Skip to Content
Technical Articles
Author's profile photo Manish Mishra

SAP Central Finance – Central Payment Overview and Activation

Central Finance comes up with bundle of challenges as well as cost saving opportunities and minimizes the risk in green field SAP implementation projects with Finance first approach with centralized reporting system.

Central payment functionality is not activated by default in Central Finance System.

If CPay is not activated, SAP considers that payment is all done in source system and S/4 CFIN is used as financial reporting tool.

 

Open%20Item%20Replication

Open Item Replication

  • CPay activation for a company code implies that all open items from customer and vendor account are replicated from source system(s) to central finance system.
  • Processing of open items will take place in central finance system.
  • Open item in source system are technically cleared i.e. they are flagged with ALE-EXTERN (we will see the demo towards end of this document) and payment document posted in central finance is not replicated back to source system.

 

CFIN Consultants needs to follow below configuration steps to activate CPay.

1) Activate clearing transfer

 

Here%2C%20select%20the%20source%20system

Here, select the source system

 

 

2) Activation of Central Payment Program

Go to SE38 and execute the program FINS_CFIN_APAR_CPAY_SWITCH

 

3) Activation of Cross System Process Control

This very important step without which SAP doesn’t allow activation of CPay at company code level.

A process type can be defined in the Central Payment scenario within Central Finance. When, in this context, an invoice is posted in the source system, the system determines the relevant partner system – in this example the Central Finance system – and checks whether the process type has been activated for the corresponding logical system. If the process type has been activated, the system checks the related open items in the Central Finance system. If the related open items in the Central Finance have already been cleared, the system prevents the reversal of the invoice in the source system.

This new framework called Cross-System Process Control (CSPC) allows the smooth and consistent flow of business processes which involve changes to documents, and which are distributed across different systems where documents are replicated between the systems. Following controls can be implemented with this framework.

For FI Invoices, SD Invoices & any down payment requests, the system prevents the accidental reversal in source system in below cases:

  • The document has already been cleared in the S/4HANA Central Finance system.
  • The customer/vendor account is locked in the S/4HANA Central Finance system.
  • The corresponding replicated document is locked in the S/4HANA Central Finance system.
  • Individual Document reversal via FB08
  • Intercompany Document Reversal via FBU8

RFC connection between source and target system must be created and active. Check with your Basis Consultant if not active.

In below step, select the logical name of source system and RFC destination name of central finance system. Once this is created, select this line and go to active process type to activate CPAY process.

 

4) Activate Central Payment for required company codes

You can see below that after saving the above configuration changes, central company code is now activated which was not active earlier.

 

Test Case Performed in Source System

Vendor%20Invoice%20posted

Vendor Invoice posted

 

Document%20Details%20with%20Flagged%20ALE-EXTERN%20appears

Document Details with Flagged ALE-EXTERN appears

 

Document%20Replicated%20in%20CFIN%20System

Document Replicated in CFIN System

 

CFIN%20Open%20Item%20document%20header%20data

CFIN Open Item document header data

 

Benefits of CPay

  • Centralized clearing and payment activities in central finance system. Eliminates payment processing in individual source systems.
  • Reduction in operational cost due to Bank connection with single CFIN system.
  • With activation of CPay, WHT to be reported in central finance system.

Restrictions with Cpay

  • AP and AR processes that depends on actual clearing status might be impacted in source system.

 

Some of Mandatory processes with Cpay

  1. Credit management must be moved to central finance system. Here, source and central finance system interact with each other
  2. Business Partner role credit management to be created along with existing FI customer / FI Vendor role. Just like we have customer at general and company code level, a new level of data called customer credit segment data will be available to update.
  3. Exposure from open sales order and FI-AR open item to be taken from source systems.
  4. Credit checks are triggered in source system (during SO entry) and carried out in CFIN system. This can be done by running exposure update program in source and CFIN system both.
  5. Above step will update payment behavior on customer credit segment data.
  6. Interface with external rating agencies to be done with CFIN system.
  7. Similarly, collection and dispute management must be brought over to central finance system.
  8. Other dependent processes based on open item management that must take place in central finance systems are- Dunning, FX Revaluation, AP/AR Correspondence, Provision for doubtful Intercompany reconciliation process, etc.

As we have seen some of benefits and restrictions that comes with activation of central payment, business needs to take very informed decision for this activation.

Assigned tags

      4 Comments
      You must be Logged on to comment or reply to a post.
      Author's profile photo Harsh Shah
      Harsh Shah

      Nice post..

      It is very helpful. Keep posting such articles

      Author's profile photo Manish Mishra
      Manish Mishra
      Blog Post Author

      thanks Harsh

      Author's profile photo Suraj Prakash
      Suraj Prakash

      Your work will bring a lot of insights into solving our next problem.

      Nice Blog ,

      Thanks  for posting ...!

      Author's profile photo Mohammed Muizuddin
      Mohammed Muizuddin

      Nice explanation. Thanks a lot for sharing.