How Implementing SAP Cash Management Helps in Monitoring Your Working Capital

  • by Gyanendra Mishra, Business System Analyst – Financial Systems
  • December 11, 2014
Learn how to connect the basic SAP order-to-cash and purchase-to-pay cycles in SAP Cash Management to manage your organization’s working capital. This working capital is further efficiently used by connecting SAP Treasury and Risk Management and SAP In-House Cash to SAP Cash Management.
Learning Objectives
By reading this article, you will learn how to:
  • Create working capital starting from the purchase-to-pay cycle and then to the order-to-cash cycle
  • Maintain working capital through connections to purchase-to-pay, order-to-cash, SAP In-House Cash, and Treasury and Risk Management modules to SAP Cash Management.
Key Concept

SAP Cash Management is a sub-component of SAP Financial Supply Chain Management that helps you maintain the liquidity and monitor the cash position of a company on day-to-day basis.

The last recession created an economic environment in which companies have an intense focus on streamlining their working capital and investments.  Although many companies have SAP systems to support traditional business processes, such as manufacturing and retail, they still neglect the day-to-day financial and treasury activities, such as collections, receivables, banking, and investments. Some companies still don’t negotiate their payment terms, banking costs, and utilization of cash in the bank. This adversely affects their days sales outstanding (DSO).

Consider this scenario: You have started a new position in the finance department of a manufacturing company, and your most important concern is how to generate and then manage your working capital. The two most important factors for running any company are creating working capital and maintaining working capital. There are different ways to calculate working capital, but the most appealing one to me is current assets minus current liabilities.

The current assets are the sales cycle, and current liability is the purchase cycle. All the business basics depend on visualizing and streamlining these two cycles. I discuss how to manage your current assets and liabilities using SAP applications. I discuss data flow in SAP Cash Management and explain how working capital is reflected in the cash cycles for purchase to pay and order to cash.

Data Flow in SAP Cash Management 

SAP Cash Management provides two reports:
•    A liquidity forecast (for the long-term cash health of the company)
•    Cash position (for the short-term cash health of a company)
Working capital is monitored with the help of these two reports. Figure 1 diagrams how SAP order-to-cash cycles, purchase-to-pay cycles, SAP In-House Cash, Treasury, and Risk Management modules are linked to SAP Cash Management. 


Gyanendra Mishra

Gyanendra Mishra is a business system analyst at an optical manufacturing company. Gyanendra is a certified functional consultant with more than 10 years of experience in SAP Financial Supply Chain Management (FSCM), Finance (FI), and Managerial Accounting (CO) and integration with other modules of manufacturing business. He worked across the globe in various industries that allow him to understand the global requirements of cash management and a strong need for effectively managing the working capital in a global business environment.

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6/8/2015 4:56:00 PM
Nabeel Nasir

Great article. Very informative. I do have 1 question I would like to ask..

How do you calculate the incoming payment for Cash Positioning? Meaning, how do I know how much will be my receivable today?


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