Transaction manager and the deal lifecycle

A treasury deal passes through the same three hands in every well-run treasury: the front office agrees it with the counterparty, the back office confirms and settles it, and accounting posts and values it. SAP's Transaction Manager models this with activities and statuses, and the separation between the three roles is the most important control in treasury.

A money market deal: the fixed-term deposit

On June 2, Contoso's treasury dealer places USD 5,000,000 with its US relationship bank for 90 days at 4.20% (illustrative). In FTR_CREATE she enters company code 1710, product type fixed-term deposit, transaction type investment, the counterparty, the amount, start and end dates, the interest rate and the interest calculation method. The system generates the flows: principal out on June 2, principal back and interest in on maturity.

At the June month-end, the deposit has earned 28 days of interest that will not be paid until August. The accrual/deferral run posts USD 16,333.33 of interest income to June. At maturity, the actual interest of USD 52,500.00 posts, and the accrual is reversed. A tester checks both numbers by hand: 5,000,000 × 0.042 × 28 ÷ 360 = 16,333.33.

An FX deal: the forward

Contoso 1710 has lent MXN 50,000,000 to Alternadores (1910) to fund integration work, repayable in six months. To protect the USD value of the repayment, treasury sells MXN 50,000,000 forward against USD at 18.60 MXN per USD for the same date, which locks in USD 2,688,172.04. The deal is an FX forward in the Transaction Manager; its flows are the two currency amounts on the value date, and until then it is valued at fair value each month-end.

Release, confirmation and settlement

Two controls sit between the dealer and the ledger. A release procedure can require a second person to release deals above defined criteria before they continue. Correspondence handles confirmations: Contoso sends its confirmation to the bank and receives the bank's; matching them, automatically through the correspondence framework or manually, proves both sides agreed the same terms. The back office then settles the deal, which marks it ready for posting and payment. Only settled deals should post.

What goes wrong in testing

• Deals are created and posted by one test user with full access, so release and segregation are never tested.
• Interest calculation methods (act/360, 30/360, act/365) are not checked against the bank's confirmation.
• Rollovers, early terminations and reversals are not tested, only clean deals to maturity.
• Test counterparties have no bank details, so settlement and payment are skipped.

Day-count conventions

Interest depends on the day-count convention, and banks differ. The same deposit gives different interest under act/360, act/365 and 30/360. Testers should know the convention on the bank's confirmation and check that the deal uses it, because a mismatch produces small differences that grow with volume and are hard to find later.

For the deposit above, act/360 and 30/360 happen to agree because the term is exactly three 30-day months in the 30/360 count; for a 92-day deposit they would differ. Include at least one deal whose term exposes the difference.