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The payment run processes payments automatically using the run parameters such as house bank, paying company code, payment method and due date as well as the technical settings for scheduling and parallel mass processing.

The payment run is created, scheduled, executed and monitored by the administrator.

The payment run can be executed as a simulation run prior to the actual payment run. The simulation run creates a payment list, but no payment documents.

The payment run carries out the following steps:

• Selecting open items based on run parameters and due date.
• Grouping open items into payments or debit memos.
• Selecting open items for clarification.
• Determining payment methods.
• Determining house bank.
• Posting payment documents and clearing open items.
• Creating payment list to check payments and exceptions.
• Creating payment medium depending on the payment method:
  • Check printout using the Print Workbench.
  • Payment medium file in all required and pre-configured formats:
    • Incoming Bank Direct Debit with/without SEPA Mandate.
    • Incoming Credit Card Payment.
    • Outgoing Bank Transfer.
    • Outgoing Check Printout.

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The contract accounting document lifecycle reflects the contract accounting processes.

Documents can be posted in invoicing (usual form), payment, dunning, or returns processing. Documents can be posted as receivables (usual form) and sometimes as payables.

Cleared and open items can be displayed and processed using the account balance display. Cleared and open items are regularly transferred to the general ledger.

Payments are initiated either by customer (payment lot) or by company (payment run). Payments clear open items and can be displayed using the account balance display.

In returns processing, payments are reset and the source receivable and charges are posted.

In dunning processing, overdue receivables are dunned. Charges and interests are posted, dunning letters are created and items can be submitted to collection agencies.

Interest can be calculated for open and cleared items, as well as for debit and credit items.

Overdue items can be integrated into an installment plan, entered as doubtful, or written off.

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The SAP S/4HANA Cloud for Contract Accounting and Invoicing supports a fully integrated Consume-to-Cash process.

This training covers in various units the part Contract Accounting in the Cloud:

• Unit 02 covers the master data.
• Unit 07 gives an overview of contract accounting in the cloud.
• Unit 08 covers the payment processing.
• Unit 09 covers the open item and collection management.
• Unit 10 covers the closing activities and the general the ledger transfer.

Contract Accounting – Key Capabilities

• Document Structure enables Storage Space Optimization.
• Document Posting on Individual Contract Account.
• Summarized Postings Transfer to General Ledger.
• Machine Learning
• Mass Activities

Contract accounting has the typical functions of a receivables management system, such as receivables posting, payments posting and dunning execution. The typical document is the receivables document which is posted by the invoicing process with reference to individual contract accounts.

Contract accounting is a subledger that is designed for processing large document volumes. Therefore, contract accounting provides mass activities such as payment run, dunning run, and correspondence run. The contract accounting document has an optimized structure for storage space and is posted on the individual contract account level.

Contract accounting is integrated into the general ledger of SAP S/4HANA Finance to fulfill the legal requirements of accounting and revenue recognition. The integration is realized by transferring a reconciliation key with summarized postings to the general ledger.

Contract accounting uses intelligent technologies such as machine learning to match incoming payments.

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The example shows the process flow of contract-based revenue recognition.

The process starts in SAP Subscription Billing with the following functions:

• The Subscription manages usage-based, one-time, and recurring charges.
• The Bill Forecast defines, when an invoice will be created for which amount, for example a three-year contract that is paid annually per position with the same amount.
• The Pre-Bill creates the actual (Pre-)Bill at the end of the year.

The process continues in the SAP S/4HANA Cloud with the following steps:

• [1] The subscription creation in SAP Subscription Billing generates a subscription event, which triggers the creation of a provider contract in SAP S/4HANA Cloud for Contract Accounting and Invoicing with information of the usage-based, one-time, and recurring charges.
• [2] The bill forecast calculation in SAP Subscription Billing triggers the creation of billing plan items in SAP S/4HANA Cloud for Contract Accounting and Invoicing with recurring and one-time billing plan items.
• [3] Out of the provider contract items and billing plan items, so called Order Item Transfer Records (TR) are created for integration into Revenue Accounting.
• [4] The transfer records are sent to the SAP S/4HANA Cloud for Contract-Based Revenue Recognition and create a revenue accounting contract. In this example three performance obligations: the usage item is created event-based, and the one-time and recurring items are created time-based.
• [5] The Usage Fulfillment and Periodic Fulfillment Schedule function of the SAP S/4HANA Cloud for Contract-Based Revenue Recognition post the correct revenue amount in the SAP S/4HANA Finance Cloud.
• [6] The transfer of the Pre-Bill from SAP Subscription Billing to the SAP S/4HANA Cloud for Contract Accounting and Invoicing generates billable items. This starts the billing and invoicing process and the posting of the contract accounting document. The contract accounting document is posted against billed revenue in the SAP S/4HANA Finance Cloud.
• [7] Out of the invoice, so called Invoice Item Transfer Records (TR) are created and transferred to the SAP S/4HANA Cloud for Contract-Based Revenue Recognition. It will do the correction postings to take out the billed revenue and post again the periodic posted revenue from the scheduler.

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Contract-Based Revenue Recognition, Definition:

• Revenue Accounting Integration with Sales, Fulfillment and Multiple Billing Systems.
• Revenue Recognition Compliance with IFRS by Multi-Element Arrangements.
• Revenue Contract and Performance Obligation Creation.
• Revenue Allocation Calculation Handling.
• Revenue Information for Periodic Status Reporting.
• Revenue Information for Profitability Analysis.
• Revenue Detailed Posting in Subleger.

