Using fund management in SAP Revenue Growth Management

In this process of setting up funds, we're starting with the budget that was calculated in the preceding step. Now, we will explore how to use and further calculate this budget. The initial task is to decide on the quantity of funds needed. Options include allocating one fund per customer or one fund per customer and category. Once that determination is made, the next step is uploading the budget, but only after it has been accurately calculated.

We may opt for a fixed budget, such as assigning everyone a set amount, like $500,000, to aid in launching new product innovations, which typically involve higher costs. Alternatively, dynamic funding might be preferable, where the budget is contingent upon customer performance.

This budget is integrated into our solution, allowing for its utilization in trade promotion activities. It's essential to note that adjustments will occur at the final stage upon customer payment, ensuring efficient allocation to bolster promotional efforts and new product launches. Furthermore, additional details will be reviewed to refine how the budget is calculated.

The concept of dynamic funding revolves around a pay-for-performance model designed to allocate budgets for promotional spending. A trade spend rate is set at the customer or product hierarchy level or both, and together with the trade sales volume forecast, it determines the funding available for the customer. This funding is dynamically adjusted based on the customer's performance, ensuring that those generating higher revenues receive more trade budget to facilitate trade promotions. The dynamic funding approach can include calculating the budget as either a percentage of sales or a fixed dollar amount per unit sold.

Variable funding, as outlined in this model, is often complemented by fixed funding. For instance, a fixed budget might allocate a flat amount, such as $4,000, to support various initiatives, including new product innovations or other reasons, where additional, predictable support is necessary. This combined approach allows for rate entry at various levels and combinations within the account and product hierarchy, offering flexibility in funding management.

The process includes summarizing the funding status in a checkbook within a fund, detailing categories such as Budget, Pre-reserved, at various levels like customer, product, or territory. These financial reports consolidate all value categories, with data extracted to SAP Business Warehouse for further detailed reporting. Dynamic funding prioritizes investment with high-revenue-generating customers, aligning promotional spending with performance incentives.

In this slide, we explore the intricacies of setting up promotions and managing the budget within a sales planning context. Initially, during the sales planning phase, a decision is made about the funds allocated for a specific customer, such as assigning a budget of one million dollars. From here, a trade promotion is developed and requires approval.

For example, a promotion might offer a one-dollar discount on all orders placed by the customer in July. Once this promotion is approved and launched, the budget amount is reserved to ensure the commitment to the promotion. As the promotion progresses, customers who utilize off-invoice arrangements will submit claims for reimbursement, indicating they've participated in the promotion and it's time for payment.

The process to handle these claims involves receiving either deduction claims or invoice claims from customers. Upon receipt, each claim undergoes approval and release before settlement occurs. This settlement process includes adjusting accounts receivable open items, whether by accommodating a deduction or issuing a check to the customer for invoice claims.

Overall, this mechanism ensures thorough and effective budget management for trade promotions, facilitating both claim handling and customer payments seamlessly.

Role: Sales Finance Manager

Name: Sam, Finance professional for sales responsible for trade budget allocation, creation, and control throughout Revenue Growth Management planning and executions.

Job Description This role is active primarily in the sales planning and budgeting phase and works closely with the Trade Marketing Manager in determining trade spend budgets and rates. It also works closely with the Sales Director in distributing trade budget across the retail customers and is responsible for instituting the organization's trade budget (fund) structure and monitoring activities against those budgets.

• Set up funds and budget allocations for each retail customer
• Set up dynamic fund rates
• Ensure the organization's financial liabilities can be met via accrual management
• Transfer trade budgets between funds as dictated by business activities

• Too many funds to be setup manually
• Difficulty to control proper fund consumption for promotion planning and executions.

