The credit facility functionality is included in SAP ERP Central Component (ECC), although licensing may be required to use the SAP Treasury and Risk Management module. SAP’s Transaction Manager module tracks Treasury trades through their full life cycle–from trade entry to payments to month-end processing to maturity of the trades. All accounting entries related to the trades are triggered by the trades and are posted directly to the SAP General Ledger. I review the credit facility functionality available with SAP’s Transaction Manager module by walking through an example trade. I show you the business partner master data setup, the trade entry, the process flow, and reporting. I provide a good foundation with a definition of terms and credit facility requirements. I also review the credit facility functionality available with SAP’s Transaction Manager module by walking through an example trade. I show you the business partner master data setup, the trade entry, the process flow, and reporting. Before getting started on the credit facility functionality in the SAP system, I define a few key terms that are helpful to understand when implementing credit facilities. Facility: a term used for credit facility. Revolver: a term used for credit facility. Syndicated credit facility: A syndicated bank facility is a loan offered by a group of lenders—referred to as a syndicate—that work together to provide funds for a single borrower. The amount of one syndicated loan is so big that one lender cannot fund or take on the debt alone. Corporations are usually the borrowers for this type of loan. There will be a lead lender or arranger for each consortium. Committed credit facility: A committed credit line is a monetary spending loan balance offered by a financial institution that cannot be suspended without notifying the borrower. A committed credit line is a legal agreement between the financial institution and the borrower outlining the conditions of the credit line. Once signed, the agreement requires the financial institution to lend money to the borrower, provided that the borrower does not break the conditions. Uncommitted credit facility: An uncommitted facility is an agreement between a lender and a borrower in which the lender agrees to make short-term funding available to the borrower; this is in contrast to a committed facility that involves clearly defined terms and conditions set forth by the lending institution and imposed on the borrower. An uncommitted credit facility does not include quarterly fees. It is possible for the uncommitted lines of credit to have the upfront and miscellaneous fees.

Draw: A draw is a borrowing against a credit facility. It is sometimes also referred to as a tranche.

Swingline: A swingline borrowing is a borrowing from one of the syndicated partners on a syndicated credit facility as opposed to from the main syndicate bank.

Credit Facility Overview

The Money Market module within Treasury and Risk Management is used to capture and track credit facility contract activity. The following functionality is supported:

• Credit facility trade entry into the SAP system
• Draws and letter-of-credit trades against the facilities
• The ability to capture, calculate, and account for the fees on the facilities correctly
• Amendments to facilities would be extending the maturity or changes in the syndicates
• Swing lines
• The ability to change quarterly fees at any time
• The ability to add miscellaneous flows to facilities
• The ability to post the correct accounting entries
• The ability to report on fees and utilizations of lines of credit
• Trade payments are reflected in the cash position report
• Accrue an issuance fee over the life of the contract using the incremental method of accrual
• Accrue the quarterly fees using book and reverse method of accrual

Credit facilities are borrowing vehicles for companies. Most companies have either a committed or uncommitted credit facility to support their liquidity needs. The extent to which a company has a committed or uncommitted credit facility depends on conditions such as its liquidity situation, bank fees, or type of business. SAP supports committed, uncommitted, and syndicated credit facilities.

Just as a drawing (borrowing) affects the use of a credit facility, leases, bank overdrafts, and letter-of-credit trades can also affect the credit facility use. Therefore, the quarterly fees, leases, bank overdrafts, and letter-of-credit trades are all related to credit facilities. For the purposes of this article, only letter-of-credit trades are discussed, and only related to how letter-of-credit trades relate to credit facilities.

The credit facility trade is the vehicle to calculate the use and fees of a credit facility. The only cash flows triggered by a credit facility trade are the fees. Separate trades are created for borrowings against the credit facility and letter-of-credit trades. These separate trades are linked to a credit facility trade and affect the credit facility’s utilization numbers. The interest on a borrowing can take the form of a fixed amount, fixed rate, or variable rate. The product type and transaction type define the different types of trades a company can track in SAP’s Transaction Manager module, and they are both three-character codes. The definition of the product type and transaction type define the functionality of the trade. Table 1 shows the different product types, transaction types, and product categories relevant to processing credit facilities in the SAP system. There should be separate product types to track committed versus uncommitted credit facilities. In addition, a product type for the draws or borrowings against the credit facility needs to be created.

