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Introduction

This guide will give you an overview of the best practices as well the capabilities of how you can define a global role catalog and define specific cost rates and prices for e.g. a certain group of people within in S/4HANA Cloud. The reason for this how-to guide is the regular request from customers to extend the existing number of activity types / materials to be able to cover their requirements regarding their global role catalogues. Although it is currently not possible to create new activity types to derive more billing materials and extend the DIP profile in the backend, we do deliver a set of functionalities that allow you to store cost rates and prices on a very granular level even in the planning phase of your projects. This flexibility helps to overcome the limitation of activity types and materials and to cover the requirements within the standard.

 

1. Activity Types and Materials

Activity types are objects that classify the activities performed at cost centers, such as machine hours, consulting hours, or units produced. To enable activities to be planned and allocated, quantities of output are measured in defined activity units.

1.1. Activity Types

Activity Types are used to define a global catalogue for your internally and externally used roles. Within S/4HANA Cloud it is best practice that activity type and sales material get the same ID and description. This makes the flow from project planning to billing smooth and reasonable. Activity Types are only used internally and are not visible to any customer or external partner, as they are only used for clustering the work activities by e.g. seniority and type of activity. This activity (role) catalogue should reflect the way how the company structures their employees and skills.

Example: T001 – Junior Consultant

SAP delivers by default 20 activity types which should be used to represent the global grade catalog for activities performed by internal and contingent employees measured in hours. Those activity pre-delivered activity types are named T001 – T020 and can be adjusted in terms of naming by the customer. They are forming the base for a globally valid skill catalog which might differ in cost- or price rates in regard to organizational assignments.

If this granularity is not sufficient, and more dimension for cost controlling are needed, it is possible to again subdivide the employee groups (activity types) more granular. With the Service Cost Level an additional component can be added to an activity type to distinguish between several levels of e.g. Junior Consultants.

The Service Cost Level can be maintained in the employee master data record in S4H cloud directly (no exchange / transfer from Success Factors possible) and represents the personal skill level of the employee. It can be customized via a SSCUI.

Example:

  • T001 and Service Cost Level 01 –> Junior Consultant Beginner Level
  • T001 and Service Cost Level 02 –> Junior Consultant Intermediate Level

With the Service Cost Level tag assigned to the relevant employee it is possible to plan cost rates on a very granular level. The service cost level does only have an influence on the cost rate – not on the sales price of the activity. The sales material will still be e.g. T001 = Junior Consultant and therefore no price maintenance for service cost level is possible as the internal employee / service level structure will not be stated on the invoice bill.

Activity Types = Catalogue of activities performed by the company (e.g. Consulting). The internal / controlling view on activities and fundament for cost calculation.

Service Cost Level = Employee level of e.g. seniority that can be added to activity type for cost controlling purposes


SAP Best Practice:

Sales Material and Activity Type do have a 1:1 relationship and it is not possible to change or adapt this assignment. To due this fact, it is recommended to set Activity Type and Material ID and Description to the same wording


1.2.  Service Materials

The standard Materials delivered by SAP to represent services conducted by service performers are T001 – T020 and match the activity types. Only these materials are externally used and will be part of the invoice to the ultimate customer. As mentioned above, Activity Types and sales materials have a 1:1 relation which is set in the DIP Profile (Dynamic Item Profile) in the backend. These settings are fix and cannot be changed by the customer.

Sales Material = 1:1 relationship to Activity Types. Sales Material is the external view on the activity catalogue of the company

1.3.  Derivation of Billing Material out of the Activity Type

All engagements which have a contract type of Time & Expense billing will receive a special treatment during the debit memo request creation via the so called “Resource Related Billing” procedure. This feature is used whenever the app “Release Billing Proposal” is called. The engine for this functionality is the Dynamic Item Processing – Profile or short DIP-Profile. In the DIP profile the original contract material in the billing item will get replaced by the billing material according to the material determination rules customized in the DIP profile. For service materials the rule defined is set up like this:

  • Activity Type (T001 – T020) + posting to any account of cost element group YBPS_T000 lead to the billing material of the same name as the activity type.

Example:

Activity Type T001 + cost posting on account 94308000 –> Billing material T001


By standard, all 20 activity types are assigned to the same G/L account. If the customer wants to be more precise in activity cost postings on G/L account level, it is possible to create new G/L accounts and assign them to the respective activity type. To ensure that the correct material will be picked out of the cost posting, every G/L account that is used as a allocation cost element in the activity types master data, has to be assigned to the cost element group YBPS_T000


The DIP profile is not accessible via SSCUI and will also not be made available, as multiple settings have to be made in order to make new material determination work for the entire end-to-end process.

