Every corporate treasury leader wants centralized payments. Fewer external bank accounts. Cleaner processes. Better visibility. Lower costs.
Sounds great—until you try to build it.
Underneath every Payments on Behalf Of (POBO) model lies an engine: a complex, tightly integrated technical foundation that tracks affiliate balances, books intercompany entries, routes payments intelligently, and reconciles it all in real time.
And that’s where most implementations go sideways.
POBO isn’t a policy, a workflow, or even a treasury strategy. POBO is infrastructure. It’s about designing an internal bank with external-bank-level precision. Without that, the promise of centralized payments quickly turns into operational chaos.
Most organizations don’t fail at POBO because the concept is flawed. They fail because they underestimate its architectural demands.
In this blog, we’ll break down how to technically enable POBO using SAP’s Advanced Payment Management (APM) combined with In-House Banking, the architecture that powers scalable, efficient, and audit-ready payment factories. We’ll also reference findings from recent surveys by Deloitte, PwC, HSBC, and others to help you understand how strong internal infrastructure – not just policy – is what separates successful centralization from failed experiments.
POBO’s technical demands (and why you can’t wing it)
At a high level, POBO seems simple: one entity – the in-house bank – executes payments for many legal entities. It’s elegant in concept, but demands a lot in its execution.
Let’s look at what has to happen under the hood:
- The initiating affiliate must have its account debited (even though no money leaves a real bank).
- The in-house bank needs to reflect this change in its internal books.
- The payment goes to the external vendor from a real, physical bank account.
- Intercompany transactions must be booked—cleanly, consistently, and traceably.
- The affiliate’s new balance must be updated in real time.
- And the reconciliation of the payment must happen automatically to support fast closes.
Without the right architecture, this becomes a reconciliation nightmare.
According to HSBC’s 2024 Risk Management survey, 93% of CFOs and treasurers admitted that cash flow forecast inaccuracies led to avoidable losses—usually because of poor payment visibility and fragmented systems.
If your POBO engine can’t track cash movement in real time, your forecasts are fiction. And so is your compliance.
Building POBO the right way: enter SAP APM and IHB
SAP’s Advanced Payment Management (APM) and In-House Banking (IHB) modules are built to support exactly this kind of internal complexity. Together, they form the backbone of a true payment factory.
Here’s how they work.
1. Virtual accounts per affiliate
Every legal entity (“affiliate”) holds a virtual account within the in-house bank. These aren’t bank accounts in the traditional sense. They’re internal ledger accounts tracked by SAP IHB. But they function like real accounts, capturing every transaction, payment, or incoming flow with full traceability.
This allows for central execution without blurring the legal or accounting boundaries between entities. Which is critical for tax, audit, and compliance.
2. Intercompany accounting in real time
When an affiliate initiates a payment, SAP APM automatically triggers two sets of journal entries:
- One between the initiating affiliate and the in-house bank (e.g., a payable or short-term loan).
- One between the in-house bank and the external vendor (actual cash movement).
This real-time intercompany posting architecture is what makes POBO auditable. It also simplifies reconciliation, because both ends of the transaction are controlled within SAP.
3. Payment routing optimization
SAP APM includes built-in payment routing rules that determine the most efficient execution method based on currency, urgency, amount, and vendor location. Whether it’s ACH, SEPA, or cross-border SWIFT, the system routes payments automatically for reduced manual decisions and error rates.
This is especially valuable for multinational organizations dealing with regulatory complexity. As noted in your POBO document, POBO feasibility varies dramatically by region. Asia, LATAM, and Eastern Europe impose strict restrictions on cross-border payments, currency controls, and reporting. SAP APM’s rule engine lets you navigate that complexity without custom logic at every turn.
What scalable POBO architecture actually looks like
If you want your payment factory to scale across regions, currencies, and ERPs, your architecture needs to support it from the start. Here’s what good looks like:
- Unified master data: Vendors, banks, GLs, and payment methods must be harmonized across all entities.
- Multi-currency FX management: Centralized FX minimizes unnecessary conversions and spreads.
- Workflow-embedded governance: Approval paths, exception handling, and audit logging must be built in, rather than managed by email.
- In-system intercompany accounting: Manual entries will always break down at scale. SAP’s journal engine keeps it clean.
- Real-time cash positions: Virtual accounts and in-house bank balances must update instantly. Periodic updates are a recipe for disaster.
- Legal & tax visibility: Every payment must be traceable to a legal entity, with proper documentation and SLA enforcement.
As noted in the EY 2024 Voice of the Treasurer survey, 74% of finance leaders cited “securing sustainable funding and operational efficiency” as their top challenges. Treasury is under pressure to do more with less. POBO, built right, is a massive efficiency unlock.
The ROI of doing it right
What does a well-architected POBO model actually deliver? Based on Serrala’s global project experience, the returns are tangible. And fast:
- 50%+ reduction in external bank accounts.
- 30–60% decrease in transaction costs through payment aggregation.
- Faster financial close cycles (shrinking from weeks to days).
- Stronger audit readiness and regulatory alignment.
- Real-time liquidity visibility across all affiliates.
But the real payoff goes beyond numbers: it’s about control. When your treasury has full visibility into every payment, knows exactly who initiated it, and can trace it from request to reconciliation, everything changes. Teams stop reacting and start forecasting. Errors drop. Trust increases. And the business starts running at a different speed.
This is what forward-looking CFOs are prioritizing. According to U.S. Bank’s 2024 CFO Insights report, over 50% of finance leaders are investing in automation and AI to unlock strategic capacity. But automation without infrastructure is just noise. POBO, built on a strong SAP APM-IHB foundation, is the core infrastructure that makes that transformation real.
Over 50% of finance leaders are investing in automation and AI to unlock strategic capacity. But that only works with a strong financial core. And POBO, when built on a high-performance engine, is the core.
The payment factory Is only as good as the engine
POBO can reduce costs, streamline execution, and improve visibility. But only if the underlying engine is built right.
If you’re trying to centralize payments, don’t just ask, “What does the process look like?” Ask, “What does the engine look like?”
How can Serrala help you institute a strong POBO engine?
Centralized payment models like POBO depend on more than just functionality—they require an internal banking engine designed with precision. We’ve been helping global corporations build that engine for the past 25 years.
We’ve been involved in SAP’s in-house banking journey since the launch of the original In-House Cash (IHC) solution, and we’ve played a key role in shaping its evolution into today’s Advanced Payment Management–In-House Bank (APM-IHB). Our team—led by long-time SAP treasury expert Peter Wolf—has partnered directly with SAP’s product development team to align system capabilities with real-world POBO needs.
From early payment factories to today’s scalable POBO deployments, Serrala has delivered solutions across North America, Europe, and Asia. Adapting to regional regulations, tax requirements, and corporate structures. Our close collaboration with SAP gives us early access to new features, influence over roadmap direction, and the ability to troubleshoot quickly.
Today, as companies adopt APM-IHB to support POBO at scale, we’re still leading global implementations of tailored, audit-ready payment hubs that optimize intercompany flows, enforce control, and reduce external banking complexity.
To read more on POBO, click here to discover how POBO can drive strategic growth in 2025
Click here for our complete guide to APM