Product type	Product category	Transaction type	Description
CF	Facility (560)	BOR	Credit Facility - Syndicated
CFD	Interest Rate Instrument (550)	BOR	Credit Facility Draw
LC	Interest Rate Instrument (550)	TAK	Letter of Credit

A number of different fees are associated with credit facilities. The different fees depend on the type of credit facility being tracked (i.e., committed versus uncommitted credit facility). Table 2 shows the different fees related to credit facilities, as well as the accounting treatment typically used.

Fee type	Accounting treatment
Up-front fee	Deferred over the life of the contract
Annual administration fee	Paid when due (no deferral)
Quarterly fee on the unutilized portion of the line of credit	Accrued monthly, paid quarterly in arrears
Miscellaneous fee	Paid when due (no deferral)
Terminated contract fees	These fees are incurred when terminating an existing contract and starting a new contract. The terminated contract fees should be deferred over the term of the new contract.

The calculation of the quarterly fee is:

Quarterly fee = unutilized portion of the credit facility * the commitment fee * number of days / days per year (for example, 360)

The up-front fee, annual administration fee, miscellaneous fees, and terminated contract fees are entered as Other Flows in the credit facility trades (for example, they are entered in the Other Flows tab in the trades).

Uncommitted lines of credit do not generate quarterly fees because there are no commitment fees directly associated with them. Uncommitted lines of credit can have up-front and miscellaneous fees.

Master Data Settings

Some master data needs to be set up before getting started. The master data needed includes the business partners representing the banks that are providing the credit facilities. In my example, say the credit facility is with Bank X. Bank X would then be created as a business partner, as described here. In addition, the business partner standing instructions need to be completed before the credit facility can be entered into the SAP system. Both steps are described here. The SAP Transaction Manager module uses business partners as the counterparties to the trades entered. Business partners are similar to customers and vendors in that they hold all relevant information for an external partner. Figure 1 shows a business partner for an external bank. Notice that the Business Partner ID field is 10 characters long. The business partner is referenced through this ID. When you assign a role to a business partner, this action opens up functionality that can be used for that business partner. All business partners to be used for trade processing must have the role of Counterparty assigned. Go into change mode by clicking the display<->change icon . Then assign the TR0151 Counterparty role to each bank-related business partner. Click the save icon when you are done. Now enter the bank accounts where the credit facility fees should be entered in the business partner bank account information, as shown in Figure 2.  

Standing Instructions

  Standing instructions is a term used to set defaults for trade types in the SAP system. Standing instructions decrease manual processing, and therefore, decrease operational risk related to processing trades in the SAP system. There are four types of standing instructions: payment details, correspondence, authorization, and derived flow standing instructions, although only the payment details and authorization standing instructions are relevant to credit facility trades. All standing instructions are set by company code and are associated with the Counterparty role. To get to the standing instructions, execute transaction code BP and in the screen that opens (not shown), click the open icon . In the pop-up screen (not shown), enter the business partner and then click the enter icon . This action displays the screen shown in Figure 3. In the Change in BP role field, select the Counterparty role, as shown in Figure 4. After you select the role of Counterparty, a Company Code button appears on the tool bar, as shown in Figure 4. After you click the Company Code button, you are taken to the standing instructions, as shown in the tab headings in Figure 5. Notice the different standing instructions tabs shown in Figure 5. Each of the standing instruction functionalities set on each of the tabs is described next. Payment details standing instructions: The payment details standing instructions are set in the SI Payment Details tab. Payment details standing instructions are how the default settlement instructions are set by company code and trade type for each business partner. Once the payment details standing instructions are set for a business partner, currency, trade type, and company code, the payment instructions default into trades as the trades are created. The person entering the trade does not need to make any changes to the payment instructions. The fields set for each payment details key (Pay.Det.ID) in the payment details standing instructions are the house bank account, business partner bank details, payment method, and so on, which default into the trade for the company code and business partner for which the standing instructions are completed as the trade is being entered into the SAP system. First, you enter the payment instructions, as shown in Figure 6. After you double-click the row, the system displays a pop-up window that provides a nicer display of the fields in the row. To have the payment details default into specific trade types, assign them to trade types by selecting the field (to the left of the Curr [currency] column and indicated by the arrow in Figure 6) and clicking the assign icon . After you click the assign icon, the system displays the screen shown in Figure 7 in which you specify the trade types to which the standing instructions should be assigned. Place the cursor on a folder of the Trans.Hierarchy and then click the select/deselect icon . These steps are done for both columns P-ID Outg. (outgoing) and PmntID-Inc (incoming) flows in the trades. Authorization standing instructions: The authorization standing instructions are set in the SI: Authorizations tab. In this step, specific trade types are authorized for a business partner in a company code. Without this authorization, it is not possible to enter trades for this business partner in this company code. The indicator to the right of the product type is selected to grant authorization (Figure 8). Figure 9 diagrams business partner master records and shows a general section of the business partner master record and a company code-specific section, similar to customer and vendor master records in an SAP system. As the diagram shows, business partner master data consists of general data and company-code-specific data. The standing instructions are set by company code.