2. Cost Rate Maintenance for Activity Types

2.1.  Internal Cost Rate

App: Maintain Cost Rates – Professional Services

For planning and posting costs for a project, the Activity Type is used to find the maintained cost rate in one of the tables below:

ICO Flag Comp. Code WBS Element Work Item Pers. No. Service Cost Level Act.Type CCtr.
no X X X X X
no X X X X
no X X X X X X
no X X X X X
no X X X X X
no X X X X
no X X X X X
no X X X X
no X X X X
no X X X
no X X X X X
no X X X X
no X X X X
no X X X
no X X X X
no X X X
no X X X X
no X X X
no X X X X X
no X X X X
no X X X X
no X X X
no X X X X
no X X X
no X X X
no X X
no X X X X
no X X X
no X X X
no X X
no X X X
no X X

 

S/4HANA Cloud offers the possibility to maintain different cost rates on the following levels:

  • Company Code
  • Company Code to be billed (transfer prices for intercompany business)
  • Cost Center of the employee
  • Activity Type
  • Service Cost Level
  • Personal Number (cost rate on employee level possible!)
  • Work Item
  • WBS Element (Work package not Billing Item)

Example: As some groups of employees might have deviating cost rates, it is possible to map them using the cost center as a key combination field. The cost center attribute allows you to structure your cost rates according to the activities done by the employee (e.g. on-premise consulting, cloud consulting…).

Personnel Number and Service Cost Level allow you to define even more specific cost rates for employee dependent attributes. For example, can every employee have a specific Service Cost Level which is maintained in the employee master record. Adding this dimension to the cost rate determination, it is possible to maintain different cost rates for two employees who do the same work (Consulting) and post their time with the same activity type (T001 – Junior Consultant) but differ in their Service Cost Level (Beginner vs. Intermediate Level).

For intracompany postings the system will only read the cost rates without the ICO flag – no receiving company code maintained (blank).

 

2.2.  Intercompany Cost Rate

App: Maintain Cost Rates – Professional Services

If one company code delivers resources to another project hosted by a different company code, intercompany cost rates must be maintained. All accesses where the ICO flag is set, in the picture below, can be used for cost rate maintenance for intercompany cost rates. This cost rate is used for planning and cost postings for the project as well for the intercompany billing between the two company codes.

 

ICO Flag Comp. Code Receiving Comp.Code WBS Element Work Item Pers. No. Service Cost Level Act.Type CCtr.
yes X X X X X X
yes X X X X X
yes X X X X X X X
yes X X X X X X
yes X X X X X X
yes X X X X X
yes X X X X X X
yes X X X X X
yes X X X X X
yes X X X X
yes X X X X X X
yes X X X X X
yes X X X X X
yes X X X X
yes X X X X X
yes X X X X
yes X X X X X
yes X X X X
yes X X X X X X
yes X X X X X
yes X X X X X
yes X X X X
yes X X X X X
yes X X X X
yes X X X X
yes X X X
yes X X X X X
yes X X X X
yes X X X X
yes X X X
yes X X X X
yes X X X
yes X X X X X
yes X X X X
yes X X X X X X
yes X X X X X
yes X X X X X
yes X X X X
yes X X X X X
yes X X X X
yes X X X X
yes X X X
yes X X X X X
yes X X X X
yes X X X X
yes X X X
yes X X X X
yes X X X
yes X X X X
yes X X X
yes X X X X X
yes X X X X
yes X X X X
yes X X X
yes X X X X
yes X X X
yes X X X
yes X X
yes X X X X
yes X X X
yes X X X
yes X X
yes X X X
yes X X

 

For intercompany (ICO) postings the system uses only cost rates with ICO flag „yes“.
Cost rates with explicitly maintained receiver company have a higher priority than cost rates with receiver company „blank“. If there is no cost rate with maintained receiver company, the “blank” entry will be used.


SAP Best Practice:

Common to have within one company code or cost center one cost rate per activity type. Exceptionally it is also possible to maintain personal cost rates, but this will lead to a large maintenance effort.


 

3. Price Rate Maintenance for Service Materials

App: Set Service Prices – Sales

For revenue planning and billing of performed service effort during a project, the sales material is used for sales price determination. Due to the direct relationship between activity type (internal view – costs) and the sales material (external view – revenue) the system finds out of the cost and effort postings of the employee, the correct sales material to find the maintained sales price in one of the tables listed below:

PCP0 – Project-specific Price (Condition: PCP0)

PSP0 – Standard Price (Condition: PSP0)

In the second table, all supported combinations of attributes for standard price determination (PSP0) of a material are listed. The way how the system finds the correct and relevant selling price is via the access sequence of the table,starting with the most specific access (Number 10) and ending with the most generic access (Number 120). When the system finds a maintained price for a valid combination, it stops at this access number and hands over the price of the material to the invoice. It will then not further check the other following access numbers, as the most specific price for this material is already found.

