Outlining automated Bank Statement Processing (4X8)

Advanced Bank Statement Automation creates templates for reprocessing rules by learning from past patterns of the manual actions taken during the reprocessing of the bank statement items. Instead of only being able to create reprocessing rules manually, you can use the templates to create reprocessing rules more easily. 

Moreover, with the scope item activated, the reprocessing of bank statement items is triggered automatically following the initial posting. Thus, the system applies the corresponding reprocessing rules to the pending items to complete the postings.

The 1MV scope item (Cash Application Integration) comprises only the machine-learning based features, such as line-item matching. The 4X8 scope item (Advanced Bank Statement Automation) comprises rule-based features, such as the creation of reprocessing rules based on templates or the automation of reprocessing rules.

If you have purchased the additional license for SAP Cash Application (1MV), you can use intelligent technology, such as the Receivables Line-Item Matching. If you have purchased the license for the Advanced Bank Statement Automation (4X8), you can automate the reprocessing of open bank statement items and use intelligent technology to work with template-based reprocessing rules.

The term "cash application" describes the accounting process of receiving cash and assigning the incoming cash to the appropriate party that the cash is from. Cash application is a part of the Accounts Receivable process that applies incoming payments to the correct customer accounts and Accounts Receivable invoices. In order to do this, the first step is to determine where to apply the cash. This is done by matching the payment to the associated invoices.

If, for some reason, an incoming payment cannot be correctly matched to its associated invoice(s), the payment may be applied to the customer at the customer account level. Once this is done, the payment can be applied to reduce the open accounts receivables for that customer.

There are two ways to apply cash: manually or on an automated basis. Although the process may sound simple, it can be very complicated when considering companies often have thousands of customer accounts and that payments are not typically made per invoice but instead for multiple invoices. The complexity increases when considering exceptions such as short payments, discounts, mismatching amounts, and so on.

The figure shows the end-to-end process flow using the four pillars of the SAP cash application process:

• The SAP Cash Application functionality
• Manage Payment Advices app
• Manage Bank Statement Reprocessing Rules app
• Reprocess Bank Statement Items app

From a sequence perspective, the following is a logical sequence to use, though SAP customers may use the sequence they prefer.

1. Payment advice extraction
2. Import bank statement
3. Posting rules by configuration (triggered when the bank statement is imported)
4. New reprocessing rules created by the Manage Bank Statement Reprocessing Rules app
5. SAP Cash Application
6. Manual cash application using the Reprocess Bank Statement Items app

The overall cash application process is split across several SAP Best Practice Scope Items. The process flow gives an overview of which components work together to deliver the best results.

Note

Some of the Best Practice Scope Items need additional licensing in SAP S/4HANA Cloud.

In SAP S/4HANA Cloud there are three ways to create a reprocessing rule for bank statements:

• Create the bank statement reprocessing rule manually via the Manage Bank Statement Reprocessing Rules app. This way the user can set conditions and accounts as per his own requirement.

• Create bank statement reprocessing rules through a scheduled job that retrieves rule information from already posted items and creates a new template from this information. This template is presented to the business user and can be applied to further items matching the condition criteria.

• Rule automation in combination with the SAP Cash Application.

Use the Manage Bank Statement Reprocessing Rules app to create and manage bank statement reprocessing rules to perform G/L and AP/AR account postings.

Often, bank statement items of the same kind cannot be automatically processed. For similar bank statement items, you can create a reprocessing rule. Reprocessing rules determine how similar bank statement items are to be processed. If a reprocessing rule applies to the conditions of the bank statement items, the items will be posted and cleared according to the actions defined in the rule.

This app provides the following key features:

• Create and edit reprocessing rules, define the conditions in which the reprocessing rules should be applied, and define the actions that the reprocessing rules should perform with the bank statement items.

• Share manually applicable reprocessing rules so your colleagues can use them too.

• Deprecate reprocessing rules that have become useless or outdated for your work.

• Automate reprocessing rules so they run in the background and automatically reprocess bank statement items.

