FI316 Umoja Cash and Liquidity Management. Umoja Cash and Liquidity Management Version 13 Last Modified: 16-August-13 Copyright United Nations

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1 FI316 Umoja Cash and Liquidity Management Umoja Cash and Liquidity Management Version 13 Last Modified: 16-August-13 1

2 Agenda Course Introduction Module 1: Cash Position & Liquidity Forecast Module 2: Manage Cash Levels Course Summary Course Assessment Course Survey 2

3 Introduction Please share with us: Your Name Your Section/Unit # Years with the UN Interesting Fact About Yourself 3

4 Ground Rules Please consider the following guidelines during the training session: Turn your cell phone to silent mode. Please step out of the class to take any important phone call Please do not access your or the Internet outside of breaks Participate fully in the training session and respect each other s contribution Breaks are included at the discretion of the trainer X X No Phones Do Not Access Participate Ask Questions Breaks 4

5 Course Overview The purpose of the Umoja Cash and Liquidity Management course is to explain the transactions related to the Cash and Liquidity Management process in Umoja. Prerequisite Review You should have completed the following prerequisite courses: Umoja Overview Umoja Master Data & Coding Block Overview Umoja Cash Management and Treasury Overview Umoja ECC Navigation Umoja BI Navigation Course Duration: 3 hours 5

6 Course Objectives After completing this course, you will be able to: List the name and purpose of the cash position tools List the tools that comprise the cash and liquidity management component Explain the composition and purpose of the Cash Position and Liquidity Forecast reports Replenish funds in UN bank accounts via bank-to-bank transfer and purchase of foreign currency 6

7 Agenda Course Introduction Module 1: Cash Position & Liquidity Forecast Module 2: Manage Cash Levels Course Summary Course Assessment Course Survey 7

8 Module 1 Objectives After completing this module, you will be able to: List the name and purpose of the current cash position tools List the cash planning tools that comprise the cash and liquidity management component Explain how the cash position tools are used to determine the current cash position 8

9 Key Terminology FXall SWIFT Key Term Automated Clearing House (ACH) Electronic Funds Transfer (EFT) Description A FX trading system currently used by the UN Treasury to execute and settle large volume FX trades Society for Worldwide Interbank Financial Telecommunication. An industry cooperative that provides a standard format for transmitting payments and other financial messages to more than 7,500 member banks, broker dealers and organizations around the world An electronic network for financial transactions in the United States large volume, low cost batches. It is used for all kinds of fund transfer transactions including direct deposit of funds, cheques and routine payments to vendors. Rules and regulations that govern the ACH network are established by National Automated Clearing House Association (NACHA) and the US Federal Reserve Transfer of funds between accounts by electronic means rather than conventional paper-based payment methods, such as cheque 9

10 Roles & Responsibilities The following Umoja Enterprise roles are involved in the Cash and Liquidity Management process: Cashier Investment Cashier Treasury Front Office User Generates all payments (using the transaction code- F110 ) in Umoja Manages cash control by fund/grant Raises issues identified through cash control to Finance Managers for resolution Ensures that banking details are provided in a timely manner and reflected accurately in Umoja to allow Front Office to manage daily liquidity Verifies that the bank communication files are processed and accepted by SWIFT/banks in a timely manner Responsible for cash positioning relying on cash and liquidity forecasts and memo records for items not yet reflected in the system Initiate bank to bank transfers Generate all payments (F111) in Umoja Ensure that bank details for investments are reflected in SAP accurately and timely to allow Front Office to manage daily liquidity Verify that all bank communication files are processed and accepted by SWIFT/banks in a timely manner Execute investment and foreign currency transactions 10

11 Introduction to Cash and Liquidity Management Cash and Liquidity Management is one of the most important aspects of daily business operations for an organization. Proper cash and liquidity management enables businesses to: Quantify their liquid assets Manage their liquidity accounts effectively Effective cash and liquidity management is dependent on the quality and reliability of the measurement tools that a company uses to monitor its cash flows. 11

12 Cash and Liquidity Management Components: Overview Cash and liquidity is managed at UN through three main tools: Cash Position Report Liquidity Forecast Report Memo Records 12

