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Non-Time Related Materials for Project Services

This guide will give you an overview of the best practices as well the capabilities of how you can setup your expenses and non-time related materials (e.g. hardware and license) that are used in customer and internal projects. Additionally you’ll get an idea how to leverage the DIP profile and pricing functionality to cover all requirements you have in regards to non-time related materials.

Remark: Non-time related service materials will not be considered in the intercompany billing scenario due to restriction in the Dynamic Item Processing Profile. Only travel expenses of intercompany resources are part of the intercompany scenario.

Non-time related services can be resource independent and used for planning and actual cost postings in projects. In comparison to time related service materials, these materials will not be recorded via time recording, further they are all based on a preceding FI cost posting document like goods receipt or supplier invoice.

1. Expenses

SAP delivers 40 pre-delivered expense materials to bill out travel expenses or other disbursements to the customer. The material keys of those pre-delivered expense materials are E001 – E040.  Like the service materials the number of expense materials cannot be enhanced.

Derivation of Billing Material out of the Expense Posting

Expense and service material treatment in billing follows the same logic. 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.

In the backend the so called “Dynamic Item Profile (DIP profile)” serves as the engine for the material determination in resource related billing.

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 expense materials the rule defined is set up like this:

  • Cost posting to any account of a cost element group YBPS_E0xx will lead to the billing material of the same name as the last four digits of the cost element group.

Example:

Cost posting against cost account 61009010 being part of cost element group YBPS_E001 will lead to billing material E001 in the invoice.

The DIP profile is not accessible via SSCUI and will also not be made available, due to the complexity of all settings necessary to make new material determination work for the entire end-to-end process. But the user can add as many cost accounts as needed to the available cost element groups in order to store / report cost postings on a more granular level as the billing material being billed out later to the customer.

Example:

Breakfast -> 61003000 -> cost element group YBPS_E011 “Per Diem”

Lunch -> 61004000 -> cost element group YBPS_E011 “Per Diem”

Dinner -> 61005000 ->  cost element group YBPS_E011 “Per Diem”

The billing material (= revenue) on the customer invoice for all three cost accounts will be “E011 = Per Diem” but the cost is separated by the three cost accounts.

Pricing for Expenses

Usually expenses are posted to projects via supplier invoices either manually, via Concur integration or via another BADI interface from an external system. Differently from time postings the costs are passed on the customer invoice 1:1 without a quantity. No special pricing is foreseen for expense postings.

Nevertheless, the system offers the possibility to put a mark-up or discount to the cost postings using the pricing condition DCM2 if needed.  This condition can be set-up with a positive or negative sign (mark-up / discount) and in percentage or absolute value.

Excursion: Expense Planning

For effort planning of expenses on a work package, the CPM Resource is used. These CPM Resources can be as granular as the Expenses Types, but are usually covering groups of expenses like Accommodation, Airfare etc. Every resource is mapped to the one or more specific primary cost accounts where later all actual costs are posted against. In the case that more cost accounts are mapped to one resource, always the first in the list is taken to post planning values.

Resources can be defined in an SSCUI UI belonging to the area of Professional Services.

The more granular the CPM Resources are structured (1:1 relationship between resource and cost account) the better the comparison of planned and actual will be. But this will lead to a very high effort in planning every little expense type in the work package. For this reason, it is best practice to assign multiple cost accounts to one CPM resource, which allows a plan/actual comparison on an aggregated level, but does not limit the number of expense types for reporting on actual data.

Example:

CPM Resource = Transportation

Primary Cost Accounts =

61007000             Travel Expenses – Airfare, Rail, Mileage

61005000             Travel Expenses – Ground Transportation

65008410             Taxi

Actual Data:

The standard expense materials delivered by SAP to represent expenses captured by service performers are named E001 – E040. Within the DIP profile the system determines the correct sales E-Material for billing depending on the cost accounts belonging to a cost element group on which the expenses are posted on.

Depending on how detailed the expenses shall be visible on the invoice, the customer can assign several expense accounts to one cost element group. Every cost element group (YBPS_E001 – YBPS_E040) leads to the billing material with the same name. If there is a posting on one of the accounts belonging to the cost element group, the billing material will be found and printed to the invoice. The connection between cost accounts in a cost element group to one billing material enables the customer to flexibly decide on the granularity between internal cost controlling via cost accounts and revenue generation on billing materials during invoicing.

Comparison between planned and actual data can be done by comparing the amount planned for the CPM resources on work package level and the sum of all actuals postings to the primary cost accounts that are assigned to the CPM resource.

Non-billable Expenses

In standard, most expense accounts are assigned to the cost element the groups YBPS_E001 to YBPS_E040 which makes the cost postings relevant for billing. As described above, the DIP profile will recognize the posting on an account within the billing relevant cost element group and will find the material for billing. In comparison to T-activity types, it is not possible to flag roles / activity types as non-billable on the work package level. So in standard expenses are billing relevant.

In some cases, expenses shall not be considered as billing relevant and therefore not be recognized during the billing process. For this scenario, a standard cost element group (YBPS_N000) for non-relevant expenses is pre-delivered in standard. This cost element group is not specified in the DIP profile hence all expense postings on accounts belonging to this cost element group are not considered in billing.

