Vendor payment process through BCM
Objective: This Article explains the processing of Vendor Payment using Bank Communication Management (BCM – End to End process from Vendor invoice to Vendor payment)
The business need for implementing BCM for processing Vendor payments
Automation of Vendor payments with less manual intervention
Approval of Vendor payments through the workflow for AP Manager
To Group the payments (multiple payment runs) for the workflow approval by AP Manager followed by approval of payment batches by Treasury Manager
Approved payments/batches are transmitted to the bank for further processing
Need to avoid multiple bank interfaces
Challenges for the business
Limit access to payment files with efficient access control process
Lack of one place to manage payment approvals and interfaces
Managing approved signatories with high staff turn over
End-End Business Process steps:
- Vendor Master– The payment method field is identified with Payment type T for wire payments using BCM. (Transaction code: XK03(ECC)/BP (S/4 HANA)
Vendor Master displayed using ECC Transaction-XK03
Vendor Master displayed using Transaction-BP
2. Reserve Identification for cross-payment run media. All payment runs identified with the prefix “:” will be processed through BCM. (Transaction Code: OBPM5)
3. Vendor Invoice posted and payment run executed. Payment run identification starts with Identification: for cross-payment run media processing using BCM. (Transaction: F110)
Payment proposal for payment run created with the prefix: indicating that the payment run will be processed through BCM.
List of Vendor invoices in payment proposal
Payment run processed and payments generated.
4. Batching Process: The batching process in BCM is used to group several payment runs into one or more payment media.
Payment run IDs that are reserved for BCM are put together in a collector identified by Merge ID.
Creation of cross-payment run payment media- (Transaction FBPM1)
The payment runs are selected using the criteria and batches are generated using the batch rules defined in the customization.
In the below screen, we are selecting only the payment run we created above to be processed using the BCM.
In the below screen, shows the status of payment for cross-payment run payment media. The status indicator is green with the payment ID created and populated in the ID payment field. If the status indicator of the payment run is red, it means that the payment run has been identified for the cross-payment run but not yet on the payment medium (Transaction FBPM2)
5. Transaction BNK_MONIP gives an overview of all payments that are managed through BCM. Payments can be restricted by the collector, the date, the payment run date, ID, file, batch, and other criteria.
In the below screen, the green status shows that the payment is in the file along with the payment information.
Payment document number, payment run ID, Account ID, House Bank, Payment run date, etc.
6. Batch approval in BCM -Multiple business resources are involved in the approval of batches and generation of payment media. This depends on batch approval amounts, for example, If the total batch amount is less than $25,000 it requires a single approval and if the amount is greater than $25,000 it will require two approvals. The number of resources involved in approval depends on the organization’s needs.
BCM offers tools that allow users to approve the payments associated with the batches. Once the payments are batched it can be decided whether the batch must go through approval. The payment media is generated only after the batch has been approved by the final approver.
Payment batches are routed to approvers based on the approval matrix and the approvers can approve the batches by going to transaction BNK_APP
The below screen shows the payment batch in BNK_APP for approval.
7. Approval Reporting: report BNK_MONIA gives a list of payment batches and the users that approved the batches with date and time information
The screen shot below shows the batch created for our payment run has been approved by the user.
8. Status Tracking:
The batch and payment monitor provides an overview of batch life cycle-creation, approval, sending, and completion. ( Transaction: BNK_MONI)
Vendor open items due for payment on the day of the payment run are automatically picked up by the system.
Payment proposal approval is routed to the inbox of the listed approvers. This helps in the segregation of responsibilities between accounts payable accountants creating the proposal and the account payable managers approving the proposals.
Multiple payment runs are merged into a single batch for ease of review and approval. The payment batches are created by the AP Managers, and they are reviewed and approved by Treasury. This again makes sure the segregation of responsibilities and internal controls are in place
Payment files can be structured based on amount and vendor categories – example Payroll / Procurement Vendor etc.,
Payment batches are routed to respective approvers for approval
Upon final approval, the files are transmitted to the bank for payment.
Each step of the process can be tracked real time and any required corrective action can be taken
Bank communication monitor provides visibility into the various statuses of the payment batches.
BCM supports all the major international bank formats eliminating need for multiple interfaces / formats
Bank Communication Management is one stop shop for all the bank interfaces and easy to manage the bank interfaces with very limited resources