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Introduction

Customer Service Organizations are focused towards fast and high quality service and at the same time want real time insight into service profitability. SAP Customer  Relationship Management (SAP CRM) is becoming widely used by these service  organizations to manage the complexities of service business. The increasing use of SAP CRM requires management accountants to understand the integration of customer service processes and to analyze service profitability by having complete view of service revenues and costs.

This article will provide detailed view of how SAP CRM integrates with Controlling. It will also explain the process flow of some key processes in SAP CRM, covering the creation of service orders and service contracts. To give background to readers on different types of service used in a service document in SAP CRM, the article covers different objects and details their impact in the integration with Controlling.

Controlling integration settings for CRM Service

1. Controlling Type

Let us go through configuration settings that drive integration between Controlling and CRM Service.  The first key aspect in the integration of Controlling with CRM is set up of the “Controlling type”. Controlling type determines how are the service revenues and service costs from CRM are to be tracked in Controlling. The service revenues and costs can either posted to a separate cost object or to be posted directly to Profitability Segment.
  • The option of “single object controlling” enables to tracks costs and revenues to separate cost object. With this option, the costs and revenues will be tracked into the Controlling internal order object. The tracking costs and revenues at the internal order level in Controlling will allow applying revenue recognition rules using the Results analysis functionality.

  • The option of “mass object controlling” posts all costs and revenues directly to Controlling Profitability Segment (CO-PA). However, this option will not allow executing revenue recognition using Results Analysis functionality.

Figure 1 provides view of Controlling Integration setting for CRM Service. This set up is done at the following menu path in configuration: Integration with Other mySAP.com Components > Customer Relationship Management > Settings for Service Processing > Controlling Integration.

Figure 1.jpg
Figure 1: Controlling Integration for CRM Service
The next aspect in integration settings is the “Controlling level” that determines whether the costs and revenues are to be tracked at CRM service document level or to be tracked at more detailed level at each line item of the CRM service document. The item level controlling will create internal order for at line item of the CRM Service document. For instance, for every line in the CRM Service document a corresponding internal order will be created. While transaction level controlling will create internal order per CRM Service document.

2. Controlling Scenario

With internal order set as controlling object, the next step is to define the Controlling scenario that will provide the parameters for the integration. The key parameters in the Controlling scenario configuration are defining the costing variant, defining the results analysis key to calculate capitalized costs & revenues and defining the settlement profile for specifying the receiver of costs and revenues.

Figure 2.jpg

Figure 2: Controlling Scenario in CRM Service
  • The costing variant is assigned for the internal orders to determine the planned costs in unit cost estimate. The costing variant will determine which price is used for valuation of material and for service hours booked against the service order. The standard SAP system offers default costing variant PC02 with predefined valuation variant.  You can directly use this standard variant or alternatively copy and customize the variant to meet your requirements.
  • The Results analysis key will drive the calculation of capitalized costs and recognition of revenues for the CRM service processes. The results analysis will calculate the work in process where costs incurred on the CRM service process are to be capitalized. It will also enable to apply different methods of revenue recognition. The results analysis configuration is done as part of CO module configuration at the IMG node of Controlling > Product Cost Controlling > Cost Object Controlling > Product Cost by Sales order > Period end Closing >  Results analysis.
  • The settlement profile will determine the target cost object to which the costs and revenues to be settled from the internal order. The settlement profile is defined in the CO module at IMG menu path of Internal orders > Actual postings > Settlement > Maintain Settlement profiles. The appropriate receivers will be defined as part of the settlement profile configuration.

3. Internal Order type

With CRM Service integration set up of single object controlling, all the internal orders are created with default order type ‘SAPS’. To use different order types based on CRM Service transaction (i.e. different internal order type by CRM process), you can implement controlling parameters BADI (definition – “iaom_business_scenar”). Within this BADI, use method “change_order_type” to derive order type based on the CRM transaction type.

Figure 3.jpg

Figure 3: BADI definition for changing default internal order type

With this back drop of controlling set up, let us understand different objects available in SAP CRM Service and its integration with Controlling.

CRM Service Products and Integration with Controlling

In CRM Service, the service order processing is based on the products used in the service order. CRM Service offers pre-defined products that can be used in service processing. Each of these products integrates in a unique way with Controlling.

1. Service Product

In CRM Service, Service product is used to plan for labor hours spent in service process. The labor hours are booked through CRM Confirmations that creates time sheet entry in ECC. The costs of labor hours are booked on transfer of time sheet data to Controlling. The actual costs are based on the activity rates maintained for combination of activity type and cost center of the service employee making the confirmation.

