Using the SAP Cash Application (1MV)

Objectives

After completing this lesson, you will be able to:

  • Outline the Architecture and Process of SAP Cash Application
  • Illustrate the main pillars of SAP Cash Application
  • Configure the Cash Application Integration

SAP Cash Application Architecture

Landscape

The SAP Cash Application is an SAP Business Technology Platform app. SAP Business Technology Platform apps are a type of app introduced with SAP S/4HANA and SAP S/4HANA Cloud.

When the SAP Cash Application app is in productive use, referred to as inference, incoming payments and open receivables are sent to the app for matching. The SAP Cash Application app will return the matches and proposals and, depending on the configured target auto-clearing accuracy, either automatically clear or propose a match. Automatic clearings and proposals are documented in logs.

When using the SAP Cash Application app, the SAP customer's data does not leave the SAP environment. The SAP customer's data is stored in a secure location in the SAP Cash Application referred to as a tenant. The tenant segregates the data from other data in the cloud app ensuring data security.

When an SAP customer implements the SAP Cash Application, they are given both a test and a production tenant. The test tenant receives historical data from the SAP customer's Quality Assurance (QA) system and is used in the training process, which builds the training model. Ideally, the QA system should be a system recently refreshed from production. The production tenant receives historical data from the production system and is used when the SAP customer is using the SAP Cash Application in a productive environment.

Customers are not given a login to the SAP Cash Application, as they do not require one.

Four Pillars

The SAP Cash Application solution contains four pillars for the cash application process:

  1. SAP Cash Application app

  2. Manage Payment Advices app

  3. Reprocess Bank Statement Items app

  4. Manage Bank Statement Reprocessing Rules app

Each of these pillars or functionality used in the cash application process are described in this course.

SAP is moving into machine learning in multiple areas and one key area is the SAP Cash Application. SAP Cash Application's intelligent receivables automation, which is powered by SAP Machine Learning, is a cloud solution that learns from historical transactions of applying customer payments to invoices for open accounts receivable items. Based on the SAP customer's preferred tolerance level, cash can be applied automatically, leaving finance teams free to deal with only the most complex exceptions.

In the training process, a model of the matching criteria based on historical clearing information is built. The historical clearing information is used during the training process to create a model that is used by SAP Cash Application when in a productive environment. SAP Cash Application automates the process of clearing incoming funds with corresponding receivables using this machine learning model. The model proposes a matching proposal and prediction results based on historical clearing information.

The objective of SAP Cash Application is to resolve cases of uncleared payments from customers and vendors using machine learning, especially when the payments do not contain the sufficient information needed by the Accounts Receivable (AR) accountants to do the clearing.

The term inference means an idea or conclusion that is drawn from evidence and reasoning. Inference is the term SAP uses to indicate the productive use of the SAP Cash Application process when the trained model is fed with production data to make predictions on the real-time unseen data for both line-item matching and customer identification. SAP Cash Application proposes open receivables that can be cleared against incoming payments based on specific criteria.

A payment advice is the remittance information from a customer (payer) indicating the invoice is paid with a payment. The payment advice may contain text, item numbers, and amount. The payment advice contains important information for accounting departments to match customer payments to open receivable invoices.

SAP provides the Manage Payment Advices app, which is used for the management of payment advices to be used in the cash application process. This app is used for the following purposes:

  • Report of payment advices (remittance advices) available to be used in the cash application process

  • Payment advices can be uploaded from file(s) or manually entered using the app

  • To automate the process, payment advices can be mass uploaded on a scheduled basis from an email server (IRPA is needed for this)

  • Confirmation of payment advices

Payment advice documents received from customers can be uploaded to the Manage Payment Advices SAP Fiori app for automatic processing. The payment advice extraction feature within SAP Cash Application will accept PDFs including unstructured scans, and use computer vision technology to read and extract information into SAP. Once these payment advice documents are converted into structured information, they are used to enhance payment clearing.

Currently, SAP supports payment advices as PDF formatted files and, depending on the release level, Microsoft Excel spreadsheets are also supported. When the files are imported into SAP, the payment advice will be read and saved. Payment advices can be imported from more file types using the SAP Roadmap. Use the SAP Roadmap to check when new and enhanced functionality will become available.

