New Financial Accounting for Service Management in S/4HANA Cloud
Welcome to this blog about the new Financial Accounting solution for service management, which is available in S/4HANA public Cloud and planned for on premise on roadmap.
With the availability of service management in S/4 we started a new integration into financials, but also in logistic, procurement, billing and HR. There are service contracts and service orders available. Service contracts can be used to close service agreements with customers. As an example, we can take a maintenance contract for one year, for which an annual fee is due at the beginning. The service order enables the provisioning and billing of services to a customer. An example could be a repair at customer site, spending technician hours and spare parts.
In this Blog we will first introduce the new controlling object, which enables a new service order and contract specific reporting and their assignment in multiple financials and logistic applications. And we give you some insights in the new financial reporting capabilities.
In chapter 2 we show how we benefit now in the service scenario from the financials innovations based on Universal Journal. Then we explain in chapter 3 the accounting architecture for service objects.
In chapter 4 we come to the service order business objects and transactions and their reflection in Financials. We will explain the service objects and the options for service order item bundling. With chapter 5 we cover the service contract with short intro in revenue recognition and the hierarchic contract reporting including assigned service orders.
We will close in chapter 6 with some special postings on service order -like intercompany cost allocation.
1. First insight in new Financials for service
There are now several innovations available for Financials 4 Service Management. Base is the new Controlling Object for service order item and contract item. Via its incorporation in the generic Controlling interface (technical: Coding block), the new service objects are available for account assignment in multiple Financials transactions – e.g. post general journal entry or reassign cost and revenues – and in logistic applications – like billing, procurement or supplier invoice – see figure 1.
This allows now a service document related reporting! (Remember, in ERP we map an internal order as accounting object for service order items, controlled by account assignment manager.)
In figure 2 you get an example for a service order cost and revenue reporting
You see here a detailed reporting for a service order with 3 items.
On item 20 there is a time confirmation of 5h of employee “50001179”( display of name can be activated) – provided with activity type “Service-Time” and an overtime category OV01 “weekend”– and the matching billed revenue line, in which 2 of the 5 hours are billed.
On Item 30 travel expenses of 70€ are posted and billed.
On item 40 a spare part “Stock Service part” is issued and billed.Based on this good issue material overheads of 10% are posted. And then the spare part is billed.
With the new architecture – see chapter 3 – not only a service order margin can be provided by the postings on service objects, but also a real-time profitability reporting on the market segments is available. With the use of Universal Journal integrated Profitability, we derive for every posting on a service object a profitability segment – see figure 3.
Every posting on service document impacts the profitability for the market segment attribute customer “Inlandskunde DE 3” and the product sold ”SRV_bundle_02” (how this bundle set up looks like, you can see in figure 12 and in the posting example beginning in figure 16) . We account assign the service order item and derive additional the profitability segment and store its attributes in the line items in parallel to the service document item. See also figure 5.
The derivation logic is explained in architecture chapter 3.
Additionally, there is an aggregated reporting for a contract item and the subsequently assigned service order items available. In this use case the contract item represents a service agreement with the customer, the subsequently created service order items are assigned to the contract item in order to ensure price agreements taken in account by service order billing.
In figure 4 you see an aggregated reporting based on the revenues on contract – including realized revenues provided by event-based revenue recognition – and the cost and revenue postings on the assigned service order item.
The selection is on service contract ”7000000180” applied in the very left column as reporting dimension.
In the upper rows you see the direct postings on the contract item: billing and revenue recognition. Below we show the postings on two assigned service orders.
With the reporting app product and service margins you can get – based on semantic tags – an overview for service orders and contracts– see figure 5.
In this report the G/L accounts are assigned to semantic tags. This allows in the columns a margin reporting and it shows on the two very right columns the balance sheet value posted by revenue recognition.
figure 5 reporting app product and service margins – selection for service documents
With the S/4HANA reporting technology it is possible to include dynamically service order or service order item attributes in the Financial report – in the figure above the service order item master attribute “employee responsible” is included. This gives you more insights in the service business processes.
You get this by marking the column “service document item” -> drilldown -> “add attribute”. You will get several fields from service order item – a cutout see below.