• Invest the spent budget with proper amount
• Invest the spend budget on key areas (account/product/and etc.)
• Make sure the spent is properly controlled
• Make sure the budget consumption is auditable at finance compliance

• Collaborated define on the budget rate/amount
• Allocate budget in accordance with company targets over key accounts and products
• Apply budget check over planning and settlements
• Detailed tracking and auditing of all funds transactions

Simplification on fund structure:

• No need to create a "fund plan" on top of the fund.
• Make the fund type optional, reducing the number of funds to be created.
• Multiple products can be added to one fund, reducing number of funds to be created and making mapping to the account plan with multiple products simpler.
• Dynamic rates are naturally part of the fund master data definition.

We are going to look at how the fund setup process looks like. In the previous annual sales planning and budgeting step, we have calculated the budget from annual budget planning. Now, we will dive into more details on how we can create fund and budget accordingly.

The first step is to decide how many funds we are going to have, according to allocation rule configuration via fund dimension setup. This could be, for example,

• massively generated from master data
• Fixed initial budget can be entered at funds during generation at one shot
• Excel upload is possible to create fund and fixed budget at one shot

• Provide in-time KPIs for the essentials aspects on fund budget and consumption situations realizing proactive alert and monitoring
• Figures drilldown to trace down problem all the way from dashboard, to fund level checkbook, till detail posting transactions and original promotions.
• Easy navigation between related objects providing smooth UX experience

There are following configuration entities to be defined for funds:

Firstly, Fund Global Toggle, it is the general control where funds management is activated. E.g., for CPG companies, who don't want to use funds management process simply don't need to activate this toggle.

Secondly, Generic setting, this is the place to define the starting year to enable fund and the granularity (aka. how much) of the funds to be created.

• enableFrom Year is the starting year when funds should be created and used by account plan and promotions. The account plan/promotions created before the year will NOT determine hence controlled by funds.
• Fund Dimensions set the granularity funds should be created, the following combinations are supported: by customer/ customer + product hierarchy/ customer + fund type/ customer+product hierarchy+fund type

Finally, when "fund type" is activated in Fund Dimension, the list of fund types can be defined here, and each fund type also setup the mapping to spend type+payment type combinations, so that a promotion spend can map to the fund type accordingly.

Currently, the above configurations are handled via RGM "central configuration" import, means the configuration needs to be created in the xml format (template can be found at funds documentation on configuration), and imported via central configuration import UI. There are roadmap plans to have fund configuration UI enabled in near releases.

Fund configuration are setup via "central configuration" import/export, the relevant entries are

• Fund Global Toggle
• Fund generic setting
• Fund type (including mapping to spend type + payment type)

"Fund Global Toggle": Controls the activation of funds management.

"Fund Generic Setting" defines:

• "enableFrom" year
• Fund dimensions: by customer/ customer + product hierarchy/ customer + fund type/ customer+product hierarchy+fund type

Funds can be created in batch instead of individual creation one by one. There are two options to do that. First, generate from selected master data.

The fund dimensions reflect the dimensions configured in previous step, e.g. create fund by customer + product combination.

Now It's an easy creation flow by choosing the required customer/product from SAP S/4HANA master data, generate the funds in preview based on those value combinations, put down budget figure, and then the funds are created with fixed budget in one shot.

It's also possible to group several product hierarchy nodes together when creating fund. This is simpler when account plan has several product hierarchy nodes, and sales finance want to have a single fund for all for simplicity instead of having trouble to take care separate fund for each product hierarchy.

Regarding the fund currency, it is determined by the trade currency/sale organization currency for the fund customer (with sales area). So that different funds can have different currencies. And the budget figures posted within are always using that currency.

For simplicity, "overlapping" funds are not allowed. E.g. you can't have funds for both L1 SAPBucks + Coffee and L2 SAPBucks US+ Coffee.

Very often, sales finance used to work on budget allocation in excel. So there's the second option to create fund by excel upload.

There are provided templates where sales finance can put into the desired fund setup in that format. To make it easier for the excel entry, there's the option to pre-fill the selected customer/products(also with determined currencies) during "customize template" download option, so that sales finance simply need to put down budget figures and the excel is then ready for upload.

Very often, sales finance used to work on budget allocation in excel. So there's the second option to create fund by excel upload.