  To use this feature, you need to purchase and activate Advanced Bank Statement Automation (scope item 4X8).

• Manage templates for reprocessing rules

To create a new reprocessing rule, open the Manage Bank Statement Reprocessing Rules app. Select the Create button. You can see additional tabs on the right.

Fill in the fields on the Reprocessing Rule tab:

• In the Description  field, enter a descriptive name for your rule. For example, if you want to create a reprocessing rule for bank statement items concerning interest charges, you could enter Interest charge or Interest.
• In the Journal Entry Type field, select the type of journal entry that should be created when bank statement items are processed with this reprocessing rule.
• For the Rule for field, mark the applicable checkbox. For example, if you want the rule to be applicable to incoming payments, select Incoming Payments.

• In the Action Type field, select a value from the dropdown menu:

  • If you select G/L Posting, the rule will post the item to a general ledger account. This means it leads to an on-account posting.

  • If you select AP/AR Posting, the rule will post the item to an accounts payable or accounts receivable (subledger) account.

  • If you select Clear in Sequence, the allocation and interpretation algorithms will be activated.

Fill in the fields on the Conditions tab. In this tab, you can define the conditions for which this rule is applicable:

• In the Attribute  field, select a value from the dropdown list.

  The reprocessing rule checks uncompleted bank statement items that meet the condition. Reprocessing rules can check bank statement items for the following attributes:

  • Amount
  • Company Code
  • External Transaction
  • House Bank
  • House Bank Account
  • External Transaction
  • Manual Transaction
  • Memo Line
  • Partner Bank Account
  • Partner Bank Code
  • Partner IBAN
  • Partner Name
  • Payment Transaction Type

  Please be aware that each bank statement item will be checked only for the exact combination of the character string you type into the From  field. For example, if you select Memo Line in the Attribute field, Contains in the Option  field, and Interests in the From field, the system will not consider the reprocessing rule as applicable for a bank statement item that contains Interest in its memo line, as the last character ("s") is missing.

• In the Options  field, select a value from the dropdown menu.

  Reprocessing rules can check bank statement items for the following options: 

  • Between
  • Equal To
  • Greater Than
  • Greater Than or Equal To
  • Less Than
  • Less Than or Equal To

• In the From field, enter a value.

  You can only fill in the To  field if you used the value Between in the Options field.

Note

To add a new field, choose the Create button. You can create multiple conditions for one reprocessing rule. If there are two or more conditions with the same value in the Attribute and Options fields, but different values in the From and/or To fields, the reprocessing rule will combine the conditions with an OR connector. This means that the rule will check whether one of the conditions is applicable to the bank statement item.

If there is more than one condition, and if they contain different values in the Attribute field, the reprocessing rule will combine the conditions with an AND connector. This means that the rule will check that all these conditions are applicable to the bank statement item.

A configuration expert can edit and create payment clearing groups in the Manage Your Solution app, under Configure Your Solution → Finance → Bank Accounting → Electronic Bank Statement → Define Payment Clearing Groups. You can then assign the IDs of the payment clearing groups to the respective business partners in your business partners' master data. For example, in the Manage Business Partner Master Data, Manage Customer Master Data, or Manage Supplier Master Data apps). In this way, you determine which business partners belong to which payment clearing groups.

A payment clearing group is an attribute with which you can categorize your suppliers and customers into groups. In the Manage Bank Statement Reprocessing Rules app, you can use the attribute as a condition of the reprocessing rule. This means that with the Payment Clearing Group attribute, you have another option to actively influence the processing of your bank statement items. The advantage of this attribute is that you can refer to certain business partners in one condition by using the correct payment clearing group.

Choose New Entry to create new payment clearing groups. Define a unique identifier for each payment clearing group and give them a descriptive name that allows you to recognize the payment clearing group when used in the following tasks:

• In your business partners' master data (in the BP transaction) when you assign the payment clearing groups to your business partners to group them
• In the Manage Bank Statement Reprocessing Rules app when you select the payment clearing groups in the reprocessing rules' conditions.