Contract-Based Revenue Recognition

• Enables the seamless integration of sales contracts, fulfillments and billing from multiple operational systems into revenue accounting.
• Manages contracts with diverse line-items, the so called multi-element arrangements, to comply with IFRS and US GAAP for revenue recognition.
• Creates revenue contracts and performance obligations.
• Handles revenue allocation calculation.
• Provides detailed revenue information for periodic status reporting.
• Provides detailed revenue information for Profitability Analysis with compliant postings.
• Posts detailed revenue in sub ledger before aggregated transfer to the general ledger.

Contract-Based Revenue Recognition can be described by some business examples:

• The customer pays a monthly recurring fee per user in advance. For revenue accounting the amount should be assigned time-based to the appropriate month in the future.
• The customer creates and pays for usage-based support tickets. For revenue accounting, this transaction is assigned event-based to a revenue contract.

Contract-Based Revenue Recognition Processing Steps are:

• Contract Identification
• Performance Obligation Identification
• Transaction Price Allocation
• Performance Obligation Fulfillment
• Revenue Posting

Contract-Based Revenue Recognition is processed with the following steps:

• The Contract Identification creates revenue recognition contracts corresponding to operational documents that are created on an operational system.
• The Performance Obligation Identification identifies the performance obligations included in each contract. Performance obligations for items in the operational document are created and their relationships is managed.
• The Transaction Price Allocation determines total prices by aggregating pricing conditions passed from operational systems, and allocates the total price among the performance obligations.
• The Performance Obligation Fulfillment recognizes revenue for performance obligations as they are fulfilled.
• The Revenue Posting are transferred to the general ledger regularly to reflect revenue-related transactions.

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Revenue Sharing and Partner Settlement definition:

• Partner Agreement
• Partner Contract Lifecycle Management
• Partner Revenue linked to Customer Invoice
• Partner Credit Billing and Invoicing (Settlement)
• Cash Flow Optimization and Credit Risk Shring

Revenue Sharing and Partner Settlement functions:

• Needs the master data object Partner Agreement.
• Supports the partner contract lifecycle management.
• Connects the partner revenue sharing with customer invoices.
• Uses convergent invoicing for billing and invoicing of partner credits.
• Optimizes cash flow around payments and the sharing of credit risk.

Revenue Sharing and Partner Settlement can be described by some business examples:

• The radio company pays royalty fees to GEMA for playing songs.
• The cloud service company pays software license to the software company.
• The railway company pays for usage of foreign railway infrastructure in overland travels.

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Invoice Correction and Billing Request Definition:

Invoice Correction

• Credit Memo or Debit Memo.
• Correcting Invoice Amount without changing the Original Invoice.
• Collecting all Adjustments to the Original Invoice.

Billing Request

• Document for Invoice Correction.
• Collecting all Adjustments to the Original the Level:
  • Complete Invoice
  • Particular Invoice Item
  • Particular Billable Item in the Invoice
• Billing Request Release triggers Billable Item Creation for Adjustment Next Invoice.

The invoice correction process enables the creation of credit or debit memos to correct the amount already invoiced to a customer without changing the original invoice. The invoice correction collects all adjustments to one invoicing document.

The creation of a credit memo or debit memo generates a billing request for the correction amount, so that the correction is included in the next billing run. The combination of original invoicing document and credit memo or debit memo determines the effective amount in the next invoice to the customer.

The billing request is the document to control the invoice correction processing. Once the billing request is released, the creation of a billable item for adjustment in the next invoice is triggered.

The BIT created by billing request have the source transaction type CRDIT or DEBIT.

The BIT created by billing request have the source transaction ID as billing request number.

The BIT of one billing request are billed together, because they have the same source transaction ID.

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Invoicing Definition

• Processing Billing Documents and other kinds of Source Documents.
• Selection, Grouping and Aggregation into One Convergent Invoicing Document.
• Posting Contract Accounting Document with Receivables and Revenue Account Assignment.
• Posting Invoicing Document for Bill Printout.
• Execution Individually or via Mass Run.
• Source for Contract Accounting.

The invoicing process converges billing documents and other kinds of source documents into one invoicing document. The billing documents have been created in the previous step billing. The origin of other source documents depends on the underlying process such as sales order processing or dunning run posting a dunning charge.

The invoicing process underlies preconfigured and adoptable rules for selecting, grouping and aggregation of source documents for a well structured invoicing document.

The invoicing process generates invoicing documents and contract accounting documents that are source documents for the payment and dunning processes of the open item management.

The invoicing process can be executed either for one business partner or as a mass run.

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Billing Definition

• Processing Source Transactions represented by Billable Items (BIT).
• Selection, Grouping and Aggregation into Billing Documents.
• Execution Individually or via Mass Run.
• Posting Billing Document.
• Source for Invoicing Execution.

The billing process groups billable items into billing documents. The usage-based billable items have previously been uploaded from rating systems such as SAP Subscription Billing. The recurring- and one-time charged-based billable items have previously been requested from a billing plan.

The billing process underlies preconfigured and adoptable rules for selecting, grouping and aggregation of billable items for a well structured billing document.

The billing process generates billing documents that are source documents for invoicing.

The billing process can be executed either for one business partner or as a mass run.

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SAP S/4HANA Cloud for Contract Accounting and Invoicing supports the billing and invoicing of billable items according to