Example:

Within the cost element group YBPS_N000 it is possible to create more cost element groups with account assignments:

Examples:

Customer Entertainment è 61003000 è cost element group YBPS_N001 “Customer Entertainment”

Training and Education è 61400000 è cost element group YBPS_N002 “Other non-billable”

HR Recruitment è 61401000 è cost element group YBPS_N002 “Other non-billable”

Marketing Expenses è 65301000 è cost element group YBPS_N002 “Other non-billable”

2. H- and L-Material

It is possible to bill materials like hardware or licenses, which have been purchased on a project, directly to the customer based on the information and material from the purchase order and the cost posting from the goods receipt document. Of course, there are certain restrictions or prerequisites for the material to forward it to the final professional service invoice to the customer.

SAP recommends to use the HW0001 and LI0001 as a template for further materials. Those materials are demo materials only available in SAP starter systems!

The most important setting in the demo materials are are:

  • Material Type: Material General (If a different material type is taken, the necessary account view to maintain the valuation class is missing)
  • Account Assignment Group: X4 (SP-Hardware) / X5 (SP-Licenses)
  • Valuation Class: 3110 (Hardware) / 3120 (Licenses)
  • Views necessary: Purchasing, Sales, Accounting

Valuation Class

The valuation class determines the account for cost postings, which at the end, determines if the system finds a material for the billing process.

The logic applied follows the rules:

  1. Prerequisite is a purchase order with a material number, item type “third-party” and an account assignment against a WBS element
  2. The valuation class of the material purchased leads to a cost account at goods receipt posting
  3. The cost account has to be assigned to either the cost element group YBPS_H000 or YBPS_L000, as those two cost element groups are part of the DIP profile
  4. The DIP profile material determination entry for those two cost element groups contains the flag “Material Direct”. Due to this flag all cost postings out of purchasing orders with account assignment “WBS Element” will transfer the material of the purchase order item into the customer invoice.

– Cost Element Group: YBPS_H000 -> Hardware materials

– Cost Element Group: YBPS_L000 -> License materials

–> those are the standard settings but the cost element groups can also transfer other materials than hardware or licenses

In standard, the valuation classes 3110 and 3120 have different cost accounts assigned for the two possible purchasing scenarios (Standard and Third-Party):

  1. For a purchase order with an item with item category Third-party (General modification V3P) the system automatically picks the account 50309000 (è valuation class 3110) for hardware and 50309500 (è valuation class 3120) for license during the creation of the purchase order and will post on this account once the goods receipt is posted. This account is part of the cost element group YBPS_H000 and YBPS L000 and therefore it is recognized during billing.
  2. For a purchase order with an item with item category Standard (General modification VBR) the system will automatically pick the account 51600000 during the creation of the purchase order and will post on this account ones the goods receipt is posted. This account is not part of the cost element group YBPS_H000 and YBPS_L000 and therefore it is not recognized during billing. Meaning, that all hardware and licenses purchased and used for this project, will not be charged to the customer but only debit the project.

The reason for this setting is, that SAP assumes that project related materials are delivered directly to the project location.

It is possible to change these settings and assign different accounts to the corresponding Valuation Classes. In the SSCUI (Nr. 100297) the customer can select the Transaction Key GBB, choose the Chart of Account YCOA, General Modification: VBR (purchase order item standard) or V3P (PO item third party) and the Valuation Classes that need to be adjusted.

 

 

Derivation of Billing Material out of the purchased Material

As already stated above a similar logic as for expense materials applies for H- and L- materials. 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. 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 H- and L-materials the rule defined is set up like this:

  • Cost posting to any account of a cost element group YBPS_H000 (for HW-Materials) or YBPS_L000 (for LI-Materials), the billing material will be the same as the material on the purchase order (goods receipt) due to the ‘material direct’ flag in the DIP profile. This flag is the indicator for the system to forward the purchased material 1:1 to the invoice.

Example:

Purchase order and goods receipt of material HW0005 and cost posting to the cost account 50309000 (COGS Hardware) which is part of the cost element group YBPS_H000 will lead to the billing material HW0005.

Revenue Account Assignment Group

The account assignment group in material master is needed for revenue postings. The group includes the information on which revenue account the amount will be posted. This is important for reporting purposes.

The pre-delivered content foresees that revenue posting are only distinguished by domestic, foreign and affiliated. For example, domestic revenue will always be posted to revenue account 41910000 (“Billed Revenue Domestic Time”). In standard, there is no differentiation between the origin of the revenue (service, hardware, license etc.) and hence no separate revenue accounts for these different sources of revenue.

If further differentiation is needed, a SSCUI (Nr. 100297) is available to determine the respective revenue account for posting. By this, the customer can adjust and enhance the revenue account determination.

Price Maintenance

The standard system behavior for hardware and license materials is to forward the costs from the goods receipt 1:1 to the customer billing.

In the case that the material needs to have a standard sales price, independent from the purchased price, the pricing conditions PSP0 and PCP0 can be used to the same extend as for service materials (T001- T020).

Beside maintaining standard or project specific sales prices, the system offers the possibility to put a mark-up or discount to the cost postings using the pricing condition DCM2 if needed. This gives the customer the flexibility to maintain an uplift based upon cost instead of a specific sales price.

The standard pricing scheme will be applied here: PCO1 (cost) > PSP0 (standard sales price) > DCM2 (mark-up or discount) > PCP0 (project specific price)

PCP0 – Project Specific Price Access Sequence (Condition: PCP0)

PSP0 – Standard Price Access Sequence (Condition: PSP0)

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  • Very interesting and comprehensive post, thank you. I would have liked all this information to be available a year ago, before we went live…

    Just a maybe useful additional hint for who posts expenses to WorkPackages via APIs from external systems or applications: you can switch off the billing relevance of the respective journal entries by setting field Accounting Indicator (BEMOT) to value “S1”.

    This way the corresponding expense postings will automatically result as “written off” in app Release Billing Proposals.