Effective Cash Pooling

You can use the effective cash pooling process to optimize interest and control liquidity for business partners who have multiple accounts at a bank, such as business groups. At certain times you can transfer clearing amounts between the company's accounts and a superordinate account.

Examples:

You may have a tax advantage if you bring the balance of accounts to zero or another fixed target amount at a particular point in time (zero balancing)
If an account exceeds a particular amount, the surplus amount is transferred to the higher-level account, for example, to invest the equivalent value of this surplus.

Process Combinations

Note Note

You can combine this process with other processes in Master Contract Management. For an overview of all combination options, see Master Contract Management (FS-MCM).

End of the note.

Prerequisites

Communication Between Logical Systems

Effective cash pooling requires an account-managing system to be connected to Master Contract Management (FS-MCM). Account Management (FS-AM) is connected in the standard system.

For more information, see Communication with Logical Systems.

In effective cash pooling, you can also assign external accounts to the main master contract. In this case, you need to create a shadow account in the account-managing system and assign the key of the shadow account to the key of the external account in a mapping table. The system posts the transfer amounts to the external bank account and represents incoming and outgoing payments by means of the assignment set up in its own account-managing system also.

If you are using Account Management (FS-AM) as an account-managing system, you have made the following settings:

Create an account that you want to use as a shadow account (on the SAP Easy Access screen, choose Account Management Account Account Master Data Create Account ) or choose an existing account.
Assign the external bank account to the shadow account. From the SAP Easy Access screen, choose Account Management Account Account Master Data Assign Shadow Account .

In Customizing for Master Contract Management (FS-MCM), you need to define a payment directive type for internal and external accounts, and for payment details by choosing Start of the navigation path Master Contract Management (FS-MCM) Next navigation step Effective Cash Poolingin the Customizing activity Assign a Payment Directive Type to an Assignment Type End of the navigation path .

Customizing Settings

General Settings

You have made the following settings in Customizing for Financial Services, under Start of the navigation path Master Contract Management (FS-MCM) End of the navigation path :

Under General Settings Assign Exchange Rate Categories for Currency Translation , you have defined an Exchange Rate Type for credit and debit postings.

If the main account and subaccount do not have the same currency for clearing, the system uses the exchange rate types defined here for the translation.
You have executed all the Customizing activities under Master Contract Applications Effective Cash Pooling :

For more information about these settings, see the documentation for the Customizing activities.

Settings for Processing Group

If you want to use processing groups, you have made the following settings:

In Customizing for Account Management (FS-AM) under Contract Management General Settings Processing Group:
- Define Processing Group
In Customizing for Master Contract Management (FS-MCM) under General Settings Processing Group:
- Define Processing Group
- Define Allowed Combinations of Processing Groups

For more information about these settings, see the documentation for the Customizing activities.

Settings for Payment Directive Types

You have carried out the following Customizing activities in Customizing for Master Contract Management (FS-MCM):

Under General Settings:
- Define Payment Directive Types:
  In this Customizing activity, you define which payment directive types you want to use in the context of effective cash pooling.
- Assign Payment Directive Types to Process Result Categories:
  In this Customizing activity, you define which posting processes you wan to run for the payment directive types in the context of effective cash pooling.
- Assign Offsetting Payment Directive Types to Process Result Categories:
  In this Customizing activity, you define which posting processes you wan to run for the offsetting payment directive types in the context of effective cash pooling.
Under Master Contract Applications Effective Cash Pooling :
- Assign a Payment Directive Type to Participant Types:
  In this Customizing activity, you store a payment directive type for the various types of participant accounts (main account or subaccount, within the bank or outside the bank), each as sender (funding account) or receiver (funded account).

For more information about these settings, see the documentation for the Customizing activities.

Additional Prerequisites

The conditions named in the Prerequisites section of the system documentation for the Execute Effective Cash Pooling report have been met.

You have carried out the following Customizing activities in Customizing for Master Contract Management (FS-MCM):

Under Master Contract Applications Effective Cash Pooling :
- Define time periods
- Define Key Dates for Time Periods
Under Product Management Product Definition Master Contract Products , you have made the relevant settings for the Effective Cash Pooling feature attribute.

You have neither deactivated nor locked the Effective Cash Pooling feature on the Features tab page.

Note Note

Under Start of the navigation path Order Management Next navigation step Payment Order End of the navigation path in the Customizing activity Assign Transaction Types and Medium/Payment Method to a Payment Directive Type, you have assigned the payment directive types used here to the following transaction types if you are using Account Management (FS-AM) as your account managing system:

Payment directive type for a sending (funding) participant: Debit transaction type (for example, a credit transfer)
Payment directive type for a recipient participant: Credit transaction type (for example, a debit memo)

End of the note.

