Rebate and Commission Management

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October 21,2011

Requirement
The company sells its products through sales agents who are rewarded a commission based on the sales volume. The commission rates are not based just on the total volume but depends on the rates at which the products are sold. E.g. Commission rate = 1%, if the unit price is Rs. 1000 1200 Commission rate = 2%, if the unit price is Rs. 1201 1400 Commission rate = 3%, if the unit price is > Rs. 1400 (This is an incentive to the sales agent to negotiate a better price.) The commission is to be paid at the end of every quarter.

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Solution Exploration
Solution 1: Update a z-table with the commission amount after saving the invoice. Create a z-program to create a debit memo at the end of a quarter based on the table data. Solution 2: Use an accrual condition to calculate the commission & post to a GL account. Create a report to show the accrued commission & a z-program to create the debit memo at the end of a quarter based on the accrual posting.

Solution 3: Use the functionality of rebate management with some enhancements.

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Solution using Rebate Functionality

Benefits: No need of creating any additional reports to show accumulated values to date Avoids duplicate payments for the same period Possibility of posting provisional entries (accruals)

Difficulties: Standard Rebate processing works with a payer; not with sales agent. Rate of rebate is based on the total sales volume; is independent of the unit price of the individual transaction.

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Standard Rebate Processing

Rebate Agreement Creation VBO1 Rebate rate = 2% if volume > 4000 = 3% if volume > 6000 Accrual rate = 2% (cannot be based on scale)

Sales Order 1

Delivery, PGI 1

Invoice Amt: 2000

Rebate accrual Rs. 40 Rebate accrual Rs. 100

Sales Order 2

Delivery, PGI 2

Invoice Amt: 5000

Rebate Settlement VB(7

Credit Memo Request

Credit Memo

(Auto-generated)
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Rebate payable : Rs. 210 (Rs. 7000 * 3%) + Rebate accrual reversal

Solution Approach & Steps

Approach: Use new rebate processing which allows pricing routines to be attached to the rebate conditions. (These fields are disabled in the old procedure.) Calculate the rebate rate & accrual amount correctly based on the unit rate in the transaction. Allow final settlement (quarterly) only to the extent of accrued amount. Step 1: Creation of a partner function for sales agent Step 2: Extending price determination based on the sales agent Step 3: Rebate Customizing Step 4: Customizing the Pricing procedure and development of routines

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Price Determination Based on Sales Agent

Append structure to KOMK (or KOMKAZ) with a field representing the sales agent Add the field to the pricing catalog Write the userexits to move the partner from the sales document to the pricing communication structure MV45AFZZ-PRICING_PREPARE_TKOMK (for sales document) RV60AFZZ-PRICING_PREPARE_TKOMK (for billing rebate conditions) Create the condition table using the new field added to the pricing catalog Create an access sequence based on the new table Assign the access sequence to the condition type Note: Rebate pricing determination uses similar concept as sales pricing however s maintained in a separate IMG node; the application (E) is different from sales (A).

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New Rebate Processing

Need to activate synchronous update of LIS info-structure S136 Possible to specify condition value & base value routines for rebate conditions Possible to use exclusion indicator in rebate access sequence Very useful in addressing non-standard requirements

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Pricing Procedure for the Invoice

Two condition types are used in the pricing procedure of the invoice. A normal condition (not a rebate condition) to determine rebate rate based on the scale of the unit price A rebate condition which is used to accrue the rebate volume. A pricing routine is attached to the rebate condition to copies the rate from the normal pricing condition to the rebate condition. (Otherwise in standard rebate processing accrual rate is independent of any scale.)

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Pricing Procedure for the Rebate Credit Memo

Only the rebate condition type is used in the pricing procedure. The rebate credit memo contains two lines with the same condition type. The first line contains the rebate amount calculated based on the final sales volume. This triggers the credit posting. The second line is statistical & contains the accrual value to be reversed. This ine triggers the accrual reversal posting.

Note: Partial settlement of rebate has an option to pay the rebate to the extent of only upto accrued values; however this is not available for final settlement. In standard system final settlement amount is calculated with rebate rate based on the scale ; it is independent of the accrued amount. In this solution, a pricing routine attached to the condition type sets the final settlement value = the value accrued so far.

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Rebate Accounting
Accrual posting is used when the agreement period is comparatively long. In invoice pricing procedure assign an accrual accounting key (ERU in standard) to the rebate condition type. At the time of invoicing
Dr Rebate Expense Account (a P&L account) (assign in the left column in VKOA) Cr Rebate Accrual Account (a BS account) (assign in the right column in VKOA)
Therefore customer receivable is not affected.

At the time of settlement (partial / full): Following two entries with the actual rebate amount to be paid:
Dr Rebate Expense Account (a P&L account) (assign in the left column in VKOA) Cr Customer Receivable

Following two entries with the accrual amount (remaining to be reversed):

Cr Rebate Expense Account (a P&L account) (assign in the left column in VKOA) Dr Rebate Accrual Account (a BS account) (assign in the right column in VKOA)

Note: In this solution, amount to be paid is always equal to the accrued amount.
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Useful Sources of Information

White Paper on Rebate Processing in SAP: http://www.erpgenie.com/publications/saptips/052005.pdf OSS Notes: Note 75778 Consulting / Troubleshooting for rebate processing Note 105681 To use the new rebate procedure

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