Architecture Decisions for Open Item Management

[Mohammed_Yaseen]

Summary

When planning target architecture based on business capability assessments, the Open Item Management (Corporate --> Finance --> Payables and Receivables Management --> Open Item Management) capability under the SAP Reference Architecture model lists multiple solution capabilities. This leads to the requirement to understand how these are relevant in terms of capability fulfillment and what is relevant for specific target architecture, mainly in the solution architecture domain.

This article provides an overview of related evaluation and decision criteria related to solutions to support these capabilities.

Business Requirements

The following is the definition of the related capability.

Open Item Management: Ability to manage and monitor payables and receivables. This typically includes the ability to remind customers of pending payments, issue dunning notices, and create automated payment proposals for supplier invoices, as well as the ability to support payment handling with all payment channels, account maintenance, and period-closing activities related to accounts payable and receivable.

Solution Options

The solutions available for the definition of target architecture with the SAP Intelligent Suite will be based on the architecture decisions related to two streams relevant for Open Item Management – Invoice to Pay and Invoice to Cash.

1. Invoice to Pay
   • SAP S/4HANA Accounts Payable
2. Invoice to Cash
   • SAP S/4HANA Accounts Receivable
   • SAP S/4HANA Contract Accounting

The solutions for invoice management such as Ariba Invoice Management, SAP Invoice Management by OpenText on the Invoice to Pay side and SAP Sales, SAP BRIM on the Invoice to Cash side, which generate the invoice that results in the open item to be followed up and managed are not covered in this article as the focus is on open items. So also, capabilities related to credit management, collections management, dispute management and outgoing and incoming payments should be reviewed in related capabilities.

Characterization of the Solution Options

1. Invoice to Pay

The invoice that leads to the open item on the payment side could originate from the invoice processing capability provided by multiple solutions in the Intelligent Suite – it could come from the SAP Business Network for Suppliers, SAP Invoice Management by Open Text or SAP Ariba Central Invoice Management as examples.

Subsequent processing is standard Accounts Payable (FI-AP) solution capability within SAP S/4HANA.

2. Invoice to Cash

There are two broad solution paths to managing receivables (open items) with SAP S/4HANA and associated solutions. They are standard Accounts Receivables (FI-AR) and the Contract Accounting (FI-CA) functionalities.

The architecture decision to use FI-CA is not purely based on the need to manage receivables but stems from capability requirements to manage consolidated invoicing from multiple streams of revenue, large volumes of transactions and the need to optimize the impact of these volumes on the financial ledger.

The FI-CA based solution is prevalent by default in specific industry solutions and are referred to by different names in those contexts, for e.g.

• IS-U for the utilities industry
• RM-CA for the telecommunications industry
• PSCD for the public sector

An overview of the use of Contract Accounting is provided in SAP S/4HANA is provided in SAP Note 3493201.

The broad solution architecture covering both options is as given below (source – SAP internal).

BDR = Billing Document Request

BIT = Billable Item

CIT = Chargeable Item

Criteria to determine the most suitable target solution

As can be concluded from the above details, the need for selection of a target solution capability from multiple options as listed in SAP RBA is in the Invoice to Cash stream.

Broadly, the business characteristics that define the need for FI-CA (often part of broader solutions such as SAP BRIM) are the following.

• B2B, B2C with complexity
• Business rules-based automation, high performance and scalability
• Flexible interfacing to any finance system
• Subscriptions + pay-per-use of digital services (pre/postpaid)
• Link to granular invoices with itemized transactions

A detailed evaluation of decision criteria for FI-CA vs FI-AR is provided here (SAP internal) and includes the following key highlights comparison.

Conclusion

The solution capabilities listed for Open Item Management with the SAP RBA requires a decision on the Invoice to Cash side. This choice is normally decided as part of a broader decision based on business characteristics reflected in other capabilities and is not independently determined for Open Item Management. However, from a finance architecture point of view, it is important to understand the decision considerations and align with the overall approach.