2. S/4HANA financial innovations for service management
In S/4HANA the Universal Journal and HANA are the innovation base for financial accounting.
Guiding principles using Universal Journal
With the Universal Journal the accounting applications General ledger, Controlling, event-based revenue recognition and Profitability are now integrated. Thus,
- Profitability attributes are now available for General ledger Journal entries. We use this in the service scenario to assign them e.g. in the journal entry items for WIP, billing documents, good issues – recall example in figures 3 and 5. This provides a real-time market segment and profitability reporting.
- General ledger functionalities are now available for co postings and revenue recognition. We use this in the service scenario to provide multiple currencies and parallel ledgers for revenue recognition and Profitability – see figure 8
- Settlement between the applications – CO and CO-PA – is obsolete. We enrich in the service order scenario the profitability attributes already at the time of posting on the service order item.
- With the integration of cost accounting in the Universal journal there is in case of intercompany cost allocation a real-time consolidation provided. With specifically defined intercompany cost rates there can be additional intercompany margins applied – see chapter 5.
Real-Time insights with Event-Based Revenue Recognition
With the use of event-based revenue recognition matching principle for cost and revenues is ensured.
For service contracts a periodic revenue recognition is available. Thereby the planned billing amount is distributed over the contract running time. There are two methods available: one realizes for every period equal revenue and another calculates the realized revenue based on the period days.
For service orders we provide two methods: a completed contract method, which defers all costs and billed revenues until the service order is completed . And there is another method, which calculates the realized revenue based on the open, not billed confirmation – see example figure 26-2.
Other methods will follow on roadmap.
More about event-based revenue recognition: https://blogs.sap.com/2019/05/16/an-introduction-to-event-based-revenue-recognition-with-customer-projects-in-sap-s4hana-cloud/
Thus period-end closing for service order is simplified and accelerated. A settlement to CO-PA for market segment reporting or to G/L for update WIP is obsolete.
Enriched Account Assignment and integrated Profitability Analysis
With the Universal Journal in SAP S/4HANA, it is now possible to use in one Journal entry line item several cost objects in parallel. We still have exact only one real account assignment for every journal entry item. This is identified with the ACDOCA field “account assignment type” (technically ACCASTY). Only on the real account assignment are follow-up processes possible like revenue recognition. Additional Account assignments are attributed and used only for reporting purposes. We use this in the service scenarios:
- For the contract, the billing and revenue recognition are posted real on contract item. Additional, for these postings the profitability segment is stored as attribute.
- For the service order item, we post confirmations, billing and revenue recognition with real account assignment to service order item. In parallel we attribute the profitability segment and – in case of service contract assignment – the service contract item as reporting attributes.
An example for a controlling value flow including the cost centers and their under/ over absorption you get in figure 7
The postings and values are a cut of the example in chapter 1. The confirmation of service and expense item credit cost centers and debit the service orders. These costs and the billed revenue provide a margin for the service order and for product and customer.
The cost center is debited with periodic costs like asset depreciation, travel expenses or salary expenses. At period-end there will be a difference on the cost center between these debits and the credits posted to service orders. These differences can be allocated to profitability segment. Assumption in our example here is, that they can be assigned on product level. The level of assignment depends of course on the customer business. Technically it would be able to even assign these costs on service order item or service contract item level.
So, the profitability for a product is the aggregation of the service order costs and the allocation to profitability segment. In our example there is a negative margin for the product “SRV_Bundle” of 175 € plus a cost center over absorption of 40€ -> negative margin of 135€.
Additional innovations by using Universal Journal
Now let’s have a look on the capabilities of Universal Journal – based on the example of ledger and currencies.
As an example we post a material consumption on a service order. There are two ledger active and the material has a different price per ledger:
Upper screen shows the consumption journal entry items on the service order in ledger 0L, lower screen journal entry items in Ledger 2L. Every confirmation and posting on a service document is in parallel reflected in all available ledger. There are now parallel valuations based on the assigned accounting principle possible. In this case there are different material valuations maintained for the spare part. In ledger 0L 12,50€, in ledger 2L 15€.
Especially, there can be now parallel valuation by revenue recognition provided – for example IFRS and a local GAAP like German HGB – see example figure 26 f.
