This blog shares highlights on Service in SAP S/4HANA Cloud, private edition 2023 on the following areas:

• Item-based Accounting for Service Transactions
• Service with Advanced Execution
• Ad-hoc billing plan for fixed price services
• Inter-company Service Execution
• Stock Transfer from Service Order
• External Workforce Procurement

With Item-based accounting it is possible record and analyze cost and revenue in real-time that have incurred in service orders and service contracts. For this purpose, we have enabled each service contract item and service order item as a CO object (account assignment object). These CO objects allow to get an overview of planned and actual costs and revenue in Universal Journal.

Item-based accounting provides significant benefits, like enhanced reporting and improved margin analysis. It enables improved process efficiency and better transparency as the same object number is used in Service and Finance. And it has a matching principle for every posting – cost and revenues – with event-based revenue recognition.

Picture: Process overview Item-based Accounting

Picture: Item-based Accounting for Service Transactions

Financial Reporting and Margin Analysis

Standard financial reports for Service provide real-time insight into Actual revenue and costs, as well as Plan/actual comparison. These reports allow drill-down to detailed attributes of the service processes, like organization, sold-to, product sold, profit center, and many more.

Picture: Service Actuals report

Planned Cost and Revenue Calculation

In Service Order we have introduced baseline and ongoing Planned Cost and Revenue calculation.

Baseline: When the status of a service order has been set to Released for the first time, the planning process of a service is considered as completed. The cost and revenue that have been planned up to this point are considered as the baseline of planned cost and revenue.

Ongoing: While the baseline of planned cost and revenue serves as a basis for comparison, the ongoing planned cost and revenue reflect the continuously updated data when changes occur in the service planning process. The changes can be a change of item quantity or price, or an added item in a service order.

Picture: Planned Cost and Revenue in Service Order

Event-based Revenue Recognition

With event-based revenue recognition, costs and revenues are recognized as they occur. Recognition and adjustment postings are generated simultaneously with the transactions. The matching principle is supported inherently and therefore no periodic batch jobs are needed for reconciliation.

Event-based revenue recognition provides following advantages, compared to conventional periodic revenue recognition:

• In a conventional periodic revenue recognition process, costs and revenues are matched only at the end of the period – after settlement, reconciliation, and other periodic activities have been completed. This means that you don’t know your margins until the end of the month.
• With the event-based approach, costs and revenues are matched immediately as they occur, enabling real-time recognition and reporting. Reported profit and margins are always up to date, and income statements or cost-of-sales reports can be produced on demand.

For Service Contracts we support Time-based revenue recognition. For Service Orders, these revenue recognition methods have been enabled:

• Completed Contract
• Cost-based POC method
• Revenue Recognition based on Service Confirmations
• Recognize costs and revenues as occurred

Picture: Event-based Revenue Recognition – Service Documents

Service with Advanced Execution was first introduced in release 2022 as a restricted version under the name “Maintenance Service Order”.

Now, with 2023 release, this scenario is general available and renamed to “Service with Advanced Execution”. This new name has been chosen as this scenario provides the ability to split an end-to-end service process into a commercial service order and one or multiple execution maintenance orders. In these execution orders, companies can perform advanced operational planning with support of configurable task lists based on service product or equipment.

Picture: Process overview Service with Advanced Execution

Resource-related Quote

For a service that requires extensive planning it is necessary to already account for this planning in the quotation. For such a service, an execution maintenance order is created from the quotation. A service planner can use this order to perform detailed operational-level planning and costs estimations. This information can be returned back into the quotation, and allows a salesperson to finalize the quotation and send it to the customer.

Configurable Task Lists

Task lists describe a sequence of individual service activities which must be performed repeatedly. They are used as a reference and an input tool when processing orders and considerably reduce the time required during work scheduling.

Task Lists can be determined based on the service product in the service order item or based on a task list in the equipment master data. In case of service product-based task list, the selected activities (operations) and spare parts (components) can be dependent on the specific configuration of the service product in the service order.

Resource-related Billing

Besides fixed-price billing, the service with advanced execution process also supports resource-related billing. A dynamic item processor (DIP) profile is used for resource-related billing to convert the actual costs (personnel and material costs) of the service into billable items.

In-house Repair with Advanced Execution

In-House Repair with Advanced Execution combines the capabilities Service with Advanced Execution and the inbound and outbound logistics that are provided by customer returns.

Picture: Process overview In-house Repair with Advanced Execution

With Ad-hoc Billing plans in Service orders for the fixed price items, customers can generate the billing documents for specified dates in the billing plan without the need to complete the Service order / Items.

Picture: Ad-hoc Billing Plan in Service Order item

Inter-company service execution is a business process used to distribute a service between two companies with different company codes that belong to the same organization. A commercial company is responsible for the service agreement with the customer and customer billing. The planning and execution of the service is handed over to an execution company. The execution company plans and performs the service using a separate service order. Based on the performed services, the execution company will create an intercompany invoice towards the commercial company. This invoice is booked as a cost in the commercial company.

Picture: Process overview Inter-company Service Execution

Inter-company service execution is enabled by a customizing setting in the service order item category.

Picture: Service Order with Inter-company Service Execution

When the required service parts are not available in the executing service employee’s storage location, a stock transfer process can be triggered via a purchase requisition or purchase order to fill-up the storage location directly from the service order.

Picture: Process overview Stock Transfer from Service Order

It is now possible to trigger the procurement of third-party services. From service order or repair order, a purchase requisition of purchase order towards an external vendor will be created. After the service, when a service entry sheet is created and approved, a service confirmation will be created automatically.

This process supports purchase requisition or a purchase order with two different procurement methods: Lean Services (recommended) or External Services Management.

Picture: Process overview External Workforce Procurement

If you are also interested in other Lines of Business or industries, I would like to draw your attention to the link collection blog – The Link Collection

For more information on SAP S/4HANA Cloud, private edition 2023, check out the following links:

• SAP S/4HANA release info: sap.com/s4hana
• SAP S/4HANA Community here
• SAP S/4HANA PSCC Digital Enablement Wheel here
• Inside SAP S/4HANA Podcast here
• Join the SAP S/4HANA Movement
• Best practices for SAP S/4HANA here
• Help Portal Product Page here
• What’s New here

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