The Reprocess Bank Statement Items app is the SAP S/4HANA Cloud-specific bank statement processing app.

Bank statements can be entered into the system automatically (electronic bank statement) or manually. In both cases, rule-based processing assigns and clears the payments automatically. If the automatic processing is not successful, manual reprocessing is required. In this app, users can reprocess a bank statement item, mark it as reprocessed, and enter a reason for reprocessing. Users can also add attachments to bank statement items.

When using the Reprocess Bank Statement Items app with the SAP Cash Application functionality, users will find that the information from SAP Cash Application is directly integrated into the Reprocess Bank Statement Items app. Business users do not need to learn a new application to view the feedback from SAP Cash Application. Instead, the feedback from SAP Cash Application is included on the Log tab for each bank statement item.

The next pillar of the cash application process is template-based reprocessing rules that can be created by business users using the Manage Bank Statement Reprocessing Rules app.

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 be run after the bank statement is imported.

The functionality in this app provides a way for users to create bank statement posting and clearing rules as master data, thus 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 via the best practice scope item 4X8 - Advanced Bank Statement Processing. It is referenced here to give a holistic view of all the cash application processes.

Cash Application Process

The term cash application describes the accounting process of receiving cash and assigning the incoming cash to the appropriate party. Cash application is a part of the accounts receivable process that applies incoming payments to the correct customer accounts and accounts receivable invoices. 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.

An efficient cash application process is key to a lower Days of Sales Outstanding (DSO). DSO is the primary KPI used to measure the effectiveness of an accounts receivable team. An efficient cash application process also provides more control over a company's cash flow and liquidity. Control over liquidity is key to all companies.

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

  • SAP Cash Application app

  • 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. Extract payment advice

  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

SAP Cash Application Processes

Challenges in Applying Cash

Cash application is the process of receiving cash and assigning the incoming cash to the appropriate party that the cash is from, which is typically a customer, but could be from a vendor or another source.  

Below are aspects of the cash application process:

  • A significant volume of payments needs to be processed manually, for example if payment contains no or incomplete invoice references, master data is not up-to-date, customers pay multiple invoice at once, etc. Accounts Receivable accountants have to investigate such issues
  • Tailored rules were required for achieving higher automation, reflecting customer and country specifics. This carries high implementation costs.
  • Automation with simple rules is not sufficient, as many payments do not contain sufficient remittance information
  • Accounts Receivable accountant needs to consider many possible exceptions when manually looking for invoices.

This process is very time consuming. On average, approximately 30% of the incoming cash can be posted automatically with useful information from the bank statement. Whereas 70% of the incoming cash requires human intervention to be cleared. For many companies, applying cash to invoices while processing bank statements is a manual task - and leads to large team sizes for order-to-cash organizations. Thus, there is potential for automation.

Applying Cash

There is a lot of complexity to the cash application process when considering the details.

Cash application is the process of applying 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 payments. This is normally done by matching the payment to the associated invoices. If for some reason the payment cannot be correctly matched to its associated invoices, then the payment is matched to the customer at the customer account level.

In addition to sending a payment, the customer may send remittance information by mail, email, web portals, or other sources. The remittance information contains details on what is being paid, e.g. what invoices and corresponding dollar amounts. For many companies, the remittance information is key to applying cash.

Another complexity occurs when customers make a single electronic payment for multiple invoices. This makes matching a much more difficult process since you cannot just look at the amounts of payments to match proper payments to the invoices. The remittance information now becomes key as it is the only means of relating the payment to the correct invoices.

Part of what makes the cash application process difficult is that the incoming payment is being triggered by a third party. It is up to the third party, e.g. the customer, to provide sufficient reference information with the payment. The information passed with the incoming payment is not in the SAP customer's control. They must rely on their customer to provide it with the invoices they are paying, reasons for under payments, etc.

To understand the process of cash application, let's discuss the steps that happen to manually apply cash.

Invoice Sent to Customer

First an invoice is sent to the customer. This invoice may include information regarding multiple entities or multiple products.

Payment Received

The customer pays one or multiple invoices with one payment. The payment may be by check or by a form of an electronic payment, such as ACH, SEPA, wire, or EDI. The customer payment is received in the daily bank statement. The person applying cash has the information in the note to payee / memo line to help identify the customer who has made payment.