All postings are provided in the 3 currency types – transaction, company and global. If activated there can be additional a “free defined currency”.
With Universal Journal and HANA company code reporting can be done by aggregation of single journal entry items, what allows us to provide a reporting with great new insights: based on the new controlling object for service you can drill down aggregated amounts on e.g. company code level by all service-related attributes like billable control (alias accounting indicator), employee, product sold, customer, overtime – recall reporting example in figure 2.
With the functionality of event-based revenue recognition we get detailed information about the WIP – respectively balance sheet postings – created by revenue recognition for service documents.
In figure 9 you see the WIP posted by event-based revenue recognition. You can drill down by service document and all profitability attributes like product sold or customer.
To provide based on Universal Journal additional management accounting information, we introduced the extension ledger, in which additional postings are stored – with the same posting logic and attribution concept as in a legal ledger. The extension ledger carries only management adjustment postings, no legal relevant postings:
- In ledger 0C manual adjustments can be posted.
- In ledger 0E we store commitments and prediction data based on service contract entry.
Please note: the data in the extension ledger are always additional to the underlying legal ledger. So if you select a prediction ledger in reporting you will get always the aggregated view from all underlying ledger – see below.
In a first step we provide now prediction data for service contracts. Based on the billing plan we predict the realized revenue for the complete planned lifetime of the contract. The data are calculated by the event based revenue recognition.
Below an example for a service contract with a value of 22.600 (more to service contract see below in this blog). The contract is created in February 2022. The complete amount is to be billed at contract start. When we select the revenue accounts we get per period a predicted realized revenue of 2825€.
Basis are prediction journal entries, which are posted with the same posting logic as the legal postings. Below an example for the document posted in period 8.
More about these topics and further financial innovations in S/4HANA you can get with this book: https://www.sap-press.com/controlling-with-sap-s4hana-business-user-guide_5282/
3. New Accounting Architecture for service documents
Base for account assignment of service order item is the new controlling object. It enables the reporting showed above and a transparent assignment of the logistic objects – like purchase order or billing document – to the service order item.
Additional to the CO-Object there is a service document item mirror table for controlling/accounting purposes created (table FCO_SRVDOC), which carries the financials steering attributes like profit center, revenue recognition key, but also the market segment attributes like customer and product sold – see figure 12.
Thus, not only a service order margin can be provided by the postings on service objects, but also a profitability reporting on the market segments is available.
As mentioned, it is now possible in Universal Journal to use in one Journal entry line item multiple account assignment objects in parallel. We use this for service order as we add for every line item an attributed profitability segment. With the use of Universal Journal integrated Profitability we derive for every posting on a service object a profitability segment – based on the attributes in the accounting mirror object – and enrich the journal entry -like we do it in the for professional service tailored customer project scenario – see blog https://blogs.sap.com/2018/06/26/financial-accounting-for-customer-projects-in-sap-s4hana-cloud-part-1-real-time-insights-in-project-based-service-scenario/ Or in the project based sales scenario https://blogs.sap.com/2020/12/04/financial-accounting-for-project-based-sales-in-s-4hana-cloud/
Additionally, we store the service contract reference for a service order item in the mirror table. See figure 4: In this example the service contract 700000180 item 100 was updated as attribute for service item 800000185 item 20. For every posting on this service order item, we update the service contract information. This allows us aggregated reporting for this contract item and its subsequently assigned service order items.
New controlling object and accounting mirror table is created when the service order and its items are released. From this point in time confirmations and postings to the service order item can be done.
you see in the mirror table profit center, functional area and costing scheme. These attributes are derived with the release of the service order.
new derivation tool for profit center, costing scheme and functional area is available
There is for service management a new derivation tool available, the app Manage Substitution/Validation – service documents.
Within the business context “Substitution in Service Document” you can derive the fields with the event of order creation. The derived fields will be stored in the mirror table and used for all postings on the service order item.
By default the Profit center is derived from the employee responsible of the service order. In the employee master there must be a cost center assigned. In the cost center master, there is a profit center assigned.
With the derivation tool you can derive the profit center e.g. by the service material. And of course, you can maintain it manual in the service order app.
For the functional area there is a default derivation applied, which set the value YB25. But of course, you can create your own derivation rules.
