Describing the Master Agreement in an Overview

The lesson gives an overview about functionality that is new with master agreements that is used in B2B business processes.

In training systems the organizational units are represented by business customers like Headquarter, Development North, Sales North, Sales, South and Development South.

All business partners have their own contracts according to print services as CPU and RAM. Standard billing and invoicing processes would run without new functionality run only along contract accounts. Assuming that all organizational units have different contract accounts, because they have financial accounting responsibility, no common view on bill presentments would be possible.

With the introduction of master agreement, a view from the organizational structure is possible for invoice creation, calculation of discounts, payment of invoices and invoice list creation.

• A master agreement is a contract between a provider and a customer usually a large company in which common terms for future contracts are defined.
• In Convergent Invoicing Master Agreement concentrates on Billing Side of the process, leading system for Master Agreement Creation in a CRM System.
• The common terms can cover aspects of invoice creation (layout, recipient, payer, additional invoicing lists …) and discounting (which services have a reduced price and who benefits)
• New Master Data Object in Convergent Invoicing

Provider Contracts can have a reference to one Master Agreement.

Billable Items are checked via its Master Agreement according to conditions

Follow Up Processes are driven by billable Item Analysis according to Master Agreement.

A master agreement is a contract between a provider and another party (usually a large company) in which common terms for future contracts are defined. The common terms can cover aspects of invoice creation (layout, recipient, payer) as well as discounting (which services have a reduced price and who benefits).

The master agreement in ERP concentrates on the processing/billing side of provider contracts which reference a master agreement. Billable items which belong to such a provider contract have to be treated as specified and agreed upon in the master agreement. Essentially, which invoice and which discount(s) should the billable item be considered.

The reason for having a master agreement in place is for the customer to benefit from the common terms. With them a consolidated and harmonized processing of billable items is possible. One business partner can have multiple master agreements.

• Is a rule definition in an Master Agreement that definition which rules should apply to billable Items.
• There are three different agreement type possible: Discount Agreement, Invoice Agreement and Invoice List Agreement.
• Enhancement of master Agreement with Agreements is done in Convergent Invoicing.
• Define Rules and Areas of Validity (Partner, products, Billable Items) for Agreements.
• Define Contractual Level.

In an integrated scenario CRM focuses on the ordering side of a master agreement, ERP focuses on the billing side.

For this, different types of agreements within the master agreement can be created.

The different agreement types within a maser agreement include the following:

• Invoice agreement: Dependent on business partners, products and further selections it can be decided which invoice the billable item will end up on.

• Invoicing list agreement: If invoices are sent out in a decentralized way but the headquarters want to have an overview, additional invoicing lists can be used for this. They are similar to an invoice copy but can also be set up in such a way that only final amounts are displayed and not billable items. They can be dependent on business partners as well as invoice agreements.

• Discount agreement: Dependent on business partners, products and further selections it can be decided what kind of discounts will be applied to the billable items.

For a more convenient maintenance of the agreements area of validity, it is possible to define business partner and product groups. By those groups the single records are bundled together and can be assigned to an agreement more easily (instead of entering each entry separately, which can become quite cumbersome).

The agreements are built up out of a rules part and an area of validity part. The rules part is specific for each type of agreement. It tells what has to be done when a billable qualifies for an agreement (for example, the rules part of an invoice agreement tells who the invoice recipient is). The area of validity specifies the conditions under which the rules are applied. The conditions can be set up based on business partners, products and further selections based on filters and function modules.

Business Example in Training System:

The slide shows a business example in training system. Five provider contracts were created in the CRM system with reference to master agreement. The assignment was replicated to provider contract items.

There are transactions for displaying and changing master agreements. There is also a transaction that provides an overview of the existing master agreements. A transaction for creating master agreements is available (transaction FP_MA1), but is not needed in a live system, if you create master agreements in the CRM system and replicate them to the ERP system. In transaction FP_MA_TEST you can enter test data for billable items. After that, you can test which of the items qualify for which agreements of a master agreement.

Master agreement defines a logical bracket for a number of provider contracts with different contract accounts.

With this master data structure, it is now possible to define provider contract overall rules for partner groups, product groups and billable items in order to realize common terms for the groups.

A master agreement represents a contractual agreement between a service provider and a business customer. In a master agreement, you specify the fundamental elements and conditions for dependent individual contracts (provider contracts). In addition, you can agree on rules in the master agreement that govern the business activity that arises from these individual contracts.

The master agreement can contain agreements on products, prices, discounts, and the procedure for invoice creation. It also contains the additional parties (represented by business partners), who can sign individual contracts under the conditions of the master agreement. A master agreement can contain a customer-specific list of products to which the conditions of the master agreement apply. These can be both standard product numbers as well as custom product numbers and product names. Products often represent the right to use certain services of the provider at specially defined prices.

Business Example:

The right to use telecommunications services at specially agreed basic fees and usage fees.

In this case, products relate to a charge plan that is used in SAP Convergent Charging for determining prices for services used.

A list of all parties (business partners) that are authorized to sign individual contracts that refer to the master agreement.

Rules that specify which business partners are allowed to purchase which products.

The listed components make it easier to conclude individual contracts and make it transparent which components relate to a master agreement. You need the entries for these components primarily in SAP CRM, and therefore, you make these entries there. The elements that are needed in SAP ERP are replicated automatically to the ERP system. These elements are the list of products and the business partners that are included in the master agreement.

In the ERP system, you add entries to the master agreement that are needed for the processes for invoice creation or for subsequent discounting. You make these entries in the form of the following agreements:

• Agreement for creation of invoices (invoice agreement).

• Agreement for discounting (discount agreement).

• Agreement for creation of invoicing lists.

All agreements consist of a procedure specification, in which you define the execution rules (such as control parameters for creation of invoices or parameters for calculating and distributing discounts), and a validity area, in which you specify the billable items for which the agreement applies.

Billing and invoicing evaluate the entries for the agreements in the master agreement. However, the fields for agreements in the master agreement are not automatically available in the billing document and invoicing document. If you want to use master agreements, you have to add these fields to the billing document header and invoicing document header using a prepared enhancement.