The attributes to find the standard (list) price of a service performed are:

  • Sales Organization (equals company code in S4H Cloud)
  • Distribution Channel = 10 in S4H Cloud
  • Customer –> to maintain customer specific price conditions
  • Material Number –> of the service material e.g. T001
  • Service Organization –> Useful if e.g. shared service center exists within the same sales organization and should have a different pricing structure
  • Personal Number –> sales prices on employee level possible
  • Work Item –> to distinguish further the sales price for a special kind of work e.g. T006 Project Manager – Work Item: Onsite Workshop versus T006 Project Manager – Work Item: Documentation Work

These access numbers and the underlying combination of attributes allow to maintain very specific price for specific employees, a group of employees or even tasks within a project. For example, the price of a Junior Consultant (Material Number) from India (Service Organization) for the project task testing (Work Item ID) supporting a project in Sales Organization 1010 can be different from the price for a resource from company code 1010 (Sales Organization) for the same project task (Work Item ID). Even prices on personnel level are possible.

With the PCP0 condition it is even possible to maintain project-specific prices which only apply for the project that is maintained in the access table. Within a project, different work packages may have different price rates for the same material, so it is possible to maintain for one project different price for the same material when they are assigned to different work packages.

The attributes to find the standard (list) price of a service performed are:

  • Master Project ID
  • WBS Billing Element
  • WBS Work Package –> Resources are assigned to Work Packages
  • Material Number –> of the service material e.g. T001
  • Service Organization –> Useful if e.g. shared service center exists within the same sales organization and should have a different pricing structure
  • Personal Number –> sales prices on employee level possible
  • Work Item –> to distinguish the sales price for a special kind of work even more e.g. T006 Project Manager – Work Item: Onsite Workshop versus T006 Project Manager – Work Item: Documentation Work

Pricing Schema defines which price is taken for invoicing. The standard pricing scheme looks first into the condition PSP0 to check what the standard price is (Step 20) – and always searches for the most specific price – for this material. It will then take this price and store it for condition PSP0. In step 30 it then checks if any project-specific price is maintained in condition PCP0. It again starts from the most specific and stops once a price is found and puts it in the pricing scheme and overwrites the PSP0 price.

 

4. Cost and Price Rates for Contingent Worker

App: Custom Fields and Logic

To understand the cost and price rate determination it is necessary to have a closer look on the posting behavior of the system. To provide more flexibility in terms of debiting and crediting of cost centers and projects, SAP provides a BADi for contingent worker which can be used by the customer. SAP gives the customer the opportunity to set and define the cost assignment from service procurement to cost centers and projects. With this BADI it can be defined with which rate the cost center and the project will be debited and which of these two entities will obtain the risk of procurement.

The pre-delivered standard of SAP is that only the account assignment “Project” is supported and the project will then be debited with the hourly price of the purchase order. It is not possible, with the standard setting, to purchase an external service on a cost center and get the costs from purchasing on the project on which the contingent worker posts time. To overcome this restriction, the customer can create and activate a BADI

Business Context: HCM – Timesheet Subcontractor Services

The BADI allows to set the rule for cost assignment to two different settings. If it is requested to purchase the service on a cost center, and assign the contingent worker to a project which will then be debited with the internal cost rate rather than with the purchasing price, the BADI can be set to service type “2”. If external services are always purchased on projects, the service type can be set to “1”.

SAPs recommendation is to activate the BADI and set it to service type “2”. This setting allows you to create Purchase Orders with both account assignment categories and correct transferring of costs to the Projects to which the Contingent Worker posted his hours. With any other setting it will not be possible to get costs to the Project if external service is purchased for a cost center.

How the system calculates the cost rate == debit of the WBS element, is summarized in left part of the picture below: Depending on the setting of the BADI and the account assignment of the purchase order, the WBS element will be debited differently. This allows to either debit the project with the internal cost rate or take the price from the purchase order and post it as costs on the WS element.

On the right part of it, the material and thereby the price determination is explained. Again the account assignment of the purchase order determines the price determination. If the purchase order is assigned to the cost center and the contingent worker (purchased as T002) is then staffed to a specific role (example T001), the system will take the price which is maintained for the material T001 in PSP0 or PCP0 and will use the material as well the related price for the billing process. But if the purchase order is directly assigned to a WBS element, the system will always take the purchased material to find the related price. In this case contingent worker of the purchase order is T002 but planned in the project as T001. For billing always the material T002 and the maintained price for this material will be taken (PSP0 or PCP0).

Workaround (Service Type “2”, Account Assignment “Cost Center”): If it is needed to get the full purchase price also as costs on the project, the personal cost rate of the contingent worker for this project can be set to the same amount as the purchase price of the related order. The cost center is now debited with purchase price and credited with internal cost rate. Project will be debited with the personal cost rate of the contingent worker (equal to hourly price of purchase order)

 

5. Usage Based Billing

The same logic as for the service materials described above applies for all usage based billing materials. Here only 10 materials and activity types have been delivered by SAP U001 – U010. Usage based billing materials can be used to bill out resource related service activities which are not based on the unit of measurement “Hour”. They can be used to bill out e.g. a number of testcases which have been conducted, service tickets processed or number of licenses used in a period.

The quantity of the usages is captured via the app “Enter Activity Allocation”. Pricing and DIP settings follow the same logic as the T-materials / T-activity types.

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