Businesses currently find themselves in a transitionary period. As economic pressures and ease of use requirements rise EFT (Electronic Funds Transfer) is a great way to meet these expectations. At the core, EFT is simply transferring money from one bank account to another without anything physically changing hands. Whether you are paying a vendor, customer or internal payment to address corporate payroll, the process can be completely automated and secured through batch processing and SFTP channels directly from your SAP system to the bank.

DOES EFT REPLACE THE NEED FOR CHEQUE PROCESSING?

We do not need to think in a vacuum when it comes to EFT vs. Cheque processing for incoming and outgoing payments. When it comes to turnaround time, cheques need to be mailed or physically delivered to the bank, whereas EFT payments are intrinsically automatic. However, several payment methods can co-exist in your system to support varying customer and vendor capabilities.

One such option is a hybrid between EFT and Cheques, known as Remote Check Printing (RCP). The general functionality of RCP is very similar to that of EFT in the fact that information is sent automatically between SAP and the bank. However, unlike EFT payments, RCP utilizes a cheque number generated in SAP while leaving the responsibility of printing and sending the cheque with the bank. This hybrid method is perfect if you’d like to stop maintaining cheque printers onsite for the dwindling number of customers and vendors who still rely on cheques.

WHAT YOU NEED TO SET UP EFT IN SAP

1. Banking Master Data – Bank name, country, institution number/bank key, address, bank code and account numbers and currencies used for EFT must be maintained in SAP

2. Recipient Account Information – The bank key, country and bank account number of your recipient must also be maintained in SAP

3. Source/Target Destination – If EFT payments are to be made through SFTP the to/from directory file path must be known and communicated with the bank

FINDING THE RIGHT FIT

EFT payment processing does not have to be a one-size fits all approach to electronic banking. There are multiple ways our clients utilize this core functionality, while still having the flexibility their business needs. Here are just some of the ways they are doing it:

• SFTP Secure File Send - A user on SAP can generate a payment file using standard SAP transaction codes and then subsequently send the file directly from SAP to a secure bank directory via a custom program/transaction.

For one of our mining clients, they identified inefficiencies in the time of delivery and subsequently the cost of distribution while processing payments manually, especially in the case of cheques that ended up lost or damaged. It also helped streamline their entire payroll process, which was originally managed outside of SAP and moved to SAP to capture the efficiency and effectiveness of EFT.

• Manual Upload - In this method, SAP users will continue to utilize standard SAP transaction codes to generate the desired payment file, but rather than directly send the file to the bank via SFTP, the user can download the file as a local copy and then upload to the bank’s secure site/portal.

Another client is making use of this manual variation by generating a payment file automatically in SAP based on the EFT specifications provided by their Banking partners. This file is subsequently downloaded as a local copy before being uploaded to the financial institution’s secure portal where the funds are displayed and accessible in real time.

• EFT Remittance - To accompany an EFT or RCP payment, remittance forms can be created and sent to match the needs of your business and bank.

A client in the meat processing business, is not just leveraging EFT Remittances as a stand-alone option, but rather are doing so in conjunction with Remote Check Printing. They had vendors across North America and they were having to issue cheques from various locations in order to deliver them in a timely manner. The logistics of this was both time consuming and expensive and thus having the ability to send their checks directly to the bank via EFT and cut out the middle men, as well as generate a remittance that can be shared with the Vendor at the time of payment, was a perfect hybrid solution for their business needs.

Closing Thoughts

When deciding whether to make the switch to EFT, consider this. Transfers through SFTP or via a secure banking platform/portal are more reliable, convenient and cost-effective than manually intensive processes that involve multiple points of human-to-human exchange. Thus, while your business becomes more efficient at processing payments, it is simultaneously reducing the risk that exists with the use of cash and cheques. This is a perfect opportunity to take advantage of some of the flexibilities of EFT while utilizing the expertise and experience of SAP and CONTAX to help your financial processes run better.

By: Michael Smith