Identifying Master Agreements and Partner Agreements

Today, many companies in the B2B markets face challenges when offering and billing B2B solution packages with innovative pricing models (comprising usage services, products, recurring subscriptions and one-time services). A prominent example is cloud services. Let’s look at a list of these challenges and how SAP S/4HANA for Billing and Revenue Innovation Management (BRIM) can support.

• Define and offer solution packages in a single quote.
• This includes hard-goods products for one-time sale, project-based billing agreements, service contracts, and warranty support, combined with recurring subscriptions and metered/usage-based charging.
• Master Agreements (sometimes called Frame Agreements) can be created to capture special terms for important customers.
• These terms govern what are the items that different entities of the enterprise can order, how they are priced, how they are billed, and how they will be paid.
• Discounts and tiering levels in the pricing agreement can be driven by shared allowances or pools of credit/entitlements/quota that are maintained in real-time even for large enterprise customers with tens of thousands of employees, seats, or devices.
• The customer can receive a consolidated bill for all services, even including billable items or complete bills taken in from third-party billing systems and converged onto a single invoice.
• Alternatively, split billing can be performed where different departments or subsidiaries within the large enterprise are responsible for paying different charges.
• Invoices can be parked and checked by account teams and adjustments made before invoices are sent.

SAP S/4HANA for Billing and Revenue Innovation Management (BRIM) offers significant benefits for large enterprises, particularly in the realms of solution sales and billing. It enables business model transformation by facilitating the creation of solution packages tailored to meet diverse customer needs. With SAP BRIM, enterprises can enhance customer retention and boost deal win-rates by providing a unified solution quote and a single converged invoice, simplifying the customer experience. Also, the platform ensures transparent invoicing, reduces disputes, and lowers Days Sales Outstanding (DSO) through automated and timely high-volume processing; streamlining operations and improving overall financial efficiency.

A Master Agreement is a comprehensive contract established between a provider and a customer, typically a large company, whereby the common terms and conditions for future contracts are clearly defined. This overarching agreement outlines various essential aspects, including ordering procedures, which specify who within the customer's organization can place orders for which products and under what conditions.

Also, it details invoice creation, encompassing the layout of the invoices, the recipient details, the payer information, and any extra invoicing lists that must be generated. Furthermore, the Master Agreement stipulates the discounting practices, clarifying which services are eligible for discounts and identifying the beneficiaries of these reductions. This foundational document streamlines future transactions by providing a consistent framework that both parties adhere to; simplifying the process and enhancing efficiency. Let’s look at an example.

Discounts are scaled based on volume, for example, a 3% discount for usage-dependent charges if the total amount for the month exceeds EUR200.00, and a 5% discount if EUR500.00 is exceeded. If the invoice amount for all contracts of a Master Agreement exceeds EUR20,000 over the course of a month, then you grant a discount of 5%. However, this discount does not go to the invoice recipients, but is instead credited to the group headquarters.

Discounts in the pricing agreement can be driven by shared allowances or pools of credit/entitlements/quota that are maintained in real-time even for large enterprise customers with tens of thousands of employees, seats, or devices.

Invoice agreements specify who receives the invoice, the payer of the invoice, the layout, and extra invoicing lists. The customer can receive a consolidated bill for all services, even including billable items or complete bills taken in from third-party billing systems and converged onto a single invoice. Alternatively, split billing can be performed where different departments or subsidiaries within the large enterprise are responsible for paying different charges.

Once a month, the group headquarters receives a summary of all invoices that were sent to its subsidiaries.

Different services have been billed using two separate invoice agreements, INV1 and INV2. You now want group headquarters to receive an invoicing list for all invoices that were created using INV1 and that went to German subsidiaries. In that case, you restrict the business partners to those for the German subsidiaries, and at the same time make a restriction to invoice agreement INV1.

As shown in the previous graphic, the SAP HQ has a Master Agreement (=MA) 4711 for the products "Mobile Business" and "Fixed Services".

SAP Germany and SAP North America are allowed to participate in this MA with the corresponding products. This participation includes the following:

SAP Germany receives an invoice for fixed services and recurring fees for mobile services. Whereas usage fees are paid by the SAP HQ. North America receives an invoice for fixed services and recurring fees for mobile services. In addition, North America receives a discount of 10% on the invoice amount and an invoice list is sent to the HQ.

The previous business scenario shows the creation of a Master Agreement. The Master Agreement data is distributed between SAP S/4HANA SOM and SAP S/4HANA FI-CA and each component stores the relevant data for its core processes. Master agreements get created in SAP S/4HANA Service SOM. SAP S/4HANA Service SOM focuses on the ordering side of the Master Agreement.

During creation of a Master Agreement, the products, which are part of this Master Agreement, can be entered. Those products are based on standard products but in the context of the Master Agreement, you can have a Master Agreement specific product number and a specific product description or different prices.

While SAP S/4HANA Service SOM focuses on the ordering side of a Master Agreement, SAP S/4HANA FI-CA focuses on the billing side.

1. Access the SAP Fiori App Manage Master Agreement and create a new Master Agreement.

   Assign a Master Agreement contract partner. The Master Agreement contract partner must have a contract account for technical reasons as well. The Master Agreement Contract Account (MA-CA) is used in Convergent Invoicing to assign billable items.

