SAP Financial Supply Chain Management - An overview
Financial Supply Chain Management (FSCM) in simple terms means managing demand and supply of cash/cash equivalents. SAP has come out with SAP FSCM functionality or suite of applications to manage this more effectively and efficiently thus helping companies to manage the costs associated with this process better. In this posting we will look at what are the features and functionalities available in SAP FSCM and how it can be leveraged better for the benefit of business.
Key business areas where SAP FSCM functionalities can be leveraged are input for more efficient working capital management, receivables management and cost management of payments. SAP FSCM functionalities are enabled by SAP Netweaver technology to enhance the reach and better integration - both within and outside the organization applications as well as integrated within SAP ERP Financials.
SAP Financials is broadly organized in 4 broad functionality areas to support all financial management processes as well as integration with other business processes:
- Financial and Management Accounting
- Financial Supply Chain Management
- Treasury and Risk Management
- Corporate Governance
Prior to ECC 5.0 most of the functionality supporting business processes related to claims, dispute, and credit management were handled outside SAP application using legacy systems or handled manually. Integration with the Account receivable and cash management was more of a manual activity in most of the cases.
With ECC 5.0 SAP introduced SAP Financial Supply Chain Management (FSCM). Key objective is to bring business processes on the receivables and collection side within SAP solution thus providing more value. It helps in tying all the loose ends around receivables, collections and cash management within the organization thus leading to better integration and last step connect with the customers.
As with other SAP products this has also evolved over a period of time. Initially Cash and Treasury Management were also part of FSCM due to close integration needs but today they are part of Treasury functionality. Though some of the functionalities were available in previous versions but benefits were limited. Most of the other functional areas are well established and mature from functionality perspective while FSCM is a new functionality with very limited knowledge and implementation experience available in the market.
Key functionalities/applications within FSCM are:
- Electronic Bill Presentment and Payment - This application provides a better and more real time interfacing with the customers and vendors with added benefit of self service to view the accounts as well as make electronic payments. It is mainly caters to presenting the invoices and account statements to the customer and vendors over the internet. Key benefit is reduction in overheads and cycle time associated with this process for both - organization as well as its customer and vendors.
- Collections Management - This application provides the functionality to manage the collections more efficiently and effectively. This is similar to the collection management functionality already present in SAP FI-AR component with added features like sending payment reminders, portal catering to collection agents, devising collection strategies and managing agreements related to payments from customer.
- Credit Management - Provides with functionality to manage credit policies and risks associated with the receivables centrally - even for scenarios where the business is supported by multiple instances across the globe. Thus helps in implementing uniform credit policies and rules across the globe as well as have one view for a customer who is dealing in multiple countries. It also brings in functionality of managing complex customer credit account hierarchies and rules associated with it.
- Dispute Management - Facilitate and automate a lot of manual activities involved in handling disputes related to payments related to receivables in electronic form. This also leads to better integration and flow of information across multiple stakeholders involved to resolve the disputes.
Some of the key benefits SAP FSCM brings in are:
- Last step integration with customers and vendors with minimal infrastructure requirements from customer or vendor side thus leading to higher adoption rate
- Reduction in manual activities, communication and co-ordination efforts thus leading to reduction in overall cost of managing and doing activities in the receivables related process areas
- Usage of business partners across multiple functionalities provide more flexibility as well as streamline the m data maintenance across the landscape
- Information available almost in real time to better manage the working capital and receivables thus reducing the cost associated with it
In subsequent posting on this topic we will understand in more detail each of the application areas in SAP FSCM in more detail.