Introduction

For service contracts in the SAP S/4HANA Cloud, the following two item categories are based on the periodic billing plan: 

• Service contract item (SCN1) 
• Service contract item for price adaptation (SCN2)  

For these items (especially when a Monthly settlement period rule is selected), you would notice that in the system generated billing request lines:

1.  The settlement start and end dates can be very normally set to the exact same days for each month, or
2.  Very strangely these dates vary a bit and makes the billing values at each billing request line vary as well.

You could find that the special day making the difference is the 28th, in the case of a monthly settlement rule.

If the Contract Start date is set to a day earlier than 28th of each month, the billing plan is generated normally in the system: 12 billing request lines with the same billing value in each line exactly equal to the monthly fee you have configured in the system.  

However, if the Contract Start date is later than 29th, the billing plan is generated, taking February (29th only available for the leap-year February) into account: total 13 billing request lines with the billing value of one settlement period is split. 

Reasons 

The reason behind is that the period billing plan has been pre-configured in the standard system as the standard delivery for periodic billing plan generation. 

With this configuration, the general rule is: 

• One month is considered as 30 days 
• The daily price is considered as the Monthly Fee (PSI1) times 12 months and then divided by 360 days. 

Another factor that matters here is that during the generation of a billing plan, the system firstly calculates the settlement start and end dates and then uses these dates to calculate the billing values based on the Monthly Fee.  

Calculation Logic 

The following section describes the detailed calculation logic for settlement period calculation and billing value calculation. 

Note:  

• The following logic explained is only for normal years with 28 days in February.
• The following logic explained is based on the Monthly settlement period rule.

1. Generation of Settlement Periods 

The settlement period is calculated one by one starting from the contract start date. The end condition is that the calculated last settlement period end date plus 1 day is equal to the contract end date. Then the contract end date will be set to the end date of the last settlement period. 

1.1 Settlement Start Date

• If the current settlement period is the first settlement period, the settlement start date is set using the contract start date. 

• If the current settlement period is not the first settlement period, the settlement start date is set to the previous settlement end date plus 1 day. 

 Example 

A service contract item with validity period from 2021.01.01 to 2022.01.01. 

A service contract item with validity period from 2021.01.30 to 2022.01.30. 

1.2 Settlement End Date

• The settlement end date is normally equal to the settlement start date plus one month minus 1 day. However, this one month is defined differently based on different settlement start dates: 

• • If the settlement start date is set in a 31-day month (January, March, May, July, August, October, December), then the system takes 31 days for one month. 

• • If the settlement start date is set in a 30-day month (April, June, September, November), then the system takes 30 days for one month. 

• • If the settlement start date is set in February, then the system takes 28 days for one month. 
• If the month of the calculated settlement end date minus the month of the settlement start date is larger than one, the system sets the settlement end date to the last day of earlier month minus one day. 
• If the settlement end date plus one day is equal to the contract end date, the system sets the settlement end date to the contract end date. And this settlement period is the last settlement period in the billing plan. 

Example

A service contract item with validity period from 2021.01.30 to 2022.01.30 

2. Calculation of Billing Values 

With the settlement periods calculated in the billing plan, the system calculates billing values based on the settlement start and end dates. 

• If settlement end date – settlement start date + 1 day > 30 days, the billing value is equal to the monthly fee. 
• If settlement end date – settlement start date + 1 day = 28, the month of settlement end date is February, and the year is not a leap year, the billing value is equal to monthly fee 
• If settlement end date – settlement start date + 1 day < 30 and the month of settlement end date is not February, the billing value is equal to

𝑀𝑜𝑛𝑡ℎ𝑙𝑦 𝑓𝑒𝑒−(30−(settlement end date – settlement start date+1))∗daily price

• If settlement end date – settlement start date + 1 day < 28 and the month of settlement end date is February, then the billing value is equal to

𝑀𝑜𝑛𝑡ℎ𝑙𝑦 𝑓𝑒𝑒−(30−(settlement end date – settlement start date+1))∗daily price

Example

We can take a look at the following four scenarios when for example setting the Monthly Fee to USD 100.  

1. Service contract item start date is earlier than 28th (01.01)
2. Service contract item start date is 29th (01.29)
3. Service contract item start date is 30th (01.30)
4. Service contract item start date is 31st (01.31)

Billing Plan for Item Start on 01.01

Billing Plan for Item Start on 01.29

Billing Plan for Item Start on 01.30

Billing Plan for Item Start on 01.31

Conclusion

In this blog, you have learnt that how the system generates the periodic billing plan for your service contract items. We hope that it give you a clear clue about the reasons why sometimes the billing request lines and the billing values look so different from those in the many other cases in your system.

Test yourself about the leap year case and verify it in your system if you’re curious.

If you have any questions, please comment under this blog. We will get back to you soon with our answers. If you have any other questions about service contracts, you can find Q&A and post your questions in the community.