned letter of complaint or a photograph of the damaged goods. Employees from other company departments who must become involved in the dispute process are simply entered as the next processor. The time needed to process disputes related to accounts receivable is shortened when the SAP Business Workflow tool sends an e-mail to inform all those involved.
According to the META Group, SAP Collections Management is a customer-specific accounts receivable management application that helps companies identify, segment, and prioritize customers from the viewpoints of risk management and customer relationship management (CRM). The application allows users to select specific customers according to various criteria, such as a specific level of accounts receivable and the length of late payments. SAP Collections Management also offers payment reminders, agreements on promised payments, and follow-ups with proactive accounts receivable management. Payment promises that are not met are automatically set to Broken when the payment date is exceeded and become the basis for further requests. For example, the history of a payment promise is important for a company’s credit management so that it can adjust the customer’s credit limit.

Part 2

Ursula Winkler
Ursula Winkler