What is In House Cash?

SAP In-House Cash (IHC) is a comprehensive functionality within SAP that allows organizations to optimize and centralize their internal and external payment processing. In simplest terms, an in-house bank is a way for a company to move payment-related processing – normally done at external banks – to within the company’s infrastructure, and in the process, reduce external banking costs and improve controls.

Business has its operations in APAC, Europe and America with 10 different legal entities each making their own payments with accounts payable group of 10 people for each entity so 10 times 10 is a hundred people. Also business has a lack of visibility for cash and its elements make up their cash and their cash processing and visibility of their balances across the globe in the various countries and regions and have a lack of control over their processes due to manual efforts in consolidation. Business is unaware of funds, they are borrowing too much and paying too much interest. Business wants centralized treasury for better visibility.

We proposed SAP In-House Cash (IHC) to move from external banks to in-house cash and proposed to replace those 10 external banks with 10 internal banks, then external banking is done through a single account per region. Now Business could take off the hundred people who are processing the AP and reduce that down to 10, because now there is a centralized process. Business could then free up the folks in subsidiaries to do other things.

SAP In-House Cash (IHC) is a comprehensive functionality within SAP that allows organizations to optimize and centralize their internal and external payment processing. In simplest terms, an in-house bank is a way for a company to move payment-related processing – normally done at external banks – to within the company’s infrastructure, and in the process, reduce external banking costs and improve controls.

The SAP in-House Cash application allows companies with a diversified organizational structure to minimize the actual flow of cash and therefore reduce bank charges, interest expenses, and losses resulting from delays in value-dating payments. It also helps to avoid many of the disadvantages associated with external clearing solutions, such as inflexible procedures with fixed dates and extra costs resulting from manual post processing.

It is particularly useful for companies with a decentralized structure or those managing a group of subsidiaries, allowing them to handle cash and payments more efficiently.

For many organizations, payment processing is handled within each country or region of operation, leading to costly and often duplicate efforts across the group organization. In addition, companies often have multiple banking systems, inconsistent processes, and a general lack of visibility across payment processing for the group organization. These are areas where SAP’s IHC solution may be a good fit.