Simplifications in Rebate processing with Condition contract in S/4HANA

Rebate is a kind of discount paid to a customer retroactively. Generally, this discount is based on the customer’s sales volume over a predefined time period and settled by credit notes at the end of the year. Accruals also also generally calculated at regular intervals (monthly) for the amount that needs to be paid back to the customer . Below image shows a typical rebate scenario in which the rebate discount is applicable when the cumulative value of sales is above 50000. At the end of fourth month, the rebate has been calculated @4% on 2000(52000-50000) i.e 80 and considered as an accrual for that month. Total rebate for the year has been calculated as 3040.

The process flow diagram for Sales rebate in SAP ECC has been depicted in below image. After the creation of rebate agreement and billing document/s, Transaction VBOF (or program SDBONT06) needs to be run to update the corresponding sales volume in rebate agreement. Rebate is generally processed at regular intervals or at the end of the year. An Index table VBOX is used to link the rebate invoices to reduce the processing time . Finally, the rebate agreement is released for settlement and subsequentl settlement creates debit memo request and debit memo to the customer.

Major limitations of the above rebate process in ECC are

• Size of Index table VBOX can be very high (in the range of 2-5 TB), specially for Consumer goods company
• Re-indexing of table VBOX is required in case of new customers or change in rebate conditions
• Only rebate relevant customer sales documents can be processed

S/4HANA has simplified the rebate processing with the

• Elimination of Index table
• In-memory HANA database with the capability to access and process the primary / billing documents directly
• Elimination of debit memo request
• Harminization of rebate processing for ‘Order to cash’ and ‘Procure to pay’ scenarios

A Condition contract is created in S/4HANA instead of a rebate agreement as shown in below image. System now neither requires to update the billing document in rebate agreement (condition contract) nor separate tables (like VBOX as in case of ECC). HANA database now directly accesses the relevant (billing) documents and calculates the accrual values based on the accrual conditions of business volume for Condition contracts. Also, note that no credit memo request is created which is a futher simplificatios. Settlement document directly creates credit memo along with corresponding financial accounting documents .

Simplified sales rebate flow with condition contract in S/4HANA is depicted in below image. Business volume is determined based on the parameters in condition contract and the relevant data is read directly from the corresponding business documents like billing documents for sales rebate.

The parameters for determination of business volume is also very much configurable (i.e not fixed ) in S/4HANA . Below image shows the standard configurations for business volume determination for Sales rebate 0S01 which considers the fields BONBA (Rebate basis 1) and NETWR (Net value of billing item). If the gross value of billing item is more appropriate for a particular business scenario, then that can be achieved with standard configuration.

Another big advantage of rebate solution with condition contract is that it can be applied to vendor rebates as well (and many other scenarios like bonus , commissions etc). The process and system solution for rebates in Sales (Order to cash) and procurement (Procure to pay) is same as shown in below image.

Business benefits with new Rebate solution with Condition Contract have captured / summarized as below.

Below images show a sales condition contract (1) , Delta accrual (2) and Partial settlement (3) in S/4HANA 1909 release. Settlements are carried as per the settlement calendar and settlement (Delta accrual, Partial settlement , Final settlement ) as set in the condition contract.

Apart from sales rebate condition contracts (0S01), S/4HANA 1909 release has provided several kinds of sales scenarios with sales bonus, commission etc as shown in below image . Same is applicable also for vendor rebates (not shown in picture) .

Rebate solution with condition contract was introduced initially in 1511 release of S/4HANA. Solution has matured and got extended for various scenarios in subsequent releases of S/4HANA. Below images show the condition contract types available in S/4HANA 1511 and 1610 releases. In fact , there was no SAP Standard condition contract type for typical ‘Sales rebate’ in 1511 release, I had to create a custom condition contract type ZSBB copying SBBI (condition contract type for sales bonus) and also do several configurations in pricing etc. Now in 1909 release, no (or very minimal) additional configuration is needed for a typical Sales rebate scenario condition contract type 0S01.

SAP has also provided very detailed and useful documents on White paper, process descriptions , configurations, FAQ etc with several notes like 2481672 , 2815535 , 2200691 , 2267377, 2535889.

In my view, this new Rebate solution is one of the most significant simplifications in S/4HANA. This blog is based on my personal observations , tests , existing blogs and SAP documents. Will appreciate your views / comments.