13 Cash Position Report The Cash Position report provides value-dated balances of UN bank accounts and funds-in-transit. Report data is derived from: General Ledger (G/L) cash balances Treasury investments FX data brought into Umoja from Fxall (gain/loss incurred through exchange of currency) Cash Position Report Mission Cashiers will use the Cash Position report. 13

14 Liquidity Forecast Report Liquidity Forecast Report The Liquidity Forecast report provides dynamic projections of UN s cash flow based on items such as bank balances, transactions processed through bank accounts (AP, AR), and memo records. The basis of this report is derived from financial documents that move through the AP Financial Supply Chain (from a purchase order to a goods receipt, invoice, bank clearing and finally an item on a bank account statement) (from Assessed Contribution to invoicing and receipt of revenue). These documents include: Purchase Orders (PO s) Procurement contracts Invoices Assessed Contributions Investment inflow and outflows Liquidity Forecast reports will be generated for each business area; these reports will be consolidated to determine liquidity forecast for the entire organization. 14

15 Memo Records Memo records are used to record additional transactions that are not yet processed in the Umoja system, but are important for the purpose of cash management as they impact cash flows. These transactions may include cash flows related to pensions, tax reimbursement payments, rations, troop reimbursement and fuel (both for ground and air transport). Memo Records 15

16 Field Impacts to Liquidity Forecasts Missions play an important role in ensuring the accuracy of UN liquidity forecasts. The timely submission and incorporation of mission-related expenses impacts the cash flow reflected in the liquidity forecast in real time. This impacts business decisions made on the basis of the forecast. Field activities that directly impact liquidity forecast include: Timely submission of payroll and other large vendor payment projections Timely processing of daily outgoing payments 16

17 Run Liquidity Forecast Access the Cash Management and Forecast Page Enter data for one-time entry Analyze Report Data The process begins when the user has logged into Umoja. Access the Cash Management and Forecast: Initial Screen to enter criteria for the report. 1 Enter FF7B in the Command Field 2 Click the Enter icon

18 Run Liquidity Forecast Access the Cash Management and Forecast Page The Cash Management and Forecast: Initial Screen appears. Enter data for one-time entry Analyze Report Data Enter the appropriate data: 3 Enter 1000 in the Company Code field 4 Enter the appropriate business area code in the Business Area field 5 Select the Cash Position and/or Liquidity Forecast check box 6 Enter the grouping code in the Grouping field 7 Enter the report date in the Display as of field 8 Enter the correct currency in the Display in field

19 Run Liquidity Forecast Access the Cash Management and Forecast Page Enter data for one-time entry Analyze Report Data 9 Click the Execute icon in the top left hand corner of the screen 9 19

20 Run Liquidity Forecast Access the Cash Management and Forecast Page Enter data for one-time entry Analyze Report Data The Cash Position/Liquidity Forecast Report appears. Note: Additional information on interpreting and using the Cash Position and Liquidity Forecast Reports can be found in the Overview of the Cash Position and Liquidity Forecast Reports Job Aid. 20

21 Memo Records What is a Memo Record? Memo records are one-time financial entries that are used to bring transactions that have not been processed in Umoja into the Cash Position and Liquidity Forecast for a specific account. The inclusion of transactions added as memo records results in a cash position that is updated in real-time and not subject to lag-processing times that may be incurred during transaction processing or pending periods. Memo records are organized into thirteen planning types; UN will be using the following four types: 1. DI and MP memo records are created to account for expected customer payments in the future and they factor into Umoja sub-ledger balances 2. AB and AU memo records are created to account for notifications of payments being processed by a banking institution DI General Planning MP AB AU Noted Items Confirmed advices Unconfirmed advices Once the actual payment is received, the memo record must be archived to avoid double-counting. 21

22 Create a Memo Record Access the Create Memo Record Page Enter required data Process Memo Record The process begins when the user has logged into Umoja. Access the Create Memo Record screen. Enter FF63 in the Command Field 1 Click the Enter icon