A short intro to the substitution and validation tool you get here: http://here https://blogs.sap.com/2020/02/04/sap-s-4hana-cloud-2002-release-for-finance/ or here https://microlearning.opensap.com/media/1_tqstd5je
The derivation logic of the profitability attributes is explained in figure 13
Attributes like the customer, the product sold or the sales organization is derived by the service order, respectively the Financial mirror object.
Within the profitability derivation logic additional attributes are derived by reading the master data: product group from product master, industry and customer group from business partner.
If there are profitability extensibility fields available, they will be derived and assigned to Journal entry item too.
There are rules for change management in place to ensure this architecture and avoid inconsistent data:
- The profit center assignment in service order/contract item must not be changed if there are any postings on the service order item
- The service contract assignment in service order items must not be changed if there are any postings on the service order item
- If profitability attributes in customer or product master or rules for extensibility fields change, there is a profitability realignment in place
financial baseline plan for service orders is now available
With 2202 plan data for service order baseline planning is available. With the release of the service order the service order item information are transferred to FIN, calculated and stored in the central plan data table
- Same as for the actuals the service material is mapped to an activity type, an expense material to a G/L account
- With using ACDCOP we ensure for plan data the same information as for the actuals. So the market segment derivation is provided here too.
Below an example based on the service order used in chapter 4 – see figure 16. The data are shown with the app market segment plan/actual
Figure plan 1: plan – actual comparison for a service order
You see market segment information provided for plan too. Additional there are plan overheads and quantity information provided.
service order bundles for an aggregated margin view
If you want to report a service order item not on its single items, but more on a aggregated/ bundled view, there are bundle scenarios available. We have two in place.
The fixed price bundle you can use if you bill and control your margin on an aggregated level. Example below for an inspection: you bill a fix amount for the inspection of 190€, but you need additional items for the time of service technician, expenses and purchased spare parts. The setup is described in figure 14.
Only for the main item 10, the inspection, there is a co-object created. The confirmations for the Items 20 to 40 account assign all to item 10. These items are not relevant for billing.
Item 10 is relevant for billing, but do not process any confirmation.
As a result, all postings are on one CO-object with the attributes of the main item – here product sold is for all postings the “inspection”.
Revenues of item 10 and costs from item 20 to 40 match on one object.
Another bundle scenario is the confirmation-based bundle. Here we have a main item just as a business bracket for several service items, which are conformation and billing relevant and sub items to the main item. The main item defines the product sold. Probably it will be used on the invoice output. Example for architecture see figure 15. Posting example in figure 7.
As there is no confirmation and billing done for the main item 10, there is no CO-Object created.
The sub items provide costs, their confirmations are sent to billing and post revenues on the sub item CO-object. There is a link in the accounting mirror table for these items to the main item. The product sold is copied from the main item -> so we get the margin for the inspection and not for the single items. There can be different profit center derived per service order item.
This setup we use in the following service process example.
4 Service Business Processes
With the app “Manage Service orders” service orders can be maintained, and confirmations created – see figure 16.
There are 2 different service order types available in S/4HANA Cloud – distinguished by the billing method: “Fixed price service order” (SVO2) and “Service order” (SVO1).
In the fixed price scenario, the billing is based on quantity and Price of the service order items. In the “service order” scenario there is a confirmation-based billing in place. Especially the billing quantity is defined by the confirmations, but also pricing relevant attributes like accounting indicator/billable control can be applied here.
For the service order items there are several item categories available, which define the subsequent business transactions
- Service item: used for technician time confirmations. Triggers time sheet and activity allocation in Accounting
- Expense item: for confirmation of expenses like travel costs. Triggers cost allocation from service technicians cost center to the service order item
- Stock service part: triggers goods issue from stock to service order item
- External service item. For integration of subcontractor support. Triggers a purchase order and subcontractor time confirmation by Service entry sheet – not shown in this blog
- Service part. For purchasing of service order related materials. Triggers purchase order and subsequent goods receipt, which posts on service order
Independent of the order type there are some general principles in place.