Here, the derivation of activity type is based on the CRM item category.  The item category signifies different types of service to enable mapping by activity types. The configuration for linking the CRM item category and activity type is to be done in IMG node of Integration with  Other mySAP.com Components > Customer Relationship Management > Settings for Service Processing > Time Sheet Integration > Define Derivation of Attendance Type, Activity Type and Cost Element.

Figure 4.jpg

Figure 4: Set up for service hours to derive activity type

2. Tools Product

Tools product are the materials that are repetitively used in performing the service job. The usage of tools item in the CRM Service process are booked through CRM confirmations and the costs are directly posted in Controlling as Internal activity allocations.  The actual cost of tools is recovered from cost center assigned to the tool item. The costs booked are based on the cost center and activity type combination maintained for the tool material in the following configuration node of Integration with Other mySAP.com Components > Customer Relationship Management > Settings for Service Processing > Controlling integration > Determine Cost Center and Activity Type for Tool.

Figure 5.jpg

Figure 5: Set up for tools to derive cost center and activity type

3. Expense Product

The expense item in the CRM Service process is used to account for additional expenses of the service order. The expense item costs are booked through CRM confirmations and directly create Controlling posting as reposting of costs on primary cost elements. The costs are recovered from the cost center of the service employee making the confirmations. The activity type and reposting primary cost element is based the configuration made in Integration with Other mySAP.com Components > Customer Relationship Management > Settings for Service Processing > Time Sheet Integration > Define Derivation of Attendance Type, Activity Type and Cost Element.

4. Service parts

The consumption of Service parts in the CRM Service process is posted through confirmations and these directly create material withdrawal posting in  materials Management. The cost of the service parts is based on the price maintained in the ECC material master. The actual costs of service parts are posted through goods issue on the internal order or to the account assignment object assigned during confirmations.

5.Sales Product

Sales products in CRM Service signify the materials sold along with the service. The Sales items in CRM Service Order are not confirmed but directly create a sales order in Sales & Distribution (SD) in ECC. The cost of sales product is posted to the internal order on goods issue for delivery in Materials Management (MM).

The following table gives snapshot of how each CRM service product integrates from costs and revenue perspective with Controlling and type of Controlling transaction posted in ECC.

CRM
Product
Cost
driver
Revenue
driver
Controlling
Interface
Controlling
posting on internal order
Service product Activity
rates maintained for cost center/activity type combination in ECC
Pricing
conditions in CRM Service Order / Contract
CATS
document
Actual
activity allocations

Sales product

Standard
costs of material maintained in ECC
Pricing
conditions in CRM Service Order / Contract
Postings
from goods movement
Postings
from finance
Service parts Standard
costs of material maintained in ECC
Pricing
conditions in CRM Service Order / Contract
Postings
from goods movement
Postings
from finance
Expense item Pricing
conditions in CRM Service Order / Contract
Pricing
conditions in CRM Service Order / Contract
Reposting
of costs
Reposting
of primary costs (on primary cost elements)
Tools items Activity
rates maintained for cost center/activity type combination in ECC
Pricing
conditions in CRM Service Order / Contract
Cost
accounting document
Direct
Activity allocation

Note: In CRM Service process, billing can be performed in CRM using CRM billing or in ECC in Sales & Distribution module. In this article, all the scenarios are explained with ECC billing only.

Let us go now through the commonly used CRM service scenarios by organizations. I will explain the controlling integration approach used in these scenarios.

Business Scenarios

Scenario 1: CRM Service Order process

In this scenario, for the service requested by the customer a service order is created in CRM system. The resources consumed in the service like materials, hours spent, additional expenses etc. are recorded as costs of service. The revenues are generated through billing done to the customer for the resources consumed. The following diagram in figure 6 gives representation of this process.

Figure 6_Visio SEO_2.jpg
Figure 6: CRM Service Order Process

In this process, the CRM service order triggers an internal order in ECC that will capture all costs and revenues. The costs booking on internal order will be based on confirmations booked in CRM system. The CRM confirmations create a CATS document in ECC and the CATS document books cost of the service on the internal order. When the billing is created, the revenues are booked against the internal order. Based on the set up done for results analysis, the costs of service can be capitalized as work in process.

From the management accounting perspective, all the costs and revenues will be collected against the internal order. The internal order will provide complete view of all revenues and costs booked on the service order.  The Results Analysis process will calculate the costs to be capitalized on the service order. The results analysis calculation will be driven based on the results analysis key linked to the internal order. Depending on the settlement receiver maintained for the internal order, costs are settled to a cost center or to CO-PA segment.