Match Remittance Information to Payment

The customer may have sent remittance information, which must be tracked down. The remittance information may have been sent by mail, email, web portals, or other by other means.

Manual Cash Application Process

If a match is not found using the pre-configured bank statement posting rules, the cash application specialist must view the note to payee or memo field in the bank statement for any hints to determine the customer.

Determine Customer

The cash application specialist may search customer master records to try to determine the customer from whom the payment is from.

Determine Invoice(s)

Once a customer is determined, the customer's open items are reviewed, and the open items relevant to the incoming payment are determined. The customer open items are cleared against the incoming payment.

Post on Customer Account

If the customer can be identified, but the specific invoices being paid cannot be identified, the payment may be posted on the customer account and a follow-up call made to the customer to get the information required.

Large SAP customers may have thousands of customers making payments across many company codes, depending on their business. It is difficult for humans to remember the details of how a specific customer pays month after month, but this is something that can be done programmatically, which is what the SAP Cash Application is doing.

SAP Cash Application speeds up the cash application process with machine learning technology. It automates the process of clearing incoming bank payments with corresponding receivables by using machine learning functionality that proposes matching proposal / prediction results based on historical data (previously cleared bank payments and receivables).

SAP Cash Application aims to resolve the cases of un-cleared single, partial and combined payments from the customers/vendors using Machine Learning, especially when the payments do not contain sufficient information needed by the Accounts Receivable accountants for clearing. Since the application is tightly integrated to the SAP systems, it can seamlessly fit into existing Accounts Receivable processes.

SAP Cash Application

Machine Learning Capabilities

We have been using computers for decades now. And we are used to seeing the computer take over certain tasks which were done by humans.

There is one major difference between a human and a computer:

We humans are able to adopt to changes and constantly improve ourselves. And that's because we can learn. We learn from experience. Computers on the other hand have to be explicitly programmed. The software consists out of a chain of commands, which only work for the predefined situations. Therefore humans can handle things that were not pre-thought of by the developer who created the coding.

With Machine Learning this is now changing. Just imagine a computer, that could learn; not learn from experience, but learn from data. That is the idea of Machine Learning that opens totally new doors for us.

Model Behavior

In the SAP Cash Application training process, a model of the matching criteria based on historical clearing information is built. The historical clearing information is used during the training process to create a model that is used by the SAP Cash Application when in a productive environment.

In the training process, machine learning can identify patterns in knowledge-intensive processes, without explicitly defining the patterns by rules. The SAP machine learning engine learns from historical transactions during an initial training period.

The inputs to the training process are:

  • Electronic Bank Statements
  • Accounting Documents
  • Payment Advices
  • Customer Master Data
  • Bank Master Data
  • House Banks
  • Payer bank account information
  • Clearing data for electronic bank statement line items

During the training process, a model is built. This model is then used in the inference process when the SAP Cash Application process is live in production.

The SAP Cash Application model used for this course was trained with 12,000 bank statement items, and with the above data distribution and behavior.

In order to make a good model, which is one that predicts well, it must learn implicitly through the provided data. The provided data must not only contain perfect match cases, but it should contain imperfect matching cases as well. This is necessary for the Machine Learning to learn from these imperfect cases in order to make correct prediction when it encounters similar errors during the production inference executions.

The SAP Cash Application needs to learn the correct behavior from both the perfect matches as well as those with imperfectly provided data.

The distribution of the training cases were as follows:

50% perfect match cases- bank statement items' memo lines contain exact invoice document numbers. See Example 1, 2 and 3 for the behavior patterns.

50% imperfect match cases- bank statement items' memo lines contain certain errors in the invoice numbers. See Example 4, 5, 6, 7, 8, and 9 for the behavior patterns

In this section, we show the examples used to build the model used for this training. In all these examples, the memo line is used to build the model. When building a model from actual historical bank statement clearings, many 50+ fields from the historical clearings are used to build the model.

Note: Please keep in mind, SAP customers implementing the SAP Cash Application, will use their actual historical bank statement clearings to build the model.

Behaviors for the perfect matching cases

Example 1: Exact document number in bank statement memo line

  • 1 Invoice
  • Document number (bkpf.belnr): 123456789
  • Organization Business Partner name / Customer Name1 from KNA1 (kna1.name1): ABC Corp
  • 1 Bank statement item
  • Memo-line (febre.vwezw): 123456789

Example 2: 2 exact document numbers with customer name in memo line.

