SAP RAR Optimized Contract Management: Goods Issue & Time-Based Fulfillment Business Use Case
In this blog post I will be focusing on SAP Revenue accounting and reporting (RAR) Use Case for Event-Based Fulfillment – Goods Issue as well as Time-Based Fulfillment of Performance Obligations. A performance obligation (POB) can be fulfilled when a specified event happens which is Event-Based Fulfillment. A performance obligation can be fulfilled over a period of time which is Time-Based Fulfillment.
The goods or services that are promised in the contract represent a single performance obligation. SAP RAR has performance obligation types, and this represents data which addresses queries on fulfillment type; if it is Time or Event Based, and also specifies about the duration.
Performance obligations can be fulfilled on the occurrence of an event. They can also be fulfilled over a period of time, starting from the occurrence of such an event.
Goods Issue and Time Based
One can fulfill performance obligations (POBs) upon goods issue.
Time-based fulfillments for performance obligations involve subscriptions, for example contracts, where services are provided on a regular basis for the duration of the contract.
How the Goods Issue Process Is Integrated in Sales and Distribution with Revenue Accounting?
- The revenue accounting contract is created based on the sales order.
- When goods issue is triggered, a fulfillment event is triggered. Revenue accounting generates revenue and cost recognition postings using the actual quantity of goods issue as the fulfillment quantity.
- The cost of goods sold (COGS) is posted in the operational system, based on goods issue. The COGS is then corrected in Revenue Accounting.
Company enters into a contract with customer (17100003) for 30,000 USD for providing Hi-Tech Equipment (TG11) together with Consumable Spare Parts (TG12) and Warranty (SM001) of during contract validity from 14th October 2022 to 17th February 2023 (4 months).
|Items||Qty||SO Rate||Standalone Sales Price||Contractual Price||Total SSP||Allocated Amount||Allocation Effect|
Calculation Check Points:
- Allocated Amount = Standalone Selling Price of Item X Complete Contractual Price / (Sum of all Stand-Alone Selling Price (SSP))
- Allocation Effect = Allocated Amount – Contractual Price of Item
Step 1: Value Contract
Step 2: Sales Order
Step 3: Process Revenue Accounting Item’s related to Sales Order (Step 1)
View RAR Contract and Performance Obligations (POB’s) (Step 2)
RAR Contract – Price Allocation (Step 3, 4)
RAR Contract – Revenue Schedule (Before Fulfillment)
RAR Contract will calculate detail revenue schedule with status of each POB’s fulfillment type and status.
Step 4: SD – Outbound Delivery and Post Goods Issue
Step 5: Process Revenue Accounting Item’s related to Fulfillment
Step 6: Customer Billing
Step 7: Process Revenue Accounting Item’s related to Billing
Summary of RAR Contract – Revenue Schedule (After Fulfillment)
Service item will be 100% completed by the end of contract period which is 4 months in this case.