SAP Financial Supply Chain Management & SAP Treasury
I am blogging after a long gap of almost a year. Was in forums activity and suddenly felt a need to blog. The prime objective of this blog is to elaborate on what is Financial Supply Chain Management and what is Treasury and why they are interconnected and why they are still different.
The definition of FSCM as given in SAP documentation is “SAP Financial Supply Chain Management (FIN-FSCM) optimizes the financial and information flows within a company and between business partners”. From the context of business partners and optimizing the financial flows Treasury forms an integral part of the overall FSCM network.
But from a business context which is more relevant, FSCM and Treasury are not the same. In fact there is huge difference between both. FSCM is mainly comprised of Credit, Collections and Dispute Management which works closely with Finance and accounts department and from an SAP context is in close collaboration with FI and SD modules for credit management.
When we come to treasury management, it is handled from a business context by Treasury Department and in general is going to optimize the cash flow through investments (Treasury), reducing financial risk (Risk management) and optimizing payment processes internally (In-House cash). Cash and Liquidity management is pretty useful for cash management and forecasting liquidity.
All these work towards increasing working capital and profitability, but are done in a different manner/context. FSCM in a broad sense is to increase working capital through efficient management of credit risk and through proactive receivable management.
Treasury is going to involve different domain knowledge all together and one must have deep knowledge of treasury in SAP also in order to make informed decisions to manage the portfolio. I will write a detailed blog on what to look for in the case of treasury management and what SAP offers in treasury side.
Earlier Treasury was under Corporate Finance Management (CFM) and previously was a separate module as Treasury itself. Now in ECC 6.0 onwards it has been integrated into FSCM, but that must not be confused as to a sub module of FSCM.
I have heard many times from many different corners about FSCM and Treasury being combined together and talked about as one. Treasury on its own itself is a huge module and the role of a treasury consultant should be clearly differentiated from the role of an FSCM consultant. The business needs and objectives of both these roles are different and it cannot be performed by a Finance person with FI knowledge alone.
There are already various blogs written on overview of FSCM which can be checked through the wiki section of SDN under FSCM.
Also please check the link for wiki section:
You are right - they are different.
SAP FSCM is seen as a grouping of various sub modules. The Treasury sub module has had many homes however I am happy for it to sit under SAP FSCM.
The treasury team, do in a way look at the financial supply chain. They look to ensure correct funds are held in house banks for future liabilities and need to predict when cash is due in.
Further to this they will need to ensure they purchase currencies at the best rate based on future liabilities and buy and sell other financial products.
There is some great integration into BPC for the future planning which is a big part of the treasury team and so I look forward to any future blogs you write around the Treasury side of SAP FSCM.
Lastly - please feel free to update the wiki or answer threads on this subject.
Thanks for your comments.
Yes, The treasury team also has a big role for ensuring working capital for which the time bucket analysis in liquidity and many such tools are really excellent. I think Cash and Liquidity Management is a central module and should form the basis for future planning.
But I do feel that some enhancement is required between Treasury and receivables process like there is currently no link between collections management and cash and liquidity. A P2P will not be reflected in cash forecast (though I understand that P2P is kind of volatile). Similarly the credit risk management for treasury instruments can leverage a lot from Credit Management which does not happen now.
Having brought into FSCM, There are many instance where we can bring the interconnectivity between these modules though fundamentally their requirement is different.
In fact Treasury module is so well improved in ECC 6 that it is if not better, is on par with any good treasury product available in market and also Financial Services is in the road map of SAP and so we can expect a lot of activity in this space.
good article..thank you for sharing..
Is there any document or wiki or equivalent with the scope of the TRM module (specifically with regard to the financial instruments covered) along the evolution of the Enhancement Packages (from 0 to 6)?
See comment above: For Treasury:
http://wiki.sdn.sap.com/wiki/display/ERPFI/Treasury+and+Corporate+Finance+Management, hope it helps, I am going there next.
Sorry Joao, Page not Found, we are both out of luck on that.