Process in an SAP System

I now walk through the processing steps for credit facilities in the SAP system.

To create a facility trade in an SAP system, follow menu path Accounting > Financial Supply Chain Management > Treasury and Risk Management > Transaction Manager > Money Market > Trading > Create Financial Transaction or execute transaction code FTR_CREATE. In the screen the system displays, enter the company code, product type, transaction type, and business partner for the credit facility (Figure 10). Press the Enter key.

You are creating a syndicated bank facility trade so that each bank that is part of the syndication is listed in the trade. In the Structure tab, enter the time period for the facility, as well as the banks that are part of the syndication, as shown in Figure 11. For each of the banks, specify the time period the bank will participate in the syndication, and using the Rank field, specify if the corresponding bank is a lead bank or time secondary bank in the syndication. Enter the data in the Contract Conclusion section, as shown in Figure 11.

In the Charges tab, enter the unutilized fee percentage. In this case, the fee is 10 basis points on an actual/360-day basis times the unutilized portion of the facility. Additionally, you should enter the due date, calculation period (e.g., quarterly), and calculation method (e.g., act/360). The fee is paid quarterly in arrears. The quarterly fees related to the facility are generated from the inputs entered on the screen shown in Figure 12.

Click the detail view int. conditions icon  in the Charges tab shown in Figure 12 to specify the exact dates the system should use to determine the calculation and payment dates.

For all payments generated by trades, you can specify the working day rule, which is how the system should shift the payment date (due date) around holidays and weekend days. In Figure 12, I specified that fees will be paid quarterly, and now I need to tell the SAP system how I want that quarterly date to shift in the case of non-working days. In this case, I specified Next working day modified, which means the due date should shift to the next working day unless it moves into the next month, in which case it should shift to the previous working day, as shown in Figure 13. Click the back icon when you are done.

Next, in the Profiles tab, you need to enter the total credit line. To complete this step click the create icon  and in the pop-up screen, enter the facility amount in the Total: field. In my example, it is $4 billion. You can enter the amount each bank in the syndication contributes to the total credit line by clicking the Syndication button, as shown in Figure 14.

In the Rules tab, you specify the rules associated with this facility. The rules tighten the types of transactions that can be tied to the credit facility. This is done to minimize incorrect transactions entered against the credit facility.

In Figure 15, a rule is entered that specifies that only USD transactions can be linked to this facility. You can enter the types of transactions that can affect the utilization of the credit facility.

The rule Transaction type specifies the types of transactions that can be linked to this facility. In Figure 16, a rule is entered that only CFD/BOR, which is the product type and transaction type of the credit facility draw, trades can be entered against this credit facility. If letter-of-credit trades also draw on the credit facility, the credit facility, the product, and transaction type for letter-of-credit trades should be entered. Select the All transaction types allowed indicator if any (all) transaction type can be linked to the credit facility.

In the Administration tab, you can track additional information with the credit facility, such as the renewal policy, the collateral required, the type of collateral required, or the purpose of the credit facility, as shown in Figure 17.

In the Other flows tab, the non-quarterly fees are entered as shown in Figure 18. (The quarterly fees are generated from the fee entered in the Charges tab.)

In the Payment details tab, the payment instructions are stored as shown in Figure 19. The payment instructions default into the trade from the business partner standing instructions.

Click the save icon to save the trade. When the trade has been saved, the SAP system shows a message that the transaction has successfully been created for the specified company code. The message also displays the trade number created.

