SAP In House Cash Solution -Automation

of Accounting solution for Nostro / Vostro

SAP In House Cash Solution -Automation of Accounting solution for Nostro / Vostro posting into
General Ledger

Table of Contents

Abstract 3

Background. 3

Scenario. 4

Business process. 4

Business Requirement 4

SAP Solutions. 5

Conclusion. 17

Abstract
Nostro and vostro (from Italian, nostro and vostro; English, ‘ours’ and ‘yours’) are accounting
terms used to distinguish an account held for another entity from an account another entity holds.

The terms nostro and vostro are used, mainly by banks, when one bank keeps money at another
bank (in a correspondent account often called a nostro or vostro account). Both banks need to
keep records of how much money is being kept by one bank on behalf of the other. In order to
distinguish between the two sets of records of the same balance and set of transactions, banks
refer to the accounts as nostro and vostro.

Speaking from the point of view of the bank whose money is being held at another bank, same
solution can be extended to SAP In-House Cash Cross bank posting:

 A nostro is our account of our money, held by the other bank area
 A vostro is our account of another bank area money, held by us

A vostro account is a record of money held by a bank area or owed to a bank area by a third
party (company code).

The nostro account is a way of the bank area whose money it is, keeping track of how much is
being held by the other bank area. This is similar to an individual keeping a detailed record of
every payment in and out of his or her bank account so that she/he knows the balance at any
point in time.

This white paper explains how the concept used by banks can be extended to SAP Inhouse
Cash, using master data changes and configurations.

Background
An organization which operated globally having subsidiaries handled with multiple inhouse cash
centers. There could be transaction (receipts/payments) processed by cross bank area accounts.
For example: –

Vendor liability of company code 0005 (bank area IHC1 in Co Code 0001) is paid by in-house
cash center held by company code 6000 (bank area IMXN). The following accounting entries will
be posted

Company 0005 a subsidiary of Co code 0001 (bank area IHC1)

1. Payment to vendor

Vendor A/c             Dr

To IHC accounts rec/pay           Cr

 
Inhouse Cash entries in inhouse cash center IHC1

IHC accounts rec/pay          Dr.

To IHC Nostro/Vostro               Cr

Inhouse Cash entries in in-house cash center IMXN associated with Co Code 6000

IHC Nostro/Vostro Dr.

To Bank A/c                                         Cr

Scenario
 

Business process
Company is doing business across the Globe. We operate in around countries across globe
which are divided into regions. There are In House Cash centers to cater the payments on behalf
of the subsidiary.

Source: SAP.com/google.com

Payment processing of a Co Code 0005 of Region 2 is processed by IHC Center of Region 1.

In House Cash Center for Region1 process the payment from bank account and send the
payment file to SWIFT.
During day end processing accounting entries for cross bank area should be posted a Nostro /
Vostro account in Balance sheet.

Business Requirement
During month end closing, we need to identify the cross-bank area posting and pass manual
entries to rectify the IHC accounts receivables/ payable accounts in Balance sheet. Cross bank
area GL posting (day end processing) should be automatically posted and identified in balance
sheet.

Challenges

Technically, the accounting entries will be processed between head office and subsidiary
companies. In-case, of cross bank area posting, accounting treatment between head office of
Bank area1 and Bank area 2 should also be identified and accounted in balance sheet of
respective company codes. Cross bank area entries are to be identified and manually pass
accounting entry.

This White paper helps to setup the system to identify & post the accounting entry for cross bank
areas automatically.

Prerequisites

Required Business Function FIN_INHOUSE_CASH_1

Value Proportions

 Automated process with full audit trial

SAP Solutions
When a payment to vendor is processed from cross bank area, in the background system post
the payment item in the payment order to a cross bank accounts. The cross-bank accounts
should be created with a product BANK and in the control data tab of IHC account in General
ledger transfer maintain General Ledger group as “BANK”.

In customization for the ledger group “BANK” assign Nostro/Vostro GL Account. During posting
system will pick the GL group in the payment items and post Nostro/Vostro GL accounts
accordingly.
 

Configuration

Periodic Tasks

General Ledger Transfer Maintain GL Group

General Ledger Transfer Define GL Account Assignment: Current Accounts

General Ledger Transfer Define GL Account Assignment/Items in Post processing

Master Data
 

Scenario – 1

Cross bank area posting IHC1 to IMXN

Ordering party GL posting will be to BANK GL group (Nostro/Vostro) and recipient party will be
with IHC Cash payable/receivable group.
GL account view of IHC1 bank area (Co Code 0001), Nostro/Vostro account  is credited in
Ordering bank area (IHC1)

In recipient co code/paying co code, Nostro/vostro account is debited.

Scenario -2 External vendor payment from cross bank area

Vendor Invoice paid thru IHC

IHC IDOCs posted and payment request generated in Co code 6000 under In-house Cash area
(IMXN)
Payment order 97 created with ordering party

Recipient item type with GL group Bank (Nastro/Vostro)

IHC Transfer posting

Credited Nostro/Vostro GL in Co Code 0001 under bank area IHC1

Payment Posting in Co code 6000

Conclusion
Accounting treatment for cross bank area posting can be identified as Nostro/Vostro GL accounts
in Balance sheet. The posting process can be automated by assigning GL Group in the In-House
cash Account master data and GL assignment in GL variant in customization.