  • 2 Invoices
  • 1st Document number (bkpf.belnr): 123456789
  • 2nd Document number (bkpf.belnr): 123456790
  • Organization Business Partner name / Customer Name1 from KNA1 (kna1.name1): ABC Corp
  • 1 Bank statement item
  • Memo-line (febre.vwezw): ABC Corp 123456789 123456790

Example 3: 3 exact document numbers with customer name in memo line.

  • 3 Invoices
  • 1st Document number (bkpf.belnr): 123456789
  • 2nd Document number (bkpf.belnr): 123456790
  • 3rd Document number (bkpf.belnr): 123456791
  • Organization Business Partner name / Customer Name1 from KNA1 (kna1.name1): ABC Corp
  • 1 Bank statement item
  • Memo-line (febre.vwezw): ABC Corp 123456789 123456790 123456791

Behaviors for the imperfect matching cases

Example 4: Error in document number (remove first number) in memo line

  • 1 Invoice
  • Document number (bkpf.belnr): 123456789
  • Organization Business Partner name / Customer Name1 from KNA1 (kna1.name1): ABC Corp
  • 1 Bank statement item
  • Memo-line (febre.vwezw): 23456789

Example 5: Truncation in document number (last 5 number) in memo line

  • 1 Invoice
  • Document number (bkpf.belnr): 123456789
  • Organization Business Partner name / Customer Name1 from KNA1 (kna1.name1): ABC Corp
  • 1 Bank statement item
  • Memo-line (febre.vwezw): 56789

Example 6: Errors in the 2 document numbers (remove first number in each document number) with customer name in memo line.

  • 2 Invoices
  • 1st Document number (bkpf.belnr): 123456789
  • 2nd Document number (bkpf.belnr): 123456790
  • Organization Business Partner name / Customer Name1 from KNA1 (kna1.name1): ABC Corp
  • 1 Bank statement item
  • Memo-line (febre.vwezw): ABC Corp 23456789 23456790

Example 7: Errors in the 3 document numbers (remove first number in each document number) with customer name in memo line.

  • 3 Invoices
  • 1st Document number (bkpf.belnr): 123456789
  • 2nd Document number (bkpf.belnr): 123456790
  • 3rd Document number (bkpf.belnr): 123456791
  • Organization Business Partner name / Customer Name1 from KNA1 (kna1.name1): ABC Corp
  • 1 Bank statement item
  • Memo-line (febre.vwezw): ABC Corp 23456789 23456790 23456791

Example 8: Truncation in the 2 document numbers (last 5 numbers in each document number) with customer name in memo line.

  • 2 Invoices
  • 1st Document number (bkpf.belnr): 123456789
  • 2nd Document number (bkpf.belnr): 123456790
  • Organization Business Partner name / Customer Name1 from KNA1 (kna1.name1): ABC Corp
  • 1 Bank statement item
  • Memo-line (febre.vwezw): ABC Corp 56789 56790

Example 9: Truncation in the 3 document numbers (last 5 numbers in each document number) with customer name in memo line.

  • 3 Invoices
  • 1st Document number (bkpf.belnr): 123456789
  • 2nd Document number (bkpf.belnr): 123456790
  • 3rd Document number (bkpf.belnr): 123456791
  • Organization Business Partner name / Customer Name1 from KNA1 (kna1.name1): ABC Corp
  • 1 Bank statement item
  • Memo-line (febre.vwezw): ABC Corp 56789 56790 56791

Training Process

SAP Cash Application uses historical data to learn from. This is how the training model is built. The SAP Cash Application learns from approximately 10,000 cleared electronic bank statement items. The training model is built with historical data and this is referred to as the training process. Once the training model is built and validated, the SAP Cash Application training model used in the day-to-day inference process.

In the training process, the cloud application is fed with historical clearing documents to train it in detecting the underlying patterns to reconcile invoices. These documents include actual historical datasets of bank statements, invoices, and matching items. A model cannot be made from dummy test data.

In the training process the model analyzes the clearing history and learns which criteria to prioritize and how to optimally apply them. By considering other attributes like payment date, amount, and both customer and bank master data, the model is able to propose a match.

