Performing Milestone Billing with Down Payments

Your company decides to invoice a few customers based on the progress made in a project. As the project manager, you need to establish a milestone billing plan to manage the billing process. You also need to process customer down payments to include generating the payment request, payment processing, and payment clearing.

A typical use for milestone billing is project billing, which is often used in plant engineering and construction. This type of project often contains numerous milestones that mark the completion of various project segments. In the SAP system, milestones are found in a network with actual and planned data for the completion of project segments. Milestones are also assigned to dates in the billing plan and retain a billing block until the milestones are confirmed as complete from the network (an actual date is set for this purpose).

The billing plan can contain invoice and down-payment dates for the down payments that are agreed upon with the customer. The billing rule controls this procedure. For example:

• Billing rule 4: Down payment

• Billing rule 1: Partial invoice

You bill unlocked dates in the billing plan for the corresponding due dates. You create a down payment request for down payment deadlines or a partial/final invoice for invoice dates (both of which you send to the customer).

When you post the incoming payment for a down payment, you assign the posting to the down payment request. In the case of partial or final invoices, you copy down payments as down payments to be cleared.

Milestone Confirmation (1)

The starting point for milestone billing is a sales order item with a billing plan with dates that stem from milestones of the assigned project.

If you enter actual dates in the billing milestones (by confirming the assigned activity, for example), the billing lock imposed on the corresponding date in the billing plan is lifted.

In the forklift project, the lock on a down payment date (billing rule 4) is lifted.

Milestone Confirmation (2)

When you confirm activity 0070, an actual date for a further milestone is entered. The date is then unlocked in the sales order billing plan.

The billing program bills the unlocked second date of the billing plan.

A partial invoice is created using the billing document (controlled by billing rule 1).

The down payment is cleared to the partial invoice. In the invoice, the system defaults the down payments to be cleared in full. You can reduce the down payment amount to be cleared. When the invoices are printed, the amounts that are due and paid as down payments are displayed; these amounts are deducted from accounts payable.

Partial Invoice: Apportioned Clearing

You can change the amount of the down payment to be cleared in partial invoices by changing the amount for condition type AZWR in the pricing screen for the item.

The maximum amount that you can clear is the amount received as a down payment minus down payments that are already cleared.

The final invoice takes into account all down payments that are not yet cleared.

The down payment chains application is designed for the requirements of long-running projects. In the construction industry, in particular, projects can take several years to complete. Over the course of a project, various business transactions arise with several business partners, such as the sold-to-party, supplier, and subcontractor. You may create a number of partial invoices, taking into account retention amounts and additional costs. At the end of the project, you create a final invoice. You can also reverse documents and make corrections to postings for the final invoice.

Down payment chains enable you to structure the data entry and display of business transactions.

The purpose of a debit-side down payment chain is to monitor receivables to customers (for example, the sold-to party of a construction project) and gain information on past and future incoming payments.

The purpose of a credit-side down payment chain is to monitor payables for subcontractors or vendors and gain information on past and future outgoing payments.

Down payment chains are integrated with FI, CO, and PS.

Project Cash Management considers business transactions posted from feeder systems to projects from a payment standpoint.

Project Cash Management provides the most accurate information possible on incoming and outgoing payments and optimizes cash flows with a view to maximizing project profits. The project manager is responsible for Project Cash Management.

You can evaluate actual and planned data in the project information system through cost/revenue and payment reports.

You can plan payment flows (revenues and expenditure) on the basis of fiscal years, periods, or days. Actual data is recorded through purchasing and sales documents and customer and vendor subsidiary ledgers.

Recording Costs, Revenues, and Payment Data

Note

Down payment requests, down payments, and payments do not lead to costs or revenues, and you cannot evaluate them using cost or revenue reports.