23 Create a Memo Record Access the Create Memo Record Page Enter required data Process Memo Record The Create Memo Record: Initial Screen appears. Enter the following information: Enter 1000 in the Company Code field 3 4 Select the type of transaction that will be reflected by the memo record and press the Enter key Note: Data Search functionality can be used for fields containing UNspecific data. This functionality is accessed by clicking the Search icon located next to the field being populated or by pressing F

24 Create a Memo Record Access the Create Memo Record Page Enter required data Process Memo Record The Create Memo Record: Payment advice screen appears. Enter the required information: 5 Enter the appropriate date in the Value Date field 6 Enter the appropriate account code in the Account Name field 7 Enter the value of the item being logged as a memo record 8 Enter the currency of the memo record in the Currency field 9 Enter the amount in its local currency in the Amount in LC field 10 Enter the type of local currency used in the Local Currency field 11 Click the Enter icon to continue

25 Touch Points Umoja is an integrated system and most of its modules integrate with each other to complete a process. Touch points refer to these integration points across Umoja modules, processes and activities. Investment Transactions Investment of UN funds impacts the level of available liquidity Cash Position and Liquidity Forecast General Ledger Accounts Accounts Payable (A/P) Accounts Receivable (A/R) Sales and Distribution 25

26 Simulation Activities Throughout this training, users will have the opportunity to conduct activities in the form of simulations. Simulations are interactive recordings of the Umoja system used to help facilitate a hands-on learning experience. The simulation links are provided on the corresponding activity slides. Users can access simulations in three different modes: Show me: Users view a video of an entire transaction being conducted Let s do it together: Users will be prompted to input data at key points during the transaction (recommended) Try it: Users can complete an entire transaction on their own, with no additional instructions provided 26

27 Activity 1 Transaction Name: Running the Cash Position and Liquidity Forecast Report Transaction Code: FF7B Link to the uperform simulation: ent- details?noderef=workspace://spacesstore/870cd33b b82-8c1e-ef821ce

28 Activity 2 Transaction Name: Adding a Memo Record in Umoja Transaction Code: FF63 Link to the uperform simulation: ent-details?noderef=workspace://spacesstore/6d6b3bfcefea-431b-91e3-3c27103edd62 28

29 Learning Checkpoint 1 Proper cash and liquidity management enables businesses to quantify their assets. Fill in the blank with the correct option. A. Liquid B. Fixed C. Depressed D. Damaged 29

30 Learning Checkpoint 1 Proper cash and liquidity management enables businesses to quantify their assets. Fill in the blank with the correct option. A. Liquid B. Fixed C. Depressed D. Damaged Option A is the correct answer. Proper cash and liquidity management enables businesses to quantify their liquid assets and manage their cash flow effectively. 30

31 Learning Checkpoint 2 Which of the following contribute to the cash position report? Select the correct option. A. G/L cash ledgers B. Treasury investments C. FX module in Umoja D. All of the above 31

32 Learning Checkpoint 2 Which of the following contribute to the cash position report? Select the correct option. A. G/L cash ledgers B. Treasury investments C. FX module in Umoja D. All of the above Option D is the correct answer. The cash position report s data is derived from the G/L cash ledgers, treasury investments and FX module in Umoja. 32

33 Module 1 Summary The key points covered in this module are listed below: The Cash and Liquidity Management process enables businesses to quantify their liquid assets and manage their cash flow effectively The Cash and Liquidity Management components are the Cash Position Report, Liquidity Forecast Report and Credit Memos The Cash Position Report provides value-dated balances of UN bank accounts and funds-in-transit The Liquidity Forecast Report provides dynamic projections of UN s cash flow based on items such as bank balances, transactions processed through bank accounts and memo records Credit Memos are used to record additional cash flows that are important for the purpose of cash management 33

34 Agenda Course Introduction Module 1: Cash Position & Liquidity Forecast Module 2: Manage Cash Levels Course Summary Course Assessment Course Survey 34

35 Module 2 Objectives After completing this module, you will be able to: Describe the Cash Level Management process Outline the methods of managing cash levels Initiate a bank to bank transfer Transmit the necessary MT202 SWIFT message and receive confirmation Transfer funds to the appropriate House Bank Account 35