Process

Master Data

Create a master contract. Choose a product with the feature attribute Effective Cash Pooling activated. For more information, see Creating Master Contracts.
Create one or more agreements on the Effective Cash Pooling tab page. For more information, see Editing Effective Cash Pooling.
Choose the Contract Relationships tab page and assign the participant accounts and master contracts you require. For more information, see Editing Contract Relationships for Effective Cash Pooling.
To use processing groups, choose the Additional Administrative Data tab page, and select a processing group from the Organizational Data group box.

This graphic is explained in the accompanying text.

Example Structure of a Master Contract Hierarchy for Effective Cash Pooling

Participant contracts in a main master contract can be participant accounts or participant master contracts. One participant account in the main master contract must be indicated as the main account (indicator on the Contract Relationships tab page). You can also use a payment details account as main account. All other participant accounts are automatically subaccounts.

For participant master contracts, one participant account must be indicated as the main account. This account functions as a subaccount in the main master contract. In this case, using a payment details account as main account is not possible.

Note Note

If you use processing groups, note that the main account must be assigned with the same processing group as that assigned to the corresponding master contract.

End of the note.

Settings for Methods and Agreements

You can make the following settings in the master contract:

Tab page Effective Cash Pooling
A cash pooling agreement has a cash pooling method and time periods. The method is the same for each Cash Pooling agreement for a master contract. The time periods can differ for each agreement.

For more information, see Editing Effective Cash Pooling.
Tab page Contract Relationships
A participant can have one or more cash pooling agreements for the master contract. You can assign one or more cash pooling rules to each agreement.

For more information, see Editing Contract Relationships for Effective Cash Pooling.

For more information about methods, see Methods for Effective Cash Pooling.

This graphic is explained in the accompanying text.

Example of the Connections Between Settings in the Main Master Contract

Flow Data

Executing Effective Cash Pooling

If you execute effective cash pooling in a mass run, the system processes the selected master contracts in accordance with the settings made in the contract and in Customizing.

Note Note

To provide the calculation base used to apply the rules, the system can process a maximum of 99,999 data records for each participant account. This includes, for example, entries in the balance series (in the case of balance-based methods) or items (in the case of the ITEM method).

End of the note.

The following steps are carried out:

The system selects the due agreements for all participant accounts or master contracts for a main master contract and processes them using the participants and rules assigned to them. The agreements are stored on the Effective Cash Pooling tab page in the main master contract.

Note

If a master contract is part of a master contract hierarchy, the system first processes the due agreements on the lowest level of the hierarchy.

End of the note.
The system processes the agreements in order of due date. If multiple rules are assigned to an agreement, the system processes these as follows:
- First the system processes all value date-based rules (rules for which the Value Date-Based indicator is set in Customizing) for each value date. The priority (rule ID) defined in Customizing applies in these rules.
- Then the system processes all the other rules. The priority (rule ID) defined in Customizing applies in these rules.
For more information, see Rules for Effective Cash Pooling.

For more information about the mass run, see the system documentation for the Execute Effective Cash Pooling report.

In a single run, you execute this operation for one individual master contract. For more information, see Executing Effective Cash Pooling

Creating PLM Documents

To ensure that amounts cannot be withdrawn from a participant account just before or during the cash pooling run, you can create PLM documents in the mass run for the due participant accounts.

Based on the settings of the PLM event type used, the system creates a prenote (with amount determination) or a posting lock for the account, or both.

For more information about creating PLM documents in the mass run, see the system documentation of the report for creating PLM documents. You can call this up from the SAP Easy Access screen by choosing Start of the navigation path Master Contract Management Next navigation step Effective Cash Pooling Periodic Tasks End of the navigation path .

Cash Flow

Example Example

The following table shows the cash flow from the lower account (funding account) to the main account (funded account):

Direction of the cash flow according to the payment directive type	Deduct	Add
Order Type	Bank Transfer	Debit Memo
Sender of Payment Order	Subaccount	Main Account
Recipient of Payment Order	Main Account	Subaccount

End of the example.

Example Example

The following table shows the cash flow from the main account (funding account) to the subaccount (funded account):

Direction of the cash flow according to the payment directive type	Deduct	Add
Order Type	Bank Transfer	Debit Memo
Sender of Payment Order	Main Account	Subaccount
Recipient of Payment Order	Subaccount	Main Account

End of the example.