In this blog you will learn about Price items in Service Transactions, from service quote to service order. We will explore how Price Items facilitate financial reporting and revenue recognition for Service. This service process flow is based on SAP S/4HANA Cloud Private Edition, release 2023 FPS1.
Price Items serve two primary purposes, although Price items can also be used beyond these scenarios:
- Facilitating adjustments for price increases or modifications to service scope within service transactions, all while ensuring consolidated financial reporting and seamless revenue recognition.
- Offering a detailed commercial breakdown for individual execution order items by leveraging multiple price items.
Use Case 1: Support for price increases or changes to the service scope
In this process flow, we begin with the initial quotation of an Inspection and Repair service to the customer.
After accepting the service quote, the follow-up service order is created.
The service order needs to be released to start the actual service work.
When inspection has started, it was identified that a change in scope of work is necessary. This change could arise due to various factors, such as the identification of additional unexpected defects during the initial stages of the service process. Consequently, a re-quoting process is initiated to adjust the service scope and renegotiate terms with the customer.
Such scenarios can be managed using Price items. These Price items are included as sub-items within the (re)quote and are subsequently copied into the service order. It's important to note that price items are exclusively relevant for pricing and billing purposes. They represent revenue-only items with no associated costs. All costs incurred are attributed to the Service item originally entered in the quote and order. Additionally, price items are always sub-items and do not have an own Accounting Object. Instead, Price items 're-use' the Accounting Object of the parent item, i.e., the original service item.
Upon acceptance of the new service quote by the customer, the original service order gets updated to reflect the changes.
From a financial standpoint, all costs and revenue are booked on the Accounting Object of the parent item, ensuring comprehensive tracking and analysis. Margin Analysis and Event-based Revenue recognition are conducted based on the parent item, enabling effective financial management and reporting.
Price items are supported for regular service order items as well as Execution Order items in Service with Advanced Execution.
Use Case 2: Commercial details for Execution Order Item in Service with Advanced Execution
In this process you see a service order with 2 Execution Order Items:
- Inspection Service
- Repair Service
Both execution order items create a connected maintenance order for detailed planning and execution of the services. The difference is that the Inspection Service itself is billable, while the Repair Service is "split" into more granular commercial items (Dismantling, Repair, Certification). These sub-items offer more commercial transparency to customers, despite being planned and executed together within a single maintenance order.
In the customer invoice you see that the first execution order item (Inspection Service) is included in the invoice based on order-based billing or fixed price. For the second execution order item (Repair Service), the sub-items are included in the invoice. These sub-items are Price Items.
For the parent/child hierarchy of the Repair item, we have the costs booked on the parent item, while the revenue is booked on the sub-items. To bring costs and revenue together, the sub-items (price items) are using the Accounting Object of the Parent item.
Consequently, in financial reporting and Revenue Recognition, the reporting is done based on the Parent Item (Repair Item).
You can find more information about Price Items in SAP Documentation: Price Items
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