36 Introduction to Cash Level Management The Cash Position Report determines when current cash levels in a House Bank Account are too low to cover projected expenses that will be paid from that account. The amount required to cover those projected expenses is determined by the Liquidity Forecast Report. These reports enable UN Treasury to replenish the cash level of that account before the payments are processed. Illustration of the Cash Level Management Process in Umoja House Bank Account House Bank Account House Bank Account Vendor Check Cash Sufficiency Replenish Account, if Required Process Outgoing Payment 36

37 Introduction to Cash Level Management Depending on the type of account being replenished (determined by currency held and location), the cash level of a bank account can be replenished in one of two ways: Execute bank-tobank transfer Used to replenish bank balances by transferring funds from one bank account to another bank account of the same currency. Ex: 2 accounts holding USD currency Manage Cash Levels Purchase required currency Used to replenish bank balances held in a currency that is different from the currency where funds are being transferred from. The required currency is purchased on the foreign exchange market 37

38 Bank-to-Bank Transfer Process A Bank-to-Bank Transfer replenishes account fund levels through the transfer of money from one account to another. Transfers are made via SWIFT. Updated account totals resulting from bank-to-bank transfers will be reflected in future Cash Position and Liquidity Forecasts. The process followed to execute a bank-to-bank transfer is outlined below: Create and approve transfer payment request Transmit MT202 SWIFT message Receive Ack/Nak message from bank Illustration of the Bank-to-Bank Transfer Process Account Level Account 1 Account 2 Account Level 38

39 Bank-to-Bank Transfer Process Create and approve transfer payment request Transmit MT202 SWIFT message Receive Ack/Nak message from bank The process outlined in this course will be used to execute bank-to-bank transfers for accounts within Umoja: Create a transfer payment request in Umoja. Access the Bank-to-Bank Transfer page. 1 Enter the FRFT_B t-code in the Command Field 2 Click the Enter icon 2 1 The Fast Entry with Repetitive Codes (Bank-to-Bank Transfer) screen appears. All House Banks are saved in Umoja as Master Data and account pairing for the purpose of bank-to-bank transfers are predetermined. 39

40 Bank-to-Bank Transfer Process Create and approve transfer payment request Transmit MT202 SWIFT message Receive Ack/Nak message from bank Enter the code for the House Bank receiving the transfer in the House Bank field 3 4 Press the Enter key The House Bank Transfer information is populated in the Select Repetitive Codes table. 3 40

41 Bank-to-Bank Transfer Process Create and approve transfer payment request Transmit MT202 SWIFT message Receive Ack/Nak message from bank 5 Click the Create Payment Request button The Display logs window appears indicating that a payment request has been generated for the House Bank entered. 5 41

42 Bank-to-Bank Transfer Process Create and approve transfer payment request Transmit MT202 SWIFT message Receive Ack/Nak message from bank 6 Click the Enter icon 6 The payment request appears in the Open Payment Requests table. 42

43 Bank-to-Bank Transfer Process Create and approve transfer payment request Transmit MT202 SWIFT message Receive Ack/Nak message from bank 7 Click the Pay button 7 The Display logs window reappears indicating that the payment request has been released and paid. 8 Click the Enter icon 8 43

44 Bank-to-Bank Transfer Process Create and approve transfer payment request Transmit MT202 SWIFT message Receive Ack/Nak message from bank The creation and approval of a transfer payment request results in the automatic generation of an MT202 SWIFT message in Umoja. What is MT202 SWIFT? A SWIFT message used by Treasury to communicate high value transfer instructions between bank accounts it manages. Once the MT202 SWIFT is created in Umoja, it is transferred to the Bank Communications Management (BCM) for distribution to the bank signatories assigned to the House Bank Account from which the money is being transferred. The bank-to-bank transfer cannot be executed until it is approved by the House Bank s signatory. Once the bank signatory approves the transfer, BCM automatically sends the MT202 SWIFT message. 44