Figure 7.jpg

Figure 7 : Internal Order line item display

For example, in the internal order 7100138717 (figure 7) service costs incurred is 604.66 euros and no revenues are billed to the customer. Going by revenue recognition principles, as no revenues are billed on the service, the cost of service incurred should be capitalized. With the execution of results analysis calculation using KKA1 (Individual processing) or KKAI (Collective processing) and then subsequent settlement of the internal order using KO88 (Individual settlement) or KO8G (Collective settlement), the entire service cost of 604.66 euros will be capitalized to balance sheet as work in process. The balance of the internal order will thus be represented as capitalized cost values on balance sheet and there will not be any settlement of values to profitability segment.

Figure 8.jpg
Figure 8: Internal order line item display

Figure 9.jpg
Figure 9: Settlement rule of internal order

Figure 10.jpg

Figure 10: Settlement from internal order to profitability segment

After invoicing customer (Figure 8), the revenues of 720 euros attributable to service are recorded on the internal order.  With customer invoicing, the revenues and costs can now be recognized and reported in CO-PA. With the results analysis calculation and settlement of internal order, the capitalized value of work in process of 604.66 euros will be reversed. The revenues and costs of service will then be settled to Profitability segment. After settlement of values from internal order to Profitability segment, the balance of internal order becomes zero and all costs and revenues are reported for further analysis on various dimensions in CO-PA.

Scenario 2:  CRM Service Contract process

Figure 11_Vision Contracts_v2.jpg

Figure 11: CRM Service Contract process

In this process, CRM service contract is created for the contractual agreement drawn with the customer. As the single object controlling is set at the CRM Contract transaction type level, the internal order is created with reference to the CRM Contract. For executing service requests, CRM service orders are created with reference to the CRM Contract. Thus all the costs (material, labor hours and additional costs) are incurred in relation to the service order and these costs are booked on the ECC internal order created with reference to the contract. (Note that there is no internal order in relation to the CRM Service order as controlling settings are that the level of CRM Contract in this example.) The revenues on this internal order are booked by the billing created for the contract value.

Results Analysis process, as in scenario 1 will be executed on the internal order to calculate the capitalized costs, deferred revenues and unbilled revenues. The settlement process will create actual postings on balance sheet accounts based on posting rules set up for Results Analysis.

This process scenario is similar to scenario 1 explained above except the controlling object is created with reference to the CRM service contract that generates revenue. As explained earlier, this is driven based on the integration settings done for combination of CRM transaction type and Controlling type. Thus the costs and revenue booking happens on the internal cost object and enables to analyze the profitability of the CRM service contract.

Figure 12.jpg
Figure 12: CRM Service Contract example

For example, in the internal order 7200001202 created for the CRM Contract, the revenues of 12155 euros are billed on the contract and the service costs of 72 euros are collected on the internal order. With the setting used of controlling at transaction level, all the subsequent service costs over the life of the contract will be accumulated on this internal order.

From revenue recognition perspective, the revenues billed on the contract are to be spread over the life of the contract. The results analysis calculates the revenues of 945.42 euros to be recognized in this case and the balance of excess revenues billed is treated as capitalized revenues. The settlement process creates posting to profitability segment for the revenues recognized and for the costs settled. The balance visible on the internal order (12155 – 945.52 = 11209.58 euros) represents the revenues capitalized on balance sheet as deferred revenues.

In both the scenarios illustrated above, an integrated solution between CRM and ECC offers detailed view to track the efficiency of CRM service transactions and report both the capitalized values profitability in a comprehensive manner.

Author: Rupesh Kabra

You can reach me via email at rupesh_kabra@infosys.com

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6 Comments

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  1. SK D

    Hi Rupesh,

    Liked the document very much. Good stuff with good details.

    I have couple of points. Could you provide your e mail id? I am not able to send a direct message through SDN.

    Thanks

    (0) 
  2. Pinar Hacihasanoglu

    Hi Rupesh,

    Thanks for the helpful information. We have the same scenario, but having a trouble in settlements, as revenue accounts are created as 11-revenue type. System gives message KD256 – There are no accrual values.. in settlement. Note 179553 consulted as if there is both RA key and revenue in the object, it does not allow to settle to any other object. We may be missing or should be changing something in RA customizing.

    Any suggestion/recommendations will be really helpful.

    Regards.

    (0) 
  3. Jameel Khan

    Dear Rupesh

    Very nice document. Could you please tell me which RA key and RA method can be used in this scenario

    RA method -Percentage of completion method Or Quantity based method or WIP method of RA key is used in this scenario

    Sales order should have internal  order as account assignment or how revenues will be posted to internal order

    Thanks

    Bhima

    (0) 

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