Maintaining Condition Contracts

Process Flow example:

This example relates to a condition contract that is valid from October to December in a calendar year. The condition is defined as a scale. A monthly interim settlement is scheduled, which means that partial settlements will be made at the end of each month.

The relevant business volume does not reach the minimum amount of USD 5,000 in October so a settlement amount is not calculated for this month.

A total business volume of USD 7,000 is reached by the end of November: USD 3,000 from October plus USD 4,000 from November. The settlement run now calculates a rebate of USD 140 (2% of USD 7,000). The accruals amount is updated accordingly.

A total business volume of USD 27,000 has been reached by the end of contract term and the second scale level has been reached. This means that there is a total rebate of USD 1,080 (4% of USD 27,000).

When it calculates the final payment, the system takes into account the amount that has already been paid. In this example: USD 1,080 - USD 140 = USD 940.

The main features of a condition contract are the following:

• Central contract administration:
  • It acts as a single point of entry for contract data and contract related conditions.
  • It provides full support for all business volume related scenarios.
  • There is an intuitive data entry of settlement information available.
• Full transparency of involved documents: it provides an overview of all documents where a contract condition was determined and were accruals were posted.
• Detailed settlement overview:
  • It provides a detailed overview of complex settlement scenarios (ALV & Graphical view).
  • It provides an overview of all settlement documents and their FI status.

A condition contract enables you to store and edit the conditions negotiated with your business partner in one place in the system. This offers the best possible overview and maximum transparency of the conditions entered in the system and ensures that these conditions can be accessed centrally.

A condition contract provides different functions that make it easier to manage conditions. In addition to a validity interval that defines the period in which conditions can be negotiated, several different release scenarios are available in order to activate the conditions for operational use. Furthermore, you can enter a wide range of information (such as texts or reference data) to facilitate communication with the involved parties.

A condition contract supports flexible business volume determination. The business volume to be used can be defined without limitations:

• For business volume determination, the field selection and the field combination(s) to be used can be defined without restrictions.
• Both inclusive and exclusive functionality is supported.
• The source of the business volume is defined in Customizing.

Business volume determination is also independent from the condition record.

Condition contract settlement can be used everywhere where subsequent compensations based on business volume or quantity are to be settled with a business partner, or with a group of business partners. The settlement does not usually take place at document item level but, due to the high volume of documents, it is made based on cumulative key figures (business volume). These key figures are determined from the transactional document data.

The condition contract settlement can be used for sales-based compensation. Different data sources can be used to determine the business volume, for example purchase orders, deliveries, billing documents, point-of-sale data, or agreed fixed budgets.

You can use the following key figures that are determined by the system from the transactional document data as the basis for the settlement: quantity, monetary sales, weight, volume, or points. The key figure used for the settlement is also usually uniformly known as the "business volume base".

Calendar-based settlement:

• It supports different settlement types which are part of the supplier/customer agreement.
• There are no restrictions with respect to settlement dates.
• Settlement dates can be derived automatically from settlement calendars.

The execution date can be defined independently for each settlement date.

A detailed settlement overview is available:

• Open and executed settlement documents are shown.
• An overview of the FI status is also given.

Conditions requiring subsequent settlement are generally settled at different times according to the agreement with the business partners. You can define the settlement dates in the contract in a settlement calendar. In addition to the settlement date, you also specify which settlement type is to be used.

The following settlement types are available:

• Partial settlement

• Final settlement

• Delta settlement

• Delta accruals

You can also use detailed statements in the settlement to document which transactional documents have gone into the settlement.

Partial Settlement:

In a partial settlement, the conditions of a condition contract are provisionally settled for a specific time period in the entire duration of a condition contract. A distinction is made here between a normal partial settlement and a cumulative partial settlement. In a cumulative partial settlement, the sales and revenue from previous time periods that have already been settled are "rolled up". This means, for example, that the better condition values associated with scale levels can be used earlier in the condition contract settlement. Normally, you settle the partial settlements for a final time with the final settlement.

Final Settlement:

A final settlement permanently settles a specific time period in the entire duration of a condition contract. The settlement of a condition contract can contain one or several final settlement/s. The start of the time period is either the validity start date of the condition contract or the date of the last final settlement. The end of the time period is the current final settlement date or the validity end date of the condition contract.

All the values of a time interval that were previously partially settled are settled in a final settlement. Unlike partial settlements, final settlements are not settled in later partial or final settlements. It is still possible, however, to correct final settlements using a delta settlement

Delta Settlement:

Subsequent corrections or late postings can alter the business volume base of a time interval for which there is already a final settlement. You can now use a delta settlement to settle these subsequent changes and to correct the final settlement for the time interval. You can also repeat delta settlements. Previous delta settlements are then also taken into consideration. You can define the delta settlement in the contract settlement calendar ahead of time. One or more delta settlements are permitted. For example, you can have a final settlement on December 31 and then a delta settlement on January 15 and January 31 of the following year.

Delta Accruals Settlement:

You can create accruals with the delta accruals settlement in an accumulated form when you do not create accruals together with the source documents, like purchase orders or SD billing documents. Usually, you schedule jobs to run the delta accruals settlement periodically. You also use this settlement type to make corrections to accruals that are required because the condition data has changed. In a delta accruals settlement, existing accruals are automatically cleared.

It is not possible to use delta accruals to change the moving average price. The moving average price can be adjusted only as part of the stock posting. However, it is possible to post accruals to G/L accounts in order to map the rebate claim in FI.

Accrual conditions can be defined independently from settlement conditions.

Flexible accruals handling has the following characteristics:

• It supports different calculation types.
• Accrual conditions can be determined within source documents.
• Accruals are cleared during at settlement run.
• Changes to settlement-related conditions do not influence the accruals.
• A different way of handling of these conditions within CO-PA is possible.

The order-to-cash (O2C) process is the complete process from sales order to cash receipt. Sub-steps are usually defined individually within a company.

Use Cases in the Order-to-Cash Process

The basic sales scenarios are as follows:

• Rebates based on billing documents

• Rebates based on cash sale data

• Rebates based on agreed budgets

Due to legal requirements, accruals have to be created for customer-related settlement processes. This can be done when the SD billing documents are created or in accumulated form as part of the delta accruals posting. In this posting, the system determines the pending accruals and posts these automatically to FI. In doing so, it includes any accruals that have already been created so that the accruals always represent the current status of the expected payment obligations. Therefore, it is not necessary to re-evaluate billing documents that have already been posted or created.

Flexible reporting options using predefined reports for condition contracts are available in the standard SAP S/4HANA system. These are some of their characteristics:

• Performance-critical reports are built based on CDS View technologies and IDA (Integrated Data Access) ALV (SAP List Viewer).
• Customer-specific fields are supported.
• Flexible selection options are supported.
• They are optimized for the SAP HANA platform.