To use the payment clearing group, maintain the necessary settings in the business partner master data. Use the Customer (Fin. Accounting) role and switch to the company code data. On the Customer: Payment Transactions tab, the Payment Clearing Group field can be populated with the values set in the configuration.

Note

For each company code, the business partner can belong to only one payment clearing group. This means that if you have a business partner in more than one company code, you can assign different payment clearing groups to the business partner for the different company codes.

Furthermore, the payment clearing group can be used in the Manage Bank Statement Reprocessing Rules app. When creating a new reprocessing rule, the group can be defined as one of the rule conditions. In line with the master data set up in the business partners, only this specified group will be processed by the rule.

• If you have selected G/L Posting as the value of the Action Type field, fill in the fields on the Post to G/L Account tab.
• If you have selected AP/AR Posting as the value of the Action Type field, fill in the fields on the Post to AP/AR Account tab.
• If you have selected Clear in Sequence as the value of the Action Type field, fill in the field on the Clear in Sequence tab.

Allocation algorithms compare the data in the bank statement and in the bank statement items with matching open items, and sort the open items accordingly.

You can use allocation algorithms in your reprocessing rules to find matching open items, and collect them for posting and clearing. Unlike interpretation algorithms that use references in the memo line to find matching open items, allocation algorithms use the amount of the bank statement items and the open items, and the business partner information. The system identifies the business partner either by the bank details or by the business partner's name or ID. The following two allocation algorithms are predelivered by SAP:

One of the predelivered allocation algorithms is First In First Out - Clear Oldest Open Items First (FIFO). This allocation algorithm uses the date type parameter and selects bank statement items based on their posting date. The algorithm looks for open items that match the bank statement items, and selects the oldest matching open items that exist in your system to be cleared. This algorithm only works if the amount of the matching open items equals exactly the amount of the bank statement items. This means that the FIFO allocation algorithm does not support the identification, posting, and clearing of partial payments. Furthermore, it cannot skip open items. It proceeds to select the open items that match the amount of the bank statement item in a chronological order, from oldest to latest items. If the sum of the amounts of open items in a sequence does not match the amount of the bank statement item, the system does not apply the FIFO allocation algorithm.

One of the predelivered allocation algorithms is One Exact Match - Clear Matching Open Item. To clear a bank statement item, the One Exact Match allocation algorithm looks through your open items, and selects only one open item for clearing that has the same, exactly matching amount as the bank statement item. If the One Exact Match allocation algorithm finds more than just one matching open item, it selects the one with the oldest posting date.

Currently, the FIFO and One Exact Match allocation algorithms work only if the following three conditions are fulfilled:

• It processes only incoming payments - not outgoing payments.
• It considers only open items for processing that belong to a customer account.
• It processes only debit items - not credit items.

So far, if the processing instructions defined in your reprocessing rules did not manage to successfully process a bank statement item, the uncompleted bank statement item appeared in the Reprocess Bank Statement Items app, with a posting status of Not Completed, waiting for you to manually process it. However, in the Manage Bank Statement Reprocessing Rules app, there is the Enable On-Account Posting button in the Clear in Sequence action type of your reprocessing rules. By setting the Enable On-Account Posting button to YES, you can define that an on-account posting should occur if the processing instructions do not manage to successfully clear the bank statement items. You can find the bank statement items that the system automatically posted in the Reprocess Bank Statement Items app. These bank statement items have the Auto-Posted on Account posting status. If the system did not manage to identify the ID of the customer account or supplier account, the system cannot post the bank statement items on account, and therefore the bank statement items appear in the Reprocess Bank Statement Items app and have the Not Completed posting status. In the Reprocess Bank Statement Items app, you can then process them manually.

The Manage Bank Statement Reprocessing Rules app allows business users to automatically clear open bank statement items based on conditions they have defined as rules. Users can create reprocessing rules based on templates proposed by the system. The system analyzes the past postings and clearings, and uses the past data to generate templates for reprocessing rules that are tailored to the user's individual needs. In addition, the user defined reprocessing rules can be automated to run after the bank statement is imported.