There are provided template where sales finance can put into the desired fund setup in that format. To make it easier for the excel entry, there's the option to pre-fill the selected customer/products(also with determined currencies) during "customize template" download option, so that sales finance simply need to put down budget figures and the excel is then ready for upload.

For auditing purpose, sales finance can track down the fund mass generation batches via "track creation history" screen. Each mass generation is represented under a creation ID in the creation batch list.

The details of the batch shows that the funds and budgets is created within that batch.

At any time of the year, it's possible to adjust budget figure by increasing or decreasing by a specified amount responding to requests from the Key Account Manager or controller.

The fund determination rule is relying on the fund dimension configuration to decide what dimensions of fund customer(+sales area)/product should be determined. The determination take place automatically upon account plan creation, based on account plan customer(+sales area) and product hierarchy nodes.

Then the determined funds are shown in the account plan tab of "funds". And the "trade spend" budget KPI shows the adds-up total budget from determined fund.

During the promotion creation, funds are automatically determined based on promotion customer and product hierarchy (the lowest hierarchy node level of the promotion product). And search up along customer/product hierarchy tree (maximum 2 levels up as restriction for now for performance consideration) to match fund customer/product. If fund type is activated in fund configuration dimension, promotion spend type + payment type is used to map for fund type (as defined in the fund type configuration mapping section).

The determined funds are listed in the "associated funds", with associated trade spends using each fund. Funds customer/product hierarchy can be higher level than promotion customer/product, for performance consideration, we restrict the distance as maximum two levels up. Trade spend type and payment type are used to determine fund type if that fund dimension is activated per configuration.

The fund checkbook Key figures are displayed like total budget and available to reserve. In case of available to reserve can't cover the associated spend amount from current promotion, the "soft control" policy is applied, by showing a warning message, while the promotion can still can be saved (aka. overconsuming the budget).

During the promotion creation, funds are automatically determined based on promotion customer and product hierarchy (the lowest hierarchy node level of the promotion product). And search up along customer/product hierarchy tree (maximum 2 levels up as restriction for now for performance consideration) to match fund customer/product. In case of fund type is activated in fund configuration dimension, promotion spend type + payment type is used to map for fund type (as defined in the fund type configuration mapping section).

The determined funds are listed in the "associated funds", with associated trade spends using each fund. Funds customer/product hierarchy can be higher level than promotion customer/product, for performance consideration, we restrict the distance as maximum two levels up. Trade spend type and payment type are used to determine fund type if that fund dimension is activated per configuration.

The fund checkbook Key figures are displayed like total budget and available to reserve. In case of available to reserve can't cover the associated spend amount from current promotion, the "soft control" policy is applied, by showing a warning message, while the promotion can still can be saved (aka. over consuming the budget).

When promotion is saved as "Planned", the "pre-reserve" consumption posting is booked to fund checkbook, at value category of "pre-reserve". When promotion is released, the spend value is moved from "pre-reserved" to "reserved" via a follow up consumption posting.

When promotion is saved as "Planned", the "pre-reserve" consumption posting is booked to fund checkbook, at value category of "pre-reserve". When promotion is released, the spend value is moved from "pre-reserved" to "reserved" via a follow up consumption posting.

The funds budget and consumption situations can be checked out easily at fund dashboard. The critical KPIs like total budget, reserved, available to reserve, and number for funds in overconsumption situations are indicated.

It is convenient to drill down for details by clicking the card and navigate to the fund list screen.

Funds can be searched and shown up at provided criteria, for example, year, sales area, customer, product and etc. Also, sales fiancé may be interesting to focus on filtered overconsumed funds by simple clicking on "over budget" KPIs.

Navigation into the fund detail screen is possible by clicking on the fund line.

Fund detail provides 360-degree-view on everything relates to this fund, including fund definition, checkbook KPIs, budget postings, and consumption posting (so far only budget reservation by promotions are provided). So, it is rather easy to track down the promotion reservations on fund, and pin down the problem reservations e.g. by reservation posting amount. For this, it's easy to navigate to promotion detail to check on the planning spends details causing the overconsumption.