Regarding the historical data used in the training process, it is important that a customer follow SAP Best Practice in Cash Application when executing the historical clearings. There are numerous ways to clear payments and the method affects whether the data is good for building the model. SAP is continually expanding their data coverage to support additional scenarios but generally if the customer uses the bank statement post-processing programs, the process is supported using posting area 1 and posting area 2 for clearing customer invoice.

The training process is a required step for all SAP Cash Application line item matching implementations except for implementations of lockbox processing. (The reason for this is the lockbox process uses a generic model to propose clearings.) In addition, Payment Advices have a pre-trained model.

In productive use, incoming payments and open receivables are sent to the SAP Cash Application app for matching. The model will return the matches, and depending on the Target Auto-Clearing Accuracy settings, either automatically clear or propose matches. Automatic clearings and proposals are documented in logs. Note: There is also an "Automatic Posting / Clearing" indicator on the Automatic Bank Statement Reprocessing scheduled job that must be selected for automatic clearings.

SAP customers licensed to use the SAP Cash Application may do re-training periodically. The re-training process involves building a new model using more recent historical data. This is an option that SAP recommends, and it is up to the SAP customer to decide when they would like to do the re-training, which would be a fine-tuning of the model using the historical clearings made while the SAP Cash Application is used. The retraining process consists of simply scheduling the sending of training data as was done for the original training.

Each customer of the SAP Cash Application will have two areas allocated to them in the cloud. One is the training space, which would link to the SAP customer's test or QA environment, and the other area is the production space, which is used for productive inference processing.

Scheduled Jobs

All programs executed related to the SAP Cash Application should be scheduled as opposed to executed manually.

In production, all bank statement related jobs including the inference jobs should be scheduled before the bank reconcilers and cash application specialists start their day, as is reflected in this slide. Ideally, the system should be ready with the automatic clearings and matching proposals from the SAP Cash Application before any manual post-processing starts.

When the SAP customer sends data to the SAP Cash App, whether as part of the training process or as part of the inference process, it does so by scheduling specific jobs. The jobs are scheduled due to the volume of data transferred. The scheduled jobs can be created using the Schedule Accounts Receivable Jobs app shown here.

The three SAP Cash Application jobs that can be scheduled using the Schedule Accounts Receivable Jobs are shown here on the Template Selection popup.

This Schedule Accounts Receivable Jobs app can also be used for reporting on jobs executed.

If the Open Items Proposal indicator is selected, the Cash Application automatically proposes a set of open receivables for a given bank statement item.

If the Account Proposal indicator is selected, the SAP Cash Application automatically proposes a customer account for a given bank statement item.

If the Automatic Posting/Clearing indicator is selected, any matching proposals that have an accuracy at or over the Target Auto-Clear Accuracy set in configuration are cleared automatically.

Note

To have auto-clearing of matching proposals two things must be in place:

  1. Any matching proposals that have an accuracy at or over the Target Auto-Clear Accuracy set in configuration are cleared automatically assuming
  2. the Automatic Posting/Clearing indicator on the Cash Application: Automatic Bank Statement Reprocessing job is selected.

Notice on the last slide, the Automatic Posting / Clearing indicator was not selected. For this reason, the SAP Cash Application made a proposals (as noted in the log) but did not clear the open items even if the prediction rate was higher than the proposed threshold in configuration.

Reprocess Bank Statement Items

Reprocess Items

The Reprocess Bank Statement Items app is the SAP S/4HANA Cloud-specific bank statement processing app.

Bank statements can be entered into the system automatically (electronic bank statement) or manually. In both cases, rule-based processing assigns and clears the payments automatically. If automatic processing is not successful, manual reprocessing is required. In this app, users can reprocess a bank statement item, mark it as reprocessed, and enter a reason for reprocessing. Users can also add attachments to bank statement items.

In the figure, Reprocess Bank Statement Items App, the user can see the initial screen for the Reprocess Bank Statement Items app. As with most apps, there are many more filter items that can be used by pressing the Adapt Filters button. Here the user sees the many filter options available to display open bank statement items.

In the Reprocess Bank Statement Items app, each area of the screen is used for a specific purpose as follows:

Information in Orange (Top Panel)

The information in the top box is used to show information on the bank statement transaction (incoming money) that is being processed.