45 Bank-to-Bank Transfer Process Create and approve transfer payment request Transmit MT202 SWIFT message Receive Ack/Nak message from bank Once the bank has received and processed the MT202 SWIFT message, it sends an Ack/Nak message to Treasury confirming the transfer. This message is received via BCM and marks the end of this process. Note: The liquidation and purchase of investments and the purchase of foreign currency is handled by Treasury. These activities are covered in the Umoja Investment Accounting course. 45

46 Learning Checkpoint 1 A House Bank Account that does not have sufficient cash to meet all expense requirements can be replenished using all of the following methods, EXCEPT: Select the correct option A. Bank-to-bank transfer B. Transfer of funds from one investment pool to another C. Purchase of foreign currency 46

47 Learning Checkpoint 1 A House Bank Account that does not have sufficient cash to meet all expense requirements can be replenished using all of the following methods, EXCEPT: Select the correct option A. Bank-to-bank transfer B. Transfer of funds from one investment pool to another C. Purchase of foreign currency Option B is the correct answers. Three investment pools are maintained in three different currencies; each pool finances accounts in the same currency. If funds are not available in a specific currency, that currency is purchased on the foreign exchange market. 47

48 Learning Checkpoint 2 UN will manage House Bank Account cash balances using which of the following tools? Select the correct option A. Cash Position B. Liquidity Forecast C. Memo Records D. All of the above 48

49 Learning Checkpoint 2 UN will manage House Bank Account cash balances using which of the following tools? Select the correct option A. Cash Position B. Liquidity Forecast C. Memo Records D. All of the above Option D is the correct answer. An account s cash sufficiency is determined by its cash position, liquidity forecast and any additional expected expenses reported by the local mission. 49

50 Module 2 Summary The key points covered in this module are listed below: Cash sufficiency is determined by the Cash Position and Liquidity Forecast and ad hoc financial reporting from individual missions The cash level of a UN House Bank Account balances are managed in one of two ways: bank-to-bank transfer or purchase of foreign currency A bank-to-bank transfer can be used to replenish a currency that is held in more than one bank account Bank-to-bank transfers are conducted via SWIFT; this process is executed both inside and outside of Umoja, depending on where the account is housed Foreign currency is purchased centrally using FXall 50

51 Agenda Course Introduction Module 1: Cash Position & Liquidity Forecast Module 2: Manage Cash Levels USD Course Summary Course Assessment Course Survey 51

52 Course Summary The key points covered in this course are listed below: The Umoja Enterprise roles involved in the Cash and Liquidity Management process are Cashier and Treasury Front Office User The Cash and Liquidity Management process enables businesses to quantify their liquid assets and manage their accounts effectively The cash and liquidity management components are Cash Position report, Liquidity Forecast report and Cash Planning tool Cash levels are monitored for each House Bank Account in Umoja to ensure that the account has sufficient funds to cover the total amount being charged to it (based on the liquidity forecast); if the cash availability is insufficient, then the account balance is replenished to cover its projected expenses Purchase of all foreign currency will be done by UNHQ treasury to reduce transaction costs 52

53 Agenda Course Introduction Module 1: Cash Position & Liquidity Forecast Module 2: Manage Cash Levels Course Summary Course Assessment Course Survey 53

54 Course Assessment Now that you have completed all the modules in this course, you can test your knowledge by completing the Course Assessment. To receive credit for completing this course, you must pass this assessment with a minimum score of 90%. To complete the assessment you must return to the Learning Management System: 1. Log into Inspira 2. Navigate to Main Menu -> Self-Service -> Learning -> My Learning 3. Search for the name of the course under the My Learning Activities section 4. Click the Start link of the course assessment 5. Click the Submit button once you have completed the assessment 54

55 Agenda Course Introduction Module 1: Cash Position & Liquidity Forecast Module 2: Manage Cash Levels Course Summary Course Assessment Course Survey 55

56 Course Survey Your feedback is important to the continuous improvement of our training program. Please complete the evaluation for this course using the following steps: 1. Log into Inspira 2. Navigate to Main Menu -> Self-Service -> Learning -> My Learning 3. Search for the name of the course under the My Learning Activities section 4. Click the Start link of the course survey 5. Click the Submit button once you have completed the course survey 56

57 Congratulations! You have successfully completed the Umoja Cash and Liquidity Management course. 57