General functionality service confirmations
- You can create confirmation first, when the order is released and CO-Object for service item is created
- An executing employee is required for every confirmation:
- It derives the cost center, which is credited in the subsequent CO activity allocation
- it derives the material storage for a spare part item
- With completion of the confirmation the subsequent application is triggered – time sheet, CO reposting, material movement
- With final confirmation the confirmation and the service order are completed
- Until order is not completed there can be multiple confirmation created for one service order item
- There is now the option to define the financial posting date in the confirmation. The new field service rendered date is for the expense and material confirmation provided. For the time confirmation items the start of work date is used as posting date and service rendered date. So for the time confirmation both dates are available in reporting.
General functionality billing
- With the completion of the service order item a billing document request is created
- In case of fix price based on the item planning
- In case of confirmation-based billing based on the assigned confirmations
Now we come to our system example, which is based on the service order in figure 16. We focus on the service/expense and spare part processes. As order type we use confirmation-based billing.
With a service item confirmation an activity allocation is triggered
- For the activity allocation we need to derive an activity type. The service product of the service document item can be used to derive an activity type – see SSCUI 102920 in 21
- Activity type, executing employee, service order item and quantity are sent to time sheet
Time sheet transfer to FIN
- The cost rate for activity allocation can be defined very flexible in S/4 – see figure 19.
- The cost center of the executing employee is credited. This cost center defines the PC in this Journal entry item
- The service order item is debited. In this Journal entry item, the PC is derived from the service order item, which is defined by default from the responsible employee or by the derivation tool. In addition, the market segment of the service order item is derived in this line – e.g. customer and service product
- G/L account is defined in activity type master data
- Please note: By transfer time sheet to accounting there are additional checks in place – like closed period. The failed postings are stored in a log and can – after solving the issue – be posted with the app “Process unposted time confirmation”.
Figure 17 shows the service confirmation
There can be two quantities maintained
- The “quantity” of 2 HR is the quantity, which is billed
- The “Actual duration” of 5 Hours is sent to Time sheet and posted in accounting as costs
For service confirmation overtime category can be provided, here weekend. Based on the overtime category sales prices and cost rates can be determined. Overtime is an attribute in the cost journal entry item – see figure below. The Overtime attribute needs to be enabled by HR SSCUI.
The accounting indicator or “billable control” is stored in the Journal entry, which posts the costs on the service order item. The accounting indicator influences the sales price of the service confirmation
As mentioned above the start of work defines the posting date.
This confirmation creates the journal entry in figure 18
With the time confirmation the revenue recognition document is created, which defers the costs. Both documents have the same reference to time sheet document 495
In the time confirmation document the first item is the credit of the executing employee cost center.
Second item is the debit of the service order item with the overtime and billable control information and the market segment information of the service order – see very right columns. Here the customer and the product sold – in this example the bundle product – is shown.
Remark: in this example the profit centers are different in both line items! The executing employee is here assigned to a different PC as the service order item.
There is an own app available to maintain service specific cost rates: app “Manage cost rates – professional services” – see figure 19
Here you see an example, where for overtime service a higher cost rates of 75€ is maintained, while for service provided on normal work time there is a rate of 60€.
Cost Rates for activities can be defined very flexible in S/4HANA Cloud
- Based on “who provides” employee dependent or “what is provided” activity type / service product dependent
- Attribute service cost level can be maintained in employee master data and is taken in account for valuating time confirmation see blog https://s4hanacloud.community.sap/blogs/show/MqelJvcbEwI8LUAqR3tfOG
- Additional there can be “overtime” dependent rates for service time confirmation
- There can be own rates for Intercompany time confirmation maintained, which include already a mark-up.
more to cost rates see here https://blogs.sap.com/2018/07/24/financial-accounting-for-customer-projects-in-sap-s4hana-cloud-part-2-enhanced-activity-confirmation-for-service-industry-including-intercompany-margin-posting/
For derivation of the activity type, there is a self-service configuration available
You find this in the app ”Manage your solution” within the activity group for FIN-Service Integration – see figure 20
To assign an activity type to the service material used in the confirmation there is the SSCUI below available.
Based on material group or a dedicated service material an activity type can be derived.
In this example the activity type “SV01” is used for all materials.
Please note: it is not necessary anymore to define an own activity type per employee role – like technician or master – to get different cost rates. This can be controlled – as mentioned before – with the service cost level, stored in the employee master.