After you save the trade, documents from the bank related to the credit facility can be attached to trades. To complete this step, follow menu path Accounting > Financial Supply Chain Management > Treasury and Risk Management > Transaction Manager > Money Market > Back Office > Edit Financial Transaction or execute transaction code FTR_EDIT. This action displays the screen in Figure 20.

Enter the company code and trade number, and then click the Change button. This action opens the screen in Figure 21.

Follow the drop-down menu path in Figure 21 to attach documents to the trade. Once this option is selected, the system prompts you to select the files to attach (not shown).

After you create the credit facility trades, they follow the same back-office process that the other trade types follow. The fee payments will post to the ledger when due (in Process Treasury Trades), at which time they are queued up to be paid by the Treasury payment program (F111). (This screen is not shown.)

Enter Borrowing Against the Credit Facility

When a company needs to borrow against the credit facility, a draw trade is created. To complete this step, follow menu path Accounting > Financial Supply Chain Management > Treasury and Risk Management > Transaction Manager > Money Market > Back Office > Edit Financial Transaction or execute transaction code FTR_CREATE.

Figure 22 shows a bank borrowing/draw for $100 M from 2/10/14 to 5/11/14 against the credit facility.

In the Administr. (administration) tab the borrowing is tied or linked to the credit facility. After the borrowing is linked to the credit facility, the borrowing affects the utilization and fees on the credit facility trade. To attach a borrowing trade to the credit facility, click the create icon. In the pop-up screen shown in Figure 23, select or edit the credit facility company code and trade number. Click the save icon to save your data.

After you use the credit facility for borrowings or for letter-of-credit trades, when you look at the credit facility trade and go to the Profiles tab, you can see all draws against the facility, as shown in Figure 24. In other words, shown on this tab are any trades that affect the utilization of the credit facility.

A Summary of Process Flows

Table 3 summarizes the steps in the SAP system for credit facility trades.

Step	Frequency	Transaction code, program, or report	Description
Line up credit facility with the bank	Before starting in the SAP system	N/A	If there are aspects of the documentation that need to be updated, the treasury consultant requests the bank to update the documentation.
Create Bank Facility	One-time activity	FTR_CREATE	After the terms of the facility are complete with the bank, a treasury staff member creates the bank facility in the SAP system.
SAP settling trades	One-time activity	TM00 / FTR_EDIT	To release the flows to accounting, the trade must be settled. Click the Settle button, review the trade details, and then click the Save button to approve the trade. (Settling a trade allows the trade’s cash flows to post to the ledger.) Whether this step is required or not depends on the configuration.
Post fees to the SAP General Ledger	As needed	TBB1	Post the credit facility fees to the ledger. Verify the accounting entries. (This step is not described in this article.)
Run payments through the Treasury payment program	As needed	F111	The treasury payment program is run to send the outgoing payments to the banks. (This step is not described in this article.)
Accrue fees	Monthly	TPM44	Accrue the quarterly fees on the credit facility. (This step is not described in this article.)
Validate and analyze bank facility fees	Quarterly when due	TPM_60A	When the quarterly invoice is received from the bank, the treasury staff validate the invoice against SAP using the Bank Facilities Fee report.
Post fees to the SAP General Ledger	Quarterly when due	TBB1	After the quarterly fees from the bank have been verified, pay the fees. (This step is not described in this article.)
Run payments through the Treasury payment program	Quarterly when due	F111	The treasury payment program is run to send the outgoing payments to the banks. (This step is not described in this article.)
Adjust fees or lines of credit	As needed	FTR_CREATE / FTR_EDIT	If the fees change, the treasury operational analyst updates the facility fee in the trade.

The process steps shown in Table 4 relate to a borrowing or drawing a trade or letter of credit trade that is tied to the credit facility. As mentioned in the article, the credit facility trade is the vehicle to calculate the utilization and fees of a credit facility. The actual borrowing trades that affect the credit facility utilization are separate trades that are linked to the credit facility as shown in Figure 23.

Step	Frequency	Transaction code, program, or report	Description
Create credit facility borrowing	As needed	FTR_CREATE	When the treasury department borrows against the credit facility, a separate trade is entered.
SAP settling trades	One-time activity	TM00 / FTR_EDIT	To release the flows to accounting, the trade must be settled. (Settling a trade allows the trade’s cash flows to post to the ledger.) Whether this step is required or not depends on the configuration.
Post borrowing to the SAP General Ledger	One-time activity	TBB1	Post the borrowing trade to the ledger.
Run payments through the Treasury payment program	One-time activity	F111	The Treasury payment program is run to send the outgoing payments to the banks and to record incoming payments to the SAP General Ledger.
Accrue interest	Monthly	TPM44	Accrue interest on the borrowing trade if the borrowing crosses over month-end. (This step is not described in this article.)

