SAP In-House Cash (IHC)

SAP In-House Cash (IHC) is SAP's module for running an internal bank — maintaining internal accounts for group subsidiaries and processing payments between and on behalf of them, so the group banks internally instead of externally. It's the SAP implementation of the in-house bank concept this site covers generally, and it's where a centralized treasury operating model becomes concrete inside SAP. The core idea, ported into SAP: instead of every subsidiary transacting externally through its own accounts, they hold internal accounts with a central in-house bank, and the group settles with itself before it settles with the outside world.

What it is

IHC turns a central entity into a virtual bank inside SAP. It maintains internal current accounts for participating subsidiaries, processes transactions across them, applies interest, and produces statements for those internal accounts — much as an external bank would, but internally. The subsidiaries' balances become intercompany positions; the group's banking, for a large share of activity, moves inside.

If you've read the general in-house bank article, IHC is that concept made real in SAP: the internal accounts, the intercompany balances, the internal settlement, all as SAP functionality.

How it works

• Internal accounts — each participating subsidiary holds an internal current account with the in-house bank.
• Internal payments — transactions between group entities settle across these internal accounts, no external payment needed.
• Payments on behalf of — the in-house bank makes external payments on behalf of subsidiaries, with the subsidiary's obligation recorded internally.
• Interest and statements — the internal accounts bear interest and produce statements, like real bank accounts.

The external cash leaves through the central entity — routed out to the banks through Bank Communication Management — while the subsidiary's side is an intercompany balance.

Where it fits: IHC and the payment factory

The prize, and the catch

The prize is the in-house bank prize: far fewer external accounts, cash concentrated centrally, internal settlement instead of external payments, and the group banking with itself. The catch is the same one that shadows all of this — intercompany accounting. Every internal transaction and on-behalf-of payment generates intercompany balances that have to be tracked, reconciled and settled, with interest at proper rates and the transfer-pricing and tax implications handled. IHC gives you the internal bank; it also gives you an internal book to run with real rigour, and under-planning that accounting is how the elegant design becomes an intercompany mess.

What usually goes wrong

• Underestimating intercompany accounting. The internal accounts generate intercompany balances that must be tracked, reconciled and settled — design this up front, not after go-live.
• Treating it as pure technology. IHC is an operating-model and accounting change as much as a system one; configure the module and neglect the process, and adoption and reconciliation suffer.
• Confusing it with the payment factory. Scoping one when you needed both, or vice versa, so the centralization is half-built.
• Ignoring the tax/transfer-pricing angle. Intercompany lending and on-behalf-of activity carry real tax and transfer-pricing implications that treasury can't wave away.

Use IHC as the internal-banking backbone of a centralized SAP treasury — paired with a payment factory for external payments — and design the intercompany accounting as carefully as the cash, and it delivers the in-house bank's centralization inside SAP. It's a powerful piece of the centralization story, and, like every part of that story, it's only as clean as the intercompany plumbing beneath it.

Part of the SAP Treasury & Cash Management guide. See also what is an in-house bank and what is a payment factory. The newsletter sends one finance-systems pattern, product decision or build lesson every two weeks.