The Manage Bank Statement Reprocessing Rules app allows users to create bank statement posting and clearing rules as master data, thereby reducing the manual processing involved in the bank statement process. This is a quick and comprehensive way to get efficient reprocessing rules for higher automation.

Note

To use the automation of reprocessing rules, you need the appropriate release level, authorization, and licensing.

Note

The function of creating reprocessing rules based on templates and the automation of reprocessing rules is handled using the best practice scope item 4X8 - Advanced Bank Statement Processing. It is referenced here to give a holistic view of all cash application processes.

The automation of reprocessing rules is possible with the scope item 4X8 - Advanced Bank Statement Automation.

To automate bank statement reprocessing rules in the Manage Bank Statement Reprocessing Rules app, choose Automate Rule. You require the appropriate authorization to use this function. If you activate the automation of a reprocessing rule, the rule is automated with every import of bank statements.

This functionality is only available when a user has been assigned the appropriate authorizations and when scope item 4X8 is activated. Please note that scope item 4X8 is a separate license, as it contains additional features.

All automated reprocessing rules for bank statements need to have the Procedure Type field filled.

With this feature, you can define whether you want your automated reprocessing rules to process bank statement items in a one-step or two-step posting procedure. To do that, you need to choose the Automate Rule button to automate a manual reprocessing rule. Then, you need to fill in the Procedure Type field in the pop-up window. If you enter 001 (One-Step Posting), the automated reprocessing rule posts bank statement items in one posting step. If you enter 002 (Two-Step Posting), the automated reprocessing rule posts bank statement items in two posting steps.

When a bank statement is imported, statement items are checked to see if the conditions of the rule would apply. If one of the reprocessing rules apply, this is highlighted on the statement item.

In the Reprocess Bank Statement Items app log, users can drilldown into the details of why a specific rule was applied to the item.

SAP S/4HANA Cloud can return rule templates from a scheduled job. These rule templates can turn into an actual reprocessing rule which is applied to imported banks statement items. The creation of rule templates is covered with the scope item 4X8 - Advanced Bank Statement Automation.

There are also key performance indicators available for rule templates to see how many times and to how many items this rule was applied.

The system uses your past data to create the templates. Therefore, the templates contain the details of the postings and clearings you made in the past and are thus tailored to your work and your individual needs. The templates that the system suggests already contain pre-filled values for all necessary fields. This means that your manual work load is reduced significantly and the extent of automation in your work flow increases.

With the SAP Cash Application, you can allow the system to learn from your past data and thus create templates for reprocessing rules that are tailored to your individual needs.

In the Manage Bank Statement Reprocessing Rules app, you can use these rule templates to create your own reprocessing rules, and edit and automate them if required. Based on your past postings and clearings, the intelligent technology of SAP Cash Application gives each rule template some key performance indicators that help you understand and decide how useful the rule templates are for your work.

The system needs at least three similar items to identify the conditions as a pattern and to establish a rule template upon this.

Once the job is done, it will return the proposed rule templates to the Manage Bank Statement Reprocessing Rules app.

For each of the patterns found, the system creates a new Template ID. Through the key performance indicators, the accountant also gets a good idea if this proposed template is valuable or not.

In the Past Appl. Items column, the system displays how many items have led to this rule template. In the All Open Items column, the accountant can identify the number of open items the rule template would clear.

Browsing the details of a rule template, the accountant can look up all relevant information of the template, like the inherent conditions, the G/L Accounts, and further elements of the proposed rule.

If the accountant finds that the rule proposed is helpful, they can turn this template into an actual rule to be applied for upcoming bank statement items.

In case the accountant is basing their decision on whether they should create a rule out of a template or not, on the key performance indicators, it is helpful to always have the actual numbers available in the KPI area.

To do this, use the Schedule Accounts Receivables Jobs app and the job template Cash Application: Recalculate KPIs for Templates of Bank Statement Reprocessing Rules. This way, the numbers of the KPI area for reprocessing rules is kept up-to-date.