Describing the Invoice to Cash Process​

Objective

After completing this lesson, you will be able to describe cash collection and reconciliation​

Invoice-to-Cash Process

Invoice-to-Cash Process in SAP S/4HANA Public Cloud

The Invoice-to-Cash process in SAP S/4HANA Public Cloud streamlines financial operations from creating customer invoices to managing and clearing them. This all-encompassing process integrates essential tools like SAP Multi-Bank Connectivity and SAP Cash Application, ensuring optimized cash reconciliation and liquidity control and improved working capital.

This image illustrates the Invoice to Cash process in two main sections. The top section, titled Manage Customer Invoices, shows a linear workflow of three steps: performing pre-invoicing of billing content, managing 3rd party invoices, and invoicing the customer. The bottom section, labeled Process Accounts Receivables and Collect Payment, displays a more complex workflow. It begins with managing financial statements, followed by managing customer credit risk, processing accounts receivable (highlighted in green), and processing disputes. The flow then continues with managing receivables financing, managing payments and bank communications, and finally managing and processing collections. The diagram uses rounded rectangles connected by arrows to show the sequence of steps, all contained within a larger rounded rectangle representing the overall Invoice to Cash process.

This course will focus on the Cash Reconciliation process from bank statement which is part of the step Process accounts Receivables (AR) from the process flow above.

Process Accounts Receivables

Within the Invoice-to-Cash process, Process Accounts Receivables has a pivotal role in initiating the cash receipt against the issued invoices and subsequently overseeing incoming payments. Effectively managing this sub-process is crucial as it directly impacts the organization's customer relationships and overall working capital. Notably, this sub-process leverages SAP Multi-Bank Connectivity. This powerful tool offers streamlined, secure connectivity to global banks, enabling organizations to manage their bank statements seamlessly, despite the number and locations of their banking partners. The application aids in processing of bank statements data from multiple financial institutions and prepares it for further usage in SAP S/4HANA Public Cloud.

This image illustrates the Invoice to Cash process in a hierarchical flowchart format. The top level shows two main phases: Manage Customer Invoices (in yellow) and Process Accounts Receivables and Collect Payment (in purple), with the latter containing a highlighted Process Accounts Receivable step. This step is expanded in the middle section (in light green), which breaks it down into three components: Open Item Management, Customer Payment Collaboration, and Financial Analytics. The bottom section (in light blue) further details the Open Item Management process, which utilizes SAP Cash Application as a tool. The diagram uses color-coded boxes and arrows to show the flow and relationships between different stages of the invoice-to-cash process.

Open Item Management

Following the receipt of payments, it's essential to ensure that these are accurately allocated to the correct invoices and discrepancies, if any, are immediately rectified. Here, the Open Item Management sub-process is instrumental. It maintains accurate financial records and offers transparency into the organization's cash position. Crucial to this sub-process is SAP Cash Application. Adopting innovative machine learning techniques, it functions to automatically clear invoices using learned matching criteria derived from historical data, therefore reducing manual efforts. However, this is just one tool in the process of reconciling open items. Other methods, such as configured or automated processing rules, can also aid in matching open items with payments for greater efficiency. Combining these sub-processes, the electronic bank statements imported through SAP Multi-Bank Connectivity are exploited by SAP Cash Application and other processes to match and offset against the open receivables, leading to achieve end to end process automation from receive bank statements to clearing.

In summary, the Invoice-to-Cash process in SAP S/4HANA Public Cloud employs key tools like SAP Multi-Bank Connectivity and SAP Cash Application to streamline the management of customer invoices and payments. This process, including both 'collect cash' and 'settle, reconcile, account' sub-processes, helps maintain healthy cash flow and offers real-time visibility into the financial status of the organization, enabling well-informed decision-making.

Clearing Process

Decorative Element

Bank statements and payment advices are the import data for matching payments with open invoice items. As a first step, SAP S/4HANA reconciles payments based on rules-based clearing using two approaches:

First, using the rules configured in the S/4HANA backend.

Second, using the business user-friendly processing rules.

If payments could not be reconciled based on those two rulesets, the Cash App provides automated clearing using artificial intelligence to clear the remaining open items.

Customers always have full control over the processing status using advanced analytics tools and the SAP Fiori application.

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