Payment Streams that Meet Auditing Requirements

Communicating with banks is an expensive and inefficient activity for many companies. To exchange payment and account information, the finance departments usually maintain proprietary IT interfaces to each individual bank. It costs up to 50,000 Euros per link a year to maintain each of these communication channels. The lack of transparency of the payment streams in this sensitive area is also being scrutinized more heavily in the light of increasing compliance requirements. Moreover, the introduction of the Single Euro Payments Area (SEPA) in 2008 will involve fundamental changes for companies, such as the introduction of new payment methods and master data changes to account numbers and sort codes.

Applications in SAP FSCM
Applications in SAP FSCM

SAP is responding to these challenges in two ways – with SAP Bank Relationship Management and SAP Integration Package for SWIFT, two new applications in mySAP ERP Financials. These help companies to exchange data with banks and the international Society For Worldwide Interbank Financial Telecommunication (SWIFT). Even companies that do not belong to the financial industry can use its telecommunications network SWIFTNet to exchange payment information. This saves the companies from having to maintain different interfaces for their banks. SAP Integration Package for SWIFT and SAP Relationship Management will be available in mid-2007 with the next Enhancement Package for mySAP ERP 2005. They form part of the SAP Financial Supply Chain Management (SAP FSCM) application suite.

Complete control

Managers in the fields of accounts payable and receivable and cash and treasury management must ensure that they have sufficient internal control mechanisms in order to avoid infringing the increasingly stringent requirements of external auditors. For example, a double-checking procedure is often required before payments are authorized. SAP Bank Relationship Management helps managers to meet these requirements and also increases productivity by introducing straight-through-processing more widely.
Users can file outgoing payments for auditing purposes and monitor the complete life cycle of a payment from its authorization to successful posting of the bank statement. It is also possible to use a flexible double-checking procedure for authorization of outgoing payments. SAP Bank Relationship Management can be configured in such a way that payments of more than 10,000 Euros have to be approved by two employees, while no special approval is required for transfers of low sums.

Bundling payment tasks

Users access the payment tasks assigned to them in a special inbox known as the payment monitor. It displays both the individual payment instructions and the task groupings, or “batches”. SAP Bank Relationship Management can be used to bundle different payment runs by user-defined criteria, for example by creditor number, payment method, or amount. This allows payments to external creditors to be differentiated from transfers to other companies within a group and bundled in separate batches. This reduces banking fees and optimizes automatic matching of incoming bank statements. All in all, it increases the effectiveness of payment transactions.
Users can call up a drill-down menu in the payment monitor that takes them to the clearing documents and the master data for banks or business partners. In the payment monitor, the users approve or reject payments, or set a reminder to process them at a later date. Since users have to authenticate their approval with their digital signature, it is easy to trace who was involved in the payment process. SAP Bank Relationship Management only creates a payment medium once all the required digital signatures are available. The current status of a payment can be viewed using another transaction, the payment status monitor.
The payment status monitor is also used as a comprehensive and detailed directory for incoming status messages from the bank or SWIFT. Their secure, multibank-enabled telecommunications network (SWIFTNet) can also be accessed by companies that do not belong to the finance industry. Access is via closed user groups that are administered by the individual banks (known as Member Administered Closed User Groups, MA-CUG). User groups that administer SWIFT themselves will also be given this access in 2007. This means that companies with multiple bank connections do not have to be a member of multiple MA-CUGs.

Direct link to SWIFT

In addition to SAP Bank Relationship Management, users also require the SAP Integration Package for SWIFT in order to access SWIFT status messages. Thanks to this application, SWIFT messages can also be received, processed and displayed in the payment status monitor of SAP Bank Relationship Management. SAP Integration Package for SWIFT also displays error or negative status messages if the bank or SWIFT is unable to process the payment orders successfully. If necessary, these messages trigger certain workflow events such as the notification of other employees, or lead to automatic follow-up activities such as reversing entries.
SAP Integration Package for SWIFT processes both traditional financial messages such as payment instruction MT101 or bank statement MT940 and the new XML-based UNIFI (Universal Financial Industry) message types of the International Organization for Standardization (ISO). Because the UNIFI message types also form the basis for the new SEPA payment transfers and debits and are therefore a core element of SEPA, they will be increasingly important for companies in the future. SEPA – a European Union initiative – will be introduced in 2008 to harmonize the different payment infrastructures in Europe.

Enabling smooth data processing

SAP Integration Package for SWIFT is a Java-based add-on of the file adapter for the SAP NetWeaver Exchange Infrastructure. The application prepares outgoing files for the proprietary transfer format in the SWIFT infrastructure (SWIFT Alliance Access and Gateway) and in return converts incoming SWIFT messages for processing in the SAP solution. SAP Integration Package for SWIFT also administers local authentification mechanisms between the SAP and SWIFT environments.
The application provides various preconfigured process interfaces for the SWIFT communication services FIN and FileAct. These support the most important financial messages in the area of customer-bank communication, such as payment instruction MT 101 and bank statements MT 940 and MT 942. In the UNIFI (ISO20022) environment, message types “Credit and Debit Transfer Initiation” are used for the transfer and debit, “Payment Initiation Status” for the payment status, and “Cash Management Advice and Statement” for the bank statement. In addition, the application provides technical process interfaces, such as positive or negative acknowledgement messages that indicate whether messages have been processed successfully.

Jürgen Weiss
Jürgen Weiss