2. Create a Master Agreement Item as a reference for subscription order call-offs:
   • Select a product.
   • Define Custom Product IDs and Custom Text.
   • Configure the product and fix the configuration if required.
   • Find subitems of bundle in product list and redefined subitems.
3. Partner function in Master Agreement:

   The contract partner is the partner with whom you have negotiated the Master Agreement. A Master Agreement only has one contract partner and is assign on the Master Agreement header.

   Authorized contract partners act as the contract partner, sold-to party, and service recipient in the call-off object as a default setting.

   Authorized sold-to parties act as the sold-to party and service recipient in the call-off object as a default setting. They cannot however act as the contract partner in the provider contract. The default contract partner is used here.

   Authorized service recipients cannot act as the contract partner in the call-off object. They can be entered as an alternative service recipient in the call-off object.

   The Master Agreement Partner (Contract Partner) is the partner that you negotiated the Master Agreement with. This partner is also the legal partner. In addition, it is possible to maintain a contact person and a description.

   On Master Agreement item level, you have to assign Authorized Partners. Authorized Partners can perform call-offs (such as provider orders) for the Master Agreement or can receive goods and services. If the standard behavior is not sufficient, it is possible to define your own rule via the Check Authorized Partners for Provider Master Agreement BAdI.

   The authorized partners can be added as business partners, and the hierarchy structure itself can be added or a hierarchy node. In this case, a hierarchy node is added.

4. Convergent Charging Tables

   Depending on the Master Agreement negotiation, it can be necessary to change the entries of a standard Mapping or Range Table only for this specific Master Agreement. In case of redefining, the systems automatically copy the default table and creates a new table. Mapping or Range Tables are created as Agreement Tables with relation to the Master Agreement.

   • It is also possible to assign another existing table.
   • Via the hyperlink you can navigate to the SAP Convergent Charging table.

The concept of redefining Convergent Charging Parameter is similar to the tables. The system reads the parameter from the standard product (cross-catalog mapping) and displays them in the Convergent Charging Parameters assignment block. The following options are possible to redefine a parameter:

• Redefined Value: The Redefined Value column is editable and you can enter an individual value.
• Characteristic: The Characteristic column is editable and you can select a characteristic from the product configuration.
• BRF Event: The BRF plus function column is editable and you can select an existing BRF Event.
• You can set a Master Agreement specific billing cycle/billing cycle determination rule, which will the be copied to the subscription item of the call-off object.

These are the steps:

1. Redefine Product Billing Cycle/Billing Cycle Determination Rule:

   You can set a Master Agreement specific billing cycle/billing cycle determination rule, which is copied to the subscription item of the call-off object.

2. Manage the Status:

   Release the Master Agreement item.

3. Define Recurring Price Conditions for Master Agreement items.
4. The Master Agreement Is Replicated to FI-CA:

   Discounts, invoice agreements, and invoice list agreements are assigned to the Master Agreement and shown in the SOM side of the Master Agreement.

5. The Master Agreement item Is Ready for Subscription Offs:
   • All call-off documents are referenced to the Master Agreement for discount, invoicing agreements.
   • Create a subscription order for the sold-to party and the Master Agreement is set as reference for the subscription order.
   • Master Agreement conditions are transferred to subscription call-offs.

As traditional industries increasingly change their business model to a service-based model, a revenue sharing business model becomes more and more important. In such a model, the service provider, who has the contractual agreement with the end customer, shares parts of the revenue with their content providers or has to pay some royalties.

When an end customer is buying a service, the content partner can get part of the revenue that the services provider makes with the end customer.

For this reason, a service provider closes a partner agreement with the content provider. The partner agreement contains the conditions that were negotiated between the service provider and the content partner, such as the service and the revenue split.

The provider that acts as a billing operator, including invoicing and collections towards the end consumer, must forward a certain amount of money to the corresponding partners or third parties.

Partner agreements are similar to provider contracts a long-term agreement for a technical service that the provider company signs with a partner. It is represented by a main rate plan item within a partner agreement document.

The process to create a partner agreement is the same as for provider contract creation. The difference between provider contract and partner agreements is the product.

The product for partner agreements must be defined as a partner product and has partner settlement rules assigned. ODI determines the settlement rules during the contract activation process and creates a partner agreement in SAP Convergent Invoicing.

Mike, a customer of a telecommunication provider downloads a new song to his mobile phone. ​The song is provided by SONGY and Mike can pay for the song with his mobile telecommunication account.​ SONGY is a music and video provider and has an agreement with the telecommunication provider to provide music content to his customers.

The telecommunication provider sells digital content, for example music download provided by SONGY as an add-on to his customer. ​They have a contract with the end customer (Mike) and a partner agreement with the content provider (SONGY). An end customer buys digital content (for instance, music download) for which the provider must pay fees to third parties.

From the end customer billable item for the download, a partner item for SONGY is split off as consumption items for rating.

These consumption items are sent to SAP Convergent Charging for rating and charging and received back as partner billable items in SAP Convergent Invoicing.

Billing and invoicing of end customer and partner billable items generate debit for the end consumer as well as credit memos for the partners.

If an end user uses services or purchases products of a service provider, and these services or products use rights, infrastructure, services, or products of a partner, then payment is due to this partner. In these cases, a portion of the amount that you invoice to the end customer has to be paid to one or more partners.

From the end customer billable item, partner items are split off as consumption items for rating. These consumption items are sent to SAP Convergent Charging for rating and charging and received back as partner billable items in SAP Convergent Invoicing. Billing and invoicing of end customer and partner billable items generate debit for the end consumer as well as credit memos for the partners.