Credit Facility Reports

The following two reports are specific to credit facility trade processing in an SAP system.

Facility Utilization (TM_60): This report shows the current use of credit facilities. The output for this report is a list of the outstanding credit facility trades, the total credit line per facility, the amount drawn, the amount available to borrow, and a used percentage amount. From this report, it is also possible to drill into the contract to view additional details related to the specific drawings.

To execute this report, follow menu path Accounting > Financial Supply Chain Management > Treasury and Risk Management > Transaction Manager > Money Market > Information System > Position > Facilities: Utilization Overview or execute transaction code TM_60. Figure 25 shows the input screen to this report. The report shows the credit facility utilization as of a key date, which is the first field on the input screen.

After entering the inputs, click the execute icon .

Figure 26 shows on the output of the report that as of 9/30/2014, the line of credit trade is $4 billion. It is 4.3 percent utilized and 95.7 percent unutilized. The unutilized portion, which the fee is based on, is $3,828,000,000. This corresponds to the base fee amount displayed in the Facilities Fee report (TM_60A) on 9/30/2014.

Letters of Credit, Drawings and Fees report (TM_60A): Business users can use this report to validate the quarterly fees charged by the bank for the credit facility activity. To execute this report, follow menu path Accounting > Financial Supply Chain Management > Treasury and Risk Management > Transaction Manager > Money Market > Information System > Revenue Analysis > Facilities: Overview of Charges or execute transaction code TM_60A. In the input screen shown in Figure 27, enter the quarter being analyzed in the Evaluation Interval.

In the Output Control tab, fee data is specified and cumulative allocation should be displayed. This means the fee amount should be displayed from the perspective of the entire facility or lead bank.

The report can be run across all facilities or for just one credit facility. It can be run as of a key date or for an interval (for example, a quarter). When analyzing an invoice from the bank, you should enter the date range of the quarter and the trade number or bank (business partner field).

After entering the inputs, click the execute icon.

The output screen in Figure 28 shows the different amounts that contribute to the total quarterly fee. The output displays only the cumulative rows because the Output Key Figures were set to Cumulative. There are four rows because the utilized/unutilized portion of the credit facility changed four times within the evaluation interval (4/1/2014 to 6/30/2014).

The row selected on was 4/1/2014 to 5/10/2014 when the utilized/unutilized portion of the credit facility was constant. When you are analyzing fees, this is the view Treasury should be comparing with the invoice from the bank. (The invoice from the bank will show the changes in the utilization levels of the credit facility and the corresponding fee for that interval.)

After you select a different time period (a different row on the output screen) and click the Display Charge button, the details of how that fee amount was determined are displayed in the screen shown in Figure 29. For this fee, the base amount (unutilized portion) of the facility was based on $3,905,000,000. This is multiplied by the 10-basis point charge and the days (days / day count) to get the fee amount for that portion of the evaluation interval (5/11/2014 to 5/30/2014).

The sum of the fees for the quarter should match the invoice amount from the bank and, if not, the difference should be investigated.

Notes on Configuration of Credit Facilities

SAP provides the Product Category facility to support the management of credit facilities. This product category is able to establish limits, has the ability to attach specific borrowings or drawings, and will, if applicable, calculate fees associated with the agreement. In configuration, the credit facility product types must be defined with the Product Category Facility (560). The Facility product category represents a revolving line of credit available to a company. It allows for the management and tracking of fees and utilization of the line based on individual draws.

Transaction Codes for Credit Facilities

Table 5 shows the transaction codes covered in this article.

Transaction code	Name
BP	Create/change business partner
TM_61	Facility Create
TM_62	Facility Change
TM_63	Facility Display
TM_64	Facility Settle
TM_65	Facility Reverse
TM_69	Facility History
TBB1	Post trade cash flows
F111	Treasury payment program
TPM44	Execute accrual/deferrals
TM00	Money Market Collective Processing
TM_60	Facilities: Utilization Overview
TM_60A	Facilities: Overview of Charges