The company code, bank account, amount, date, and so on are reflected. In addition, the memo line is displayed, which contains the information on the bank statement item from the bank and from the sending party. The memo line is very helpful in determining the invoice(s) the incoming payment relates to.

Information in Blue (Lower-Left Panel)

The information in blue shows the (customer) open items to be cleared.

Choose the Select More button to filter the open items to be cleared that are displayed.

Choose the Clear button on an open item to move the open item to the list of open items that will be cleared by this bank statement transaction.

Information in Green (Lower-Right Panel)

The information in green shows the proposed open items to be cleared by the bank statement transaction.

Choose the Remove button on an open item that will be cleared by this bank statement transaction (incoming money). The open item moves back to the list of open items available to be cleared (blue box).

The balance is in brown in the upper-right corner of the screen. An item can only be cleared if the balance is zero.

To administer statement items, choose the Reprocess button on the overview page. You will be directed to the item details. From here you have several options on how to process and post the statement item.

At the top of the screen, the general bank statement information is displayed. That is the company code, house bank, or external transaction, for example. The details below contain all the information that is available from the individual item.

The account type describes mainly the object you are trying to post this item against. If you are clearing a customer open item with a line item, select this option for a more streamlined process and the customer number.

The reprocessing reason describes why you are working on this item. This could be missing configuration, missing master data, or tolerance limits, for example.

A menu bar in the lower part of the screen provides you with the posting options. You could either post the item against AP/AR items, post it on an account, or against a G/L item. You can also add attachments or see already-created documents, probably a bank ledger in the case of an incoming payment.

The figure, Allocating Accounts Receivables Items, shows a possible allocation of an incoming payment. Let's assume our customer has payed 1345 € as shown on the top, but did not specify which items to be paid via an payment advice. Providing the customer number as the account type, the cash specialist is able to obtain all the open items of that account. He is now able to manually assign the items by moving them to the Items to be Cleared area.

Posting the entries will clear the open items and complete the reprocessing for this bank statement item.

If no open items are found, or the amount paid is too low, the accounting clerk or cash specialist is also able to directly create a dispute case from the app.

Reprocess Cash Application Items

In the Reprocess Bank Statement Items app, the Machine Learning Status Account and Machine Learning Status Account Name fields display, whether the machine-learning-based technology succeeded in determining the business partner's account or not.

In the Reprocess Bank Statement Items app, you can filter the bank statement items using the values for Machine Learning Status Account (Machn Lrn Status Acc) and Machine Learning Status Account Name (Machn Lrn Status Acc Nm). You can also add them as columns in the overview table. That means, in addition to the Machine Learning Status (Machine Lrn. Status) and Machine Learning Status Name (Mach. Lrn. Stat. Nm.) fields, which refer to the machine learning status of open items, you can also view the machine learning status referring to the customer and supplier accounts with the new fields.

Furthermore, for all four fields, there is the new value of 60. This value appears if an error occurs, for example, if a bank statement item could not be processed at all because it was already cleared in the meantime. The following examples illustrate how the machine learning status account can be interpreted.

In this example, the system created a valid account proposal through machine learning (Status 20).

Looking into the details of the line, the customer account type is set and a valid customer number is maintained.

In this example, the system could not create a valid account proposal (Status 10). The account proposed by machine learning is invalid. For example, the proposed account does not exist in the system.

In the details of the item, no customer account is maintained.

For every bank statement item sent to the SAP Cash Application, information from the SAP Cash Application can be found on the Log tab of the Reprocess Bank Statement Items app.

The Log tab displays an explanation from SAP Cash Application, such as the machine learning proposals and results. This explanation tells the cash application specialist how to clear the incoming payment if the proposal is under the proposal accuracy threshold. If the proposal is over the proposal accuracy threshold, and the Automatic Posting / Clearing indicator was selected in the inference scheduled job, the information on the Log tab shows why the proposal was made by SAP Cash Application.

Manage Bank Statement Reprocessing Rules

Reprocessing Logic

The Manage Bank Statement Reprocessing Rules app allows for creation and automation of business side bank statement posting rules. The business user is able to create new bank statement posting rules directly in the system without going through configuration and is able to automate or schedule the processing of the new posting rules.

