Cash Management new features R12

I. Bank Account Balances and Interest Calculations:

In prior releases, bank account balances were only available as a part of the bank account statement. The bank account interest calculation was only available for bank accounts set up in Treasury. In Release 12, the functionality to keep track of the multiple bank account balance types and calculate accrued interest is available to all internal bank accounts set up in the centralized bank account model.

Not only can you enter the balances manually, but also you can import them automatically at the same time when the bank statement is imported. In addition to the actual historic balances, you can keep track of the projected balances. Such balances can be entered manually or copied over from the Cash Position. You can then create reports that will compare the actual balances versus projected, and you can accomplish it in either an onscreen report or via XML Publisher. Finally, to simplify the bank account interest calculation, you can create reusable interest rate schedules that will contain the interest rates and other interest calculation parameters. Interest calculation features will work not only for stand-alone bank accounts but also for the notional cash pools as well.

Bank Account Balances and Interest Calculations - Benefits:

The new bank account model allows you to view bank account balances independent of the bank statement, calculate accumulated interest on the fly, and create customized balance reports.

Bank Account Balances and Interest Calculations Maintenance:

Once you have defined your bank accounts in the centralized bank account model, query them in the bank account balance page and manage historical or projected amounts.

Bank Account Balances and Interest Calculations Setup:

To obtain a balance report, create a report layout or a view and generate a report based on that. To calculate interest on the bank account balance, create the interest rate schedules, tie them to the bank accounts and use the interest calculator page to view the accumulated interest.

II. Bank Account Transfers:

In Release 12, you are able to create bank account transfers in Cash Management. The transfers can be initiated, approved, settled and accounted for. The settlement is done through the Payments application, while the accounting is done though the Subledger Accounting engine.

Bank Account Transfers Description:

Bank Account Transfers can be created manually by the user in the system. In addition, if there are any physical cash pools defined in the system, the transfers can be created automatically when the cash leveling process is run or when a bank statement with ZBA sweep lines is processed.

With manual transfers, you have the option of creating and using a payment template. The template will default the transfer information, such as the source and destination bank accounts, currency, and payment method, and can be used in the same fashion as a repetitive or semi-repetitive wire template created by your bank.

In cases when the settlement of the bank account transfer does not have to be initiated by the system (for example, for ZBA bank account transfers that the bank processes on its own), there is an option to exclude such a transfer from the settlement process and only create the accounting entries.

Finally, the UMX security model lets you define who can create bank account transfers for which legal entities. The settlement authorization function is also separate from the transfer creation, so you can implement the separation of duties for bank account transfer management.

Bank Account Transfers - Benefits:

The bank account transfer functionality enriches the Cash Management functionality so that you could take action on the projected closing balances calculated by the system. The seamless integration with the Payments application allows you to send payment instructions to the bank in a variety of payment formats and the integration with the Subledger Accounting allows you to use flexible journal creation rules.

Bank Account Transfers Process:

•Responsibility: Cash Management

•Navigation: Cash Management > Bank Account Transfers

Once the setup is in place, you can start creating the bank account transfer. If the system parameter requires authorization, the bank account transfer must be authorized before it is available for settlement or journal creation. Otherwise, you can proceed to settle or journalize the bank account transfer immediately after creation and validation.

The Payments application formats your payment request and sends it to the bank. Any exceptions in the payment process are communicated back in the form of an error status. If settlement of the bank account transfer errors out, you can see the reason so that the cause of the error can be rectified and the bank account transfer recreated. If the payment is processed without any exception, you see a successful payment status returned.

The subledger accounting process creates journal entries according to your setup and you can drill down to view these journal entries.

Bank Account Transfers – Dependencies and Interactions:

The bank account transfer feature depends on Payments application in cases where the settlement of the bank account transfers is required. There is also a dependency on the Intercompany setup when funds are transferred between different legal entities. Finally, all of the accounting activity for bank account transfers happens in the Subledger Accounting framework.

Bank Account Transfers Setup:

•Responsibility: Cash Management

•Navigation: Setup:System Parameters > (T) Cash Management Transactions

If you are using the cash leveling or ZBA features, the setup starts with the new system profile. Then, optionally, you can set up Transaction Subtypes and Payment Templates for bank account transfers. The Payment Templates are required if you intend to send the payment instructions to the bank to process the bank account transfer. The Transaction Subtypes are optional and can be used for reporting purposes.

Bank Account Transfers Setup – Set System Profile:

The new system profile option CE: Bank Account Transfers defines where the cash transfers will be created as a result of the cash pool activity. If you choose Cash Management, then the cash transfers created by the cash leveling or ZBA sweep activity are created in Cash Management using the Bank Account Transfer framework. If you choose Treasury, then these cash transfers are created in Treasury using Inter-Account Transfers (if both bank accounts belong to the same legal entity) or Intercompany Funding transactions (if bank accounts belong to different legal entities). Before Release 12, Bank Account Transfers could only be created in Treasury. This functionality is preserved but now you have a choice.

III. Subledger Accounting:

Subledger Accounting provides a common flexible framework for creating journal entries for Bank Account Transfers and Bank Statement Cash Flows in Cash Management. Prior to Release 12, Cash Management produced journal entries for bank statement activity based on simple rules and sent them to the General Ledger interface. In Release 12, in addition to the bank statement activity, a new source of accounting entries is available – bank account transfers – and the rules for journal entry creation are more flexible and sophisticated. Finally, you can now view all the journal entries produced by Cash Management events in Cash Management.

Subledger Accounting for Cash Management:

In Cash Management Release 12, bank account transfers and bank statement cash flows are the two objects that can produce accounting events. Once the events are created and the accounting program is run, the journal entry setup and the accounting configurations are referenced to produce journal entries. The journal entries are then transferred to GL. GL has visibility into the source transactions and Cash Management users can drill down from the transaction level to the journal entry details.

Subledger Accounting - Benefits:

The Subledger Accounting feature allows multiple accounting representations for a single business event, resolving conflicts between corporate and local fiscal accounting requirements. In addition, with subledger accounting you retain the most granular level of detail in the journal entries, with different summarization options in the General Ledger, allowing full audit and reconciliation

Subledger Accounting Key Concepts :Here are some key subledger accounting concepts:

•Event model is defined in SLA for each subledger represents the transaction/document types and the lifecycle of each transaction:

-Event class classifies transaction types

-Event type defines possible actions on each event class with possible accounting significance.

The journal creation rules are defined per event class/event type. In Cash Management, there are two event classes: Bank Account Transfer and Bank Statement Cash Flow. An accounting event for a Bank Account Transfer, for example, would be the creation or cancellation of a bank account transfer. So, any time a bank account transfer is created, an accounting event is created as well. Based on the rule setup, there may or may not be a resulting journal entry. You may set up rules to generate journal entries for some events, but not for others.

Transaction object and sources are the data model for each subledger that contains the transaction attributes/information made available to be used during journal rule setup and journal entry generation.