Service Expense item
With a Service confirmation for an expense item a cost reposting is triggered in financial accounting
- In the service confirmation for an expense item the executing employee and the expense Amount needs to be maintained. This Amount is stored in pricing as condition PMP0. So, this Amount is taken for billing too. If required, surcharges can be maintained in the pricing scheme.
- The expense G/L account can be defined via configuration – depending on the service material in the service order item – see below SSCUI 102921
- The sending cost center is derived from executing employee
- G/L account, executing employee, service order item, Quantity and Amount maintained in confirmation are sent to Financials
- The service rendered date defines the posting date in financials
Reposting transaction in Financials
- There is a cost reposting triggered in Financial Accounting
- The cost center of the executing employee is credited. The PC in this Journal entry item is derived by this cost center.
- The service order item is debited. In this Journal entry item, the PC is derived by the service order item. In addition, the market segment of the service order is derived in this line – e.g. customer and service product
Let’ have a look on expense confirmation in Figure 22
Here you see the manual-maintained expense “Amount” of 70€. As service rendered date the 18th of April is maintained
Figure 23 shows the related Journal entry
Again there are two documents posted, one for the cost allocation and the matching revenue recognition document,
The first line of the expense allocation is the credit of the executing employee’s cost center.
Second line is the debit of the service order item with the market segment information of the service order.
The profit center is different in both lines as the employee’s cost center PC is different to the service order item PC.
For derivation of the expense G/L account from the service material there is a self-configuration activity available – see below.
Based on material group or a dedicated service material an expense G/L account can be derived.
In our example the G/L account “61008000” is used for all service products.
Stock service part
- In the service confirmation for a spare part the quantity and the product are defined. The plant is derived in the confirmation from the executing employee or service team. The plant is not derived and stored in the service order item.
- The service rendered date defines the financial posting date
- This is sent to MM
Goods movement in MM
- In MM there is a material movement automatically posted with Goods movement type 291 “Consumption for all account assignments from warehouse”
- Account assigned to the service order item
- The G/L Account is derived based on MM account assignment configuration
- The posting Amount is defined by the material master price
- The inventory is credited, and the service order item is debited
Figure 25 shows the stock service part confirmation.
The related journal entry is provided in figure 26
For the goods movement there are 4 document created: one for the consumption posting, one for overheads and the matching revenue recognition documents, which defer the costs in WIP.
In the consumption journal entry the firsts item is the credit of the inventory. The stock of material SRV_05 is reduced by one piece.
Second item is the debit of the service order item including the market segment information of the service order.
The profit centers are different as the material master PC is different to the service order item PC.
Excursion confirmation based revenue recognition
Now let’s shortly look based on this spare part example, how confirmation based revenue recognition works. We applied in ledger 2L this revenue recognition method.
After the goods issue posting we start event based revenue recognition. This leads to the additional revenue recognition document in ledger 2L:
For the confirmed – and not yet billed – one piece of material SRV_05 we simulate billing and get an expected billing value of 24€. ( you can check below, this is the value we get later, when we bill)
In Line 3 and 4 of the revenue recognition document we realize revenue now of 24€ with the revenue adjustment G/L account and activate on the balance sheet account WIP/accrued revenue. With items 1, 2,5 and 6 we reverse the cost adjustment, which were posted with the consumption posting – like in ledger 0L.
Thus, we show now a margin of 24€ revenues minus 16,35€ costs.
In ledger 0L, in wich completed contract methos is applied, we still just defer the costs and do not show any realized revenue and margin.
With the service order completion billing due items are created. They can be transferred to billing with the app “Release for billing”
You can mark the items and with pressing button “Release for Billing” Billing document requests are created.
The BDRs can be billed with the app “Create billing documents” – see figure 28.
When the billing document is created and transferred to Financial Accounting, we get the following Journal entry.
The Journal entry contains the receivables line item and 3 billed revenue line items for the service order items 20 to 40. The product is equal to the billed product. The product sold is derived from the main/bundle item.
The result of all these business transactions can be analyzed with the app “service order actuals”. Figure 2 and figure 3 include the postings from our example here.
