Oil and Gas Refining & Marketing Billing Process And Common Requirements
Billing is a very critical part of the business. Billing documents should be looked at in a very broad perspective rather than narrowly looking at it as just an invoice document. Billing document communicates the due date and amount due to the customers, records account receivables against customer, accounts for cash flow and act as an input to the cash forecasting process. Cash forecasting is one of the primary inputs for the top management daily to assess financial health of the company and make various business decisions. Hence, understanding various billing business processes in an organization is very critical as it directly impacts business operations.
This document provides an overview of various billing processes and common requirements in the Refining and Marketing oil industry that the implementation team comes across and details of the programs and modifications that can be utilized during implementation of these functionalities. The purpose of this document is to provide possible approaches to common requirements that are encountered during implementation and not the actual solution.
Business Process Overview
Refining and Marketing business is very vast which starts with planning and procurement of crude, movement of crude from various points to refineries, refining of crude into various products, movement of products from refinery to terminals, selling products to variety of customers, managing inventory at different stages and different places (like refinery, terminals and retail station), transportation, scheduling, managing accounts payables for all the procurement, managing accounts receivables and collecting cash for all the sales transactions.
Refining and Marketing business can be broadly classified under Bulk product supply or Commercial, light product supply or Marketing and Logistics or Asset management. Commercial business deals with managing the procurement of crude to the refinery, crude and product movement in and out of refinery and terminal via various modes of transports and selling refined products to the customers in bulk. Marketing business deals with developing customers for the refined products, sale of refined products from terminal to gas station and billing customers for the services provided. Logistics business manages the logistics assets like the terminals, pipelines, trucks, vessels, barges etc. It manages the inventory at the terminals for the parent and the third party companies and earns revenue by charging for the services provided.
Common Billing Requirements in Bulk Product Supply or Commercial Billing
Commercial billing deals with sale of crude or products to the customers. It deals with sale of products like crude, refined products, heavy oils, asphalt, NGLs and renewables. The movements are recorded on various modes of transports like pipeline, barge, vessel, rail and sometimes by truck.
Trader makes a deal with the counterparty and enters the deal into deal capture. The deal will contain important information on the product, quantity, delivery, pricing and payment terms. The deal will be converted into a contract in SAP when the deal is published by trader in deal capture. It is used for nominating the product and scheduling the product for delivery in TSW. Actualizing the delivery is when the sales order and delivery is created in SAP and PGI is done.
There are a lot of variables on the deal which influences the how the invoices are created. Some of the common requirements that arise out of commercial billing are listed below.
1. Payment due calculation based on the events
The payment terms mentioned on the deal directly influences the invoice payment due dates. The commercial business usually deals with payment terms that are based on the events and not the actual invoice creation or invoice posting dates. For example, the trader may agree with the counter party that invoice will be due no later than 30 from Bill of lading (BOL) date or 15 days from notice of readiness (NOR) date or 30 days after constructive placement date etc. As SAP provides a platform to calculate the due date, it is necessary to enhance to meet this requirement. Hence a modification is required to achieve the functionality.
The solution approach would be to create a cross reference table to relate the payment term with an event. An enhancement during invoice posting to accounting using EXIT_SAPLV60B_002 can fetch the relevant event date from IS_Oil tables using the delivery document and fetched event date is used as base line date for the payment term to calculate payment due date. Prerequisite is to make sure that the required event dates are always captured during actualization
2. Calendar Vs. Business days Payment terms
Staying with the payment term topic, sometimes the negotiation of the payment terms could be based on the business days vs. calendar days. Standard SAP provides the functionality of calculating the due dates based on calendar days. However, if a business day term is negotiated, then, the invoice should have the ability to calculate based on business days. For such requirement, the solution approach would be to create a cross reference table to relate payment term with business day Vs. calendar day. The other approach could to be to set up a naming convention like payment terms having letter ‘B’ in the first or second position of payment term will follow business days and rest will follow calendar days. For example ZB01 – “ 3 Business day”. Bank calendar can be used to check the business days and holidays. A substitution logic in FI (user exit) should be written to check if the payment term in the document is a business day payment term or a calendar day payment term and for business day payment terms, the numbers of days from base line day should be appropriately pushed so that the due date falls on a business day and not on a holiday. The advantage of writing the logic in substitution user exit will ensure it will be applicable for all SD/MM/FI invoices.
3. Provisional and Final Invoicing
Pricing is one of the variables that influences how the invoice is created. For example, if the deal mentions the pricing to be a month average, but the invoice must be created as soon the product is delivered, then, a provisional invoice is created during the month. The final invoice will be created at the end of the month and the final invoice will usually be an adjustment between the final price (month average price) and provisional price. This requirement is most common in the industry. One of the common requirements that arises with provisional and final billing is, to automatically get a list of all the deliveries in the billing due list (VF04) that are to be provisionally billed with the document type F2D1 (provisional billing). At the end of the month, these deliveries should come up automatically as F2D2 (final billing) when the final price is available.
The billing due list must be enhanced to achieve the required functionality. The user exits that can be used for this purpose are EXIT_SAPLV60P_008 and EXIT_SAPLV60P_010. The enhancement initially should bring in only those deliveries that are relevant for provisional pricing. Though it is allowed to create multiple provisional invoices, companies would like to create one provisional invoice and one final invoice after that. Hence, the modification should check for provisional invoice before creating the final invoice and the delivery should be on the due list only if the final price is available.
4. Consolidated invoices
The other common requirement from the customers is to be able to consolidate deliveries into one invoice. SAP standard has a split criterion and if all the criteria matches SAP automatically combines the deliveries into one invoice. Often the requirement will be more than the standard split criteria. The requirement would be to override the standard split criteria and create a new one to work on specific sales area and to split by BOL (Bill of Lading) or combine the invoices by material or material group or by plant etc. In such cases the functionality could be achieved by creating a new copy control routine either at the header or at the item with the specified criteria and assigning it in the copy control between source and target document. Basically VBRK-ZUKRI field must be modified to achieve the the consolidation or breaking up of the invoices.
5. Prepayments or Down payments
This is a very common scenario. Business uses prepayment as an instrument when the customer they are dealing with is an existing customer has run out of credit limit provided by the company or customer does not have a good credit history or a new customer for whom not much credit data is let available or for a customer who comes from untested territory (new territory). In such cases a debit memo request document (down payment request – sales order) type can be created. It can use the same pricing structure as that of the actual commercial invoice. Standard billing document type FDAP can be used to create the down payment or prepayment invoice. An enhancement can be created to trigger the debit memo request from the TSW before the actualization process (if needed), else can be manually handled by debit memo request followed by demo memo. The invoice print should have the title as ‘Prepayment’ or ‘Downpayment’.
I have tried to highlight how various business scenarios can influence the way the invoicing is done in the oil and gas industry. The above stated are very common business requirements which can be easily achieved by the simple enhancements and are easy to maintain in the long run.