Welcome back! In our first two posts for this series, we outlined the history of Same-Day ACH, as well as the potential impacts on financial institutions. In this week’s post, we will cover the first two practical steps necessary to set up your SAP system for Same-Day ACH, as well as provide questions you should ask during this process.
There are four primary steps that would be required:
- Same-Day ACH reconciliation process
- Payment method usage in SAP
- Vendor master data management
- Payment process modification for Same-Day ACH
Same-Day ACH reconciliation process
Same-Day ACH lessens outstanding credit risk between parties and reduces exposure to losses by settling transactions between parties more frequently. Same-Day ACH has three settlement windows each day. If you plan to send batches multiple times each day, how will you reconcile the batches to your general ledger for easy clearing? Will these processes need to differ from your existing ACH reconciliation processes?
Within SAP, each payment method posts to specific clearing accounts. As part of your system set-up, you can decide which payment method will be used and to which clearing account it will post.
There are two ways that you could simplify the reconciliation for Same-Day ACH.
- To ease reconciliation, you could have the same-day ACH batches posted to their own clearing account. This could be helpful if you are using the SAP cash position, as you may want to see this information segregated.
- Consider using the Payment Medium workbench in SAP to generate the payment files. If you use the Payment Medium workbench, SAP will generate a DME reference number for each file. If you use the SAP ACH provided layout or ISO20022 XML payments, this information is created when the payment file is generated. You could ask your bank to provide the DME reference number back to you. As part of your bank reconciliation processes, this information can be used to clear the payments automatically. If you would like to understand how this could be set up in SAP, click here.
Payment method usage in SAP
First, the payment method needs to be set in your SAP system. Within SAP, this will require a new payment method for Same-Day ACH. Payment methods are set up for a particular country first, then for a specific legal entity. Here is a new payment method set up for the US:
Next, the payment method should be limited to the USD currency, as same-day ACH can only occur in USD:
Please note: any additional payment layout changes that would be required by your banking partners on your files would have to be addressed separately.
Next, the payment method would need to be set up for the legal entities where it will be used.
Select the appropriate company code, and create a new payment method:
Assuming that this legal entity is based in the US, the payment method should be set up to be used for local banks only. Given that the limits for Same-Day ACH is $25,000, this should be set up as the maximum amount for payments.
Please note: If you are setting up same-day ACH for a legal entity that is not based in the US but can process through a US based bank, then you may need to select Foreign business partner allowed, Foreign currency allowed, and Cust/vendor bank abroad allowed.
Next, this payment method will need to be set up to process for one of your banks.
The next screens will show set up with JP Morgan as the example bank:
First, the bank must be set up to come from the appropriate House bank.
Next, the bank account is set up and attached to the appropriate bank sub-account in SAP.
Please follow the blog for a notice, or check back in two weeks, for detailed information on SAP set-up on the remaining two steps: vendor master data management and payment process modification for Same-Day ACH.