5 Service contract
Service contracts can be used to close service agreements with customers. There is an own app “Manage service Contracts” available – see figure 30
We provide here an example for a service contract for 10 month, for which a fee of 29.600€ is due at the beginning.
On item level you define the product and the billing plan, which is relevant for billing and revenue recognition.
You see here a Billing value of 29.600€, which is due on first of September 2020
The settlement start date and settlement end date defines the period, for which this service is valid. Here September 2020 to June 2021. So, we have a duration of 10 month.
With the release of the service contract the prediction data are stored – see example in figure 10 and 11.
With the app “Schedule billing document request creation” you can create the Billing document request (BDR).
Within the app “create billing documents” you can select with the service contract ID.
Figure 33 shows the billing document/ customer invoice.
With “post billing document” you get the Journal entries below
The first journal entry, 94000000161, posts receivables, tax and the billed revenue of 29.600€ to the service contract item.
The event-based revenue recognition defers the whole amount – in line 4 and 5 – as the billed value is valid for 10 month and cannot be completely realized.
The periodic realization is done by periodic event-based revenue recognition run or the manual revenue recognition for service documents – see below.
The revenue recognition is started for period 009.2020. We can realize a tenth of the complete billing amount 2.960€. The rest is still deferred
This leads to the Journal entry below.
When you start a reporting for the single service contract item, you see only the direct postings on the contract item – the billing and the revenue recognition:
When you do not define the service document type as parameter, you get all Journal entry line items with service contract maintained– the attributed of the postings to the assigned service order items too.
Now let’s come to some special postings on service objects
6 Additional postings
Manual posting on service order item
You can assign costs – and revenues – independent of the service business transactions. As the service order is part of the coding block you can post on service documents for example with the following financial transaction:
- Post General Journal entry
- Manage direct activity allocation
- Create supplier invoice
- Reassign cost and revenues
And you can allocate costs by (top down) allocation to market segment with service order as attribute.
You will see these postings on the service order e.g. with the app “Product and Service margins” and they will affect the service order and market segment margin, but these postings have – in the current solution – no impact on billing.
Intercompany time confirmation/activity allocation
There is an option to post confirmations cross company codes. This is only possible for expense items and service items, not for goods movements or purchase order related goods receipts and supplier invoices!
The service order is assigned to a company code. If you now select in a confirmation for an expense or service item an “Executing service Employee”, who is assigned to a different company code, a cross company cost posting is triggered.
Let’s have a look on this.
First service order 8000000194 is created and assigned to company code 1010. Then a confirmation is triggered -see figure 39
Figure 39 service confirmation of US Employee on a service order assigned to Germany
With the assignment of the Executing service Employee “John Consultant1_US” the service providing company code is defined – here company code 1710.
For intercompany time confirmation there can be own intercompany cost rates maintained – see figure 40
For the service/activity type “SV01” there is an intercompany rate of 100€ defined. This value is taken as transaction currency for the intercompany posting. The intracompany rate of 75 USD is taken as cost. The difference of 100€ and 75 USD (60,58€) is 39,42€. This is taken as margin.
This leads to the Journal entry postings below
The upper four line items posted in company code 1710, the four line items below in company code 1010. All eight line items are created by this one time sheet entry “492” – you see in column 4.
The cost center of the employee is credited in 1710 and the service order is debited in 1010. There are two line items – one for the cost and one for margin.
there is real-time group consolidation posted with additional line items on Intercompany clearing accounts. The relevance for group reporting is shown with the trading partner on the very right.
How this looks on the receiving service order see below in figure 42
On the service order you see the costs and the margin on separate G/L accounts.
With 2011 these intercompany CO allocations to a receiver service order are taken in account in the periodic intercompany billing. Here taxes are calculated and affiliated expenses and revenues are posted.
For more information about the complete intercompany cost allocation process covering intercompany billing too, have a look on this blog:
information about the calculation of the intercompany rates you get in this blog:
I hope you enjoyed this overview on the new accounting solution for service documents. It is another scenario, in which we are now benefiting from the innovations in financial accounting – the Universal Journal, the profitability attribution for revenue carrying objects and the event based revenue recognition.
We will enhance functionality on roadmap. We will keep you updated.