On SAP, the bank statement posting rules have traditionally been created in configuration. With the Manage Bank Statement Reprocessing Rules app, the creation of bank statement posting rules can be created as master data. For example, while post-processing bank statements, a business user may find that a new posting rule is needed that will trigger based on specific text in the memo line field in the electronic bank statement. The business user can create the new search string rule as master data in production, execute the rule, and also schedule it to run on a daily basis.

This app puts more flexibility and functionality in the hands of the business user. The Manage Bank Statement Reprocessing Rules app is another example of how SAP is moving more and more functionality from configuration to the business user with SAP S/4HANA Cloud.

Although the Manage Bank Statement Reprocessing Rules app is delivered with a license of the SAP Cash Application, it is a stand-alone app that can be used alongside the SAP Cash Application processing. The Manage Bank Statement Reprocessing Rules app is part of scope item 4X8 (Advanced Bank Statement Automation). If customers want to automate rules and have those rules be processed during the import of Bank Statement, customers need to license the item 4X8 - Advanced Bank Statement Automation in addition. Only then are the rules automated and multiple rules can get applied within the Reprocess Bank Statement Items app.

The user executing this app should have the Cash Management Specialist role assigned to their login.

The execution of the business side posting rules defined with the Manage Bank Statement Reprocessing Rules app would logically be inserted into the bank statement processing flow after the import of the electronic bank statement and before the SAP Cash Application inference programs are executed, though SAP customers may use the sequence they prefer.

A logical processing flow is the following:

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

Manual Rules

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

The user has either the option to 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 their own requirement.

A second option on how to create bank statement reprocessing rules is 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.

The third possibility would be a rule automation in combination with the SAP Cash Application.

The functionality available with the Manage Bank Statement Reprocessing Rules app is integrated with the Manage Bank Statement Items app, which enables a business user to create a new posting rule on-the-fly when processing a bank statement item.

Cash application specialists and bank reconcilers using the Reprocess Bank Statement Items app will notice the new buttons available when using the Reprocess Bank Statement Rules. These new buttons provide the functionality to allow business users to easily create and maintain business-side bank statement posting rules.

From the Manage Bank Statement Items app, after a bank statement transaction has been selected, if the user chooses the Create Rule button, the user is taken to the Create Rule functionality of the Manage Bank Statement Reprocessing Rules app and can easily create a new posting rule.

From the Manage Bank Statement Items app, when processing the Manage Rules button, the user is taken to the Manage Bank Statement Reprocessing Rules app.

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 template proposals for reprocessing rules that are tailored to the individual needs. Creating reprocessing rules based on templates reduces the manual workload and is a quick and comprehensible way to get efficient reprocessing rules for higher automation.

With the Manage Bank Statement Reprocessing Rules app, the user can create new bank statement reprocessing rules for their own use and select both the bank statement items and the G/L account to which they should be applied. In addition, the rules can be changed, even if they have already been applied.

Cash application specialists and bank reconcilers using the Reprocess Bank Statement Items app will notice the new buttons. These buttons provide the functionality to create and maintain business-side bank statement posting rules.

Action Type:

  • G/L Posting
  • AP/AR Posting
  • Analyze As

Notice that the Posting section of the screen changes based on the Action Type selected.

Post open bank statement items to a general ledger or customer/supplier account, or use the Analyze As action to use a specific condition, and choose which interpretation algorithm should be performed on the memo line that is provided.

Automated Rules

As mentioned above, the automation of reprocessing rules is possible with the scope item 4X8 - Advanced Bank Statement Automation.

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

The functionality is only available when assigned the appropriate authorizations and when the scope item 4X8 is activated. Please consider 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 select 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.

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

Rule Templates

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. Again 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.

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.

Payment Advice Extraction

Remittance Information

Customers may send remittance information by mail, email, web portals, or other sources. The remittance information contains details on what is being paid, e.g. what invoices and corresponding dollar amounts. For many companies, the remittance information is key to applying cash, as it may be the only means of relating the payment to the correct invoices.

A "payment advice" is the remittance information from a customer (payer) indicating the invoices being paid with their payment. The payment advice may contain text, item numbers, and amount. The payment advice contains important information for companies to match customer payments to open receivable invoices.

Note
Remittance information and payment advices are synonymous terms.

