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Author's profile photo T.P.R. Mathavan

‘One Exposure from Operations’- Another option for Project Cash Flow

A. Problem statement:

In the emerging ‘Project Economy’, Business enterprises that manage projects want to reconfigure the processes so that (a) projects are aligned with organizational strategy (b) projects deliver outcome (c) projects contribute positively to cash flow and strengthen ‘Enterprise Value’ etc.

For those Enterprises that run SAP, SAP’s EPPM (Enterprise Portfolio and Project Management) suite of solutions serve well to strategically align projects. With the arrival of simplified and improved Cash Management application in S4HANA, it will now be possible to measure Project Cash flow easily!

There was no easy way to view project cash flow easily in SAP, without significant enhancements, until now! This forward-looking blog describes architectural possibility to get Project Cash Flow report in S4HANA.

B. Pre-requisite/Assumption:

  • S4HANA Extended Edition with following applications in same instance:
    • Project System (PS), Material Management (MM), Financial and Management Accounting (FICO)
    • SAP S4HANA Cash (and Liquidity) Management
  • Project Cash Flow is an important measure for Projects that use external resources like procured materials and external contractors

C. Motivation:

The blog is motivated by a few emerging business trends and technical (S4HANA) capability:

  • Organizational effort to measure ‘Enterprise Value (EV)’ in addition to or alternative to other financial metrics (like P/E ratio, market capitalization etc.). As we know, EV includes ‘free cash flow’ as one of its measures!
  • Project Managers/controllers’ need and desire to always know project cash flow status (actual and forecast)
  • Improved and simplified data model in SAP’s Cash Management application in S4HANA

Disclaimer:

  • The author of the blog has not yet realized the integration (between SAP PS/MM and Cash Management) productively in S4HANA
  • But based on past SAP ERP implementations and new capabilities like ‘One Exposure From Operations’ in S4HANA Cash Management, the author believes the use case to get Project Cash Flow reports can be accomplished in S4HANA

D. Architectural recommendation:

D.1 Configuration:

Key configuration requirements in S4HANA Cash Management, but not limited to:

  1. Set up ‘One Exposure From Operations’
  2. Material Management (MM) and Sales & Distribution (SD) are configured as source applications in ‘One Exposure From Operations’ component of S4HANA Cash Management
  3. Other configurations for ‘Flow Builder’
  1. Configure Flow Types
  2. Use SAP delivered Flow categories
  3. Define planning levels and planning groups
  4. Define liquidity item (account)
  5. Schedule background jobs to move data to fetch MM and accounting data into ‘One Exposure From Operations’

Good news is that no new configuration activities are involved in PS and MM areas to achieve the integration with Cash Management in S4HANA.

D.2 Process:

The design is to generate ‘Cash Flow’ items automatically in Cash Management application automatically when certain business objects (like Purchase Requisition, Purchase Order, etc.) are created.

‘Procure-to-Pay’ process is used reference. It is commonly applicable for internal (capital investment (Capex) or operational expense (Opex)) projects.

Sr nr Trans-action PS (Project System)/MM (Material Management) Cash Management
1.1 PR

·       Based on project demand (for material or external service), Purchase Requisition (PR) is created

·       PR is account assigned to WBS Element

Cash Flow forecast is created automatically based on PR value, planned delivery date, payment terms etc.
1.2 PO ·       Purchase Order (PO) is created

·       Cash Flow is forecasted automatically (as done for PR), once PO is created

·       If PO is created from PR, Cash Flow associated with the PR is deleted

1.3 GR ·       Good receipt (GR) created

·       No new Cash Flow items created

·       But Cash Flow item that was created for PO is adjusted, if necessary, based on ‘actual quantity’ received etc.

1.4 IR ·       Invoice receipt (IR) entered

·       Cash Flow is forecasted for the IR

·       It replaces the Cash Flow entered for the PO

2.1 Payment ·       Payment processed

·       Cash Flow is forecasted based on payment information

·       It replaces the Cash Flow associated with ‘IR’

2.2 Bank Statement ·       Bank Statement is imported (payment is confirmed) ·       Actual (no forecast!) Cash Flow is reflected

Process transactions 1.1 thru’ 1.4 are treated as ‘MM’ transaction, while rest are treated as ‘accounting’ transaction by ‘One Exposure From Operations’. As can be inferred from above, it is intelligent enough to establish the document chain going from Purchase Requisition through Final payment.

D.3 Reporting applications:

Use Fiori App ‘Check Cash Flow Items’ (F0735) (with Extension as necessary) to review the Cash Flow for WBS Elements. The results can be downloaded to MS Excel for additional analysis.  App ‘Cash Flow Analyzer’ (F2332) can also be used.

 

E. Additional considerations/References

  • For Shutdown, Turnaround, & Outage type projects, where procurement will be carried out with reference to (account assigned) Work Orders or where Networks are used, integration with Cash Management may not be out-of-box
  • For commercial (Sales Order driven) projects, ‘Order-to-Cash’ process will be applicable. It will play out in similar manner with inclusion of Sales Order
  • Scheduling Agreement can be used and, like PR and PO, it integrates automatically with ‘One Exposure from Operations’
  • Refer SAP note: 2530138 (FAQ: S4HANA Cash Management and Data Set up)
  • Please explore additional apps under business catalogs:
    • SAP_SFIN_BC_CM_CASH_OPS (Cash Management- Cash Operations)
    • SAP_SFIN_BC_CM_OPS_BASIC (Cash Management- Cash Operations Basic)
    • SAP_TRM_BC_FX_BSE (Treasury- Balance Sheet FX Risk)
    • SAP_SFIN_BC_CM_BAM (Cash Management- Bank Accounts Management)
  • Among others, one or more Scope Items for Cash Management, like BFB (Basic Cash Operation, J78 (Advanced Cash Operations) will be required

 

F. Conclusion

‘One Exposure From Operations’ feature in Cash Management is expected to become single repository for all “logistical” exposure in S4HANA It will capture all Cash Flow relevant transactions. So, it must be put to good use and improved upon (via co-innovation/customer influence etc.) to get Project Cash Flows reports efficiently.

There are number of project accounting use cases that require Project Cash Flow reports from S4HANA, especially for long-running capital intensive (capex) projects. It is strongly recommended to evaluate if above architecture is ‘fit-for-purpose’ prior to pursing other options.

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