In this section, we review the process of payment advice extraction. Once the payment advices are extracted and confirmed, they can be sent to the SAP Cash Application along with open receivables and uncleared payments. The payment advices are then used by the SAP Cash Application in the inference process.

SAP provides the Payment Advice Extraction app, which is used for the management of payment advices to be used in the cash application process. This app is used for the following purposes:

  • Report of payment advices (remittance advices) available to be used in the cash application process.
  • Payment advices can be uploaded from file(s) or manually entered using the app.
  • To automate the process, payment advices can be mass uploaded on a scheduled basis from an email server. (IRPA is needed for this.)
  • Confirmation of payment advices to be used in the cash application process.

Manage Payment Advice App

Payment advice documents received from customers can be uploaded to the Manage Payment Advice Fiori app for automatic processing. The payment advice extraction feature within SAP Cash Application will accept PDFs including, unstructured scans, and use computer vision technology to read and extract information into the ERP. Once these payment advice documents are converted into structured information, they are used to enhance payment clearing.

Notice there are two tabs: Available Advices and Confirmation Pending. The Available Advices tab contains confirmed payment advices. The Confirmation Pending tab contains payment advices that have been uploaded into SAP but need to be confirmed. Before the payment advices are used in the SAP Cash Application process, they must be confirmed.

At any time during the day, the remittance information received from the customer may be imported into SAP. There are three ways the remittance advices, or payment advices, as SAP describes remittance advices, can be imported into SAP:

  1. From a scheduled upload (IRPA is required.)
  2. Manually imported from a file
  3. Manually entered

For each of the above options, the remittance information is imported then confirmed. Once the remittance information is confirmed, it can be sent to the SAP Cash Application to be used in making proposals to clearing payments.

To be able to launch the Manage Payment Advices app, the user must have the Accounts Receivable Account (SAP_BR_AR_ACCOUNTANT) role assigned. This role is in the SAP_SFIN_BC_AR_PAYM_ADV Business Catalog.

The user should specify the company code where the payment should be applied and press the Add icon to specify the file or files to be imported. The app is capable of importing multiple payment advice files at once.

After specifying the file or files to be imported, the user should press the Process button. The payment advice is read and imported into SAP after which an informational message is displayed to the user (shown here).

To confirm the payment advice, the user clicks on the payment advice(s) just imported. There is a popup available to allow the user to validate or enter the customer number.

Once the user is happy with the information uploaded, she presses the Confirm and Next button. The payment advice is now under the Available Advices tab and can be used in the cash application process. The payment advice is no longer in draft form.

The slide shows the payment advice under the Available Advices tab. We can see there are twenty payment advices that have been imported into SAP and may be used in the next cash application process.

Payment advices are sent to the SAP Cash Application using the Post open payment advice data in CSV to CAI server program (ML_CASH_APP_OPEN_PA_POST). As with all SAP Cash Application programs, this program should be scheduled, as opposed to executed manually. This program will extract all open payment advices in the system, within the default payment advice retention period. Open payment advices are the confirmed payment advices in the Manage Payment Advices app pointing to accounting document(s) which have not been cleared.

How to Use the Cash Application Integration

Learn how to improve the cash application process by automating the labor-intense process of clearing incoming bank payments with corresponding receivable invoices.

SAP Cash Application Configuration

Self-Service Configuration User Interface

Select the Manage Your Solution app in order to get to the Configuration screen.

The task Configure Your Solution will give you the possibility to maintain the SAP Cash Application SSCUI and to define parameters for SAP Cash Application.

SAP Cash Application Configuration Steps

You can set the following basic and polling settings in your system:

  • Activate the option Machine Learning Enabled?.
  • Enter a threshold rate (in percentage) to which extend you want a proposal to be created.
  • Enter a threshold rate (in percentage) to which extend you want an open bank statement item to be automatically cleared according to the best proposal.
  • Enter a period (in months) for the data to be trained.
  • Choose a limit for the amount of data (in MB) to be uploaded per package transfer.
  • Enter a number of open bank statement items that you want to be processed per batch.
  • Choose the number of attempts for the system to process a batch of open bank statement item.
  • Choose the delay in time (in minutes) that you accept to wait for the system to process a batch of open bank statement items.

For all of the configuration parameters you can set a minimum and a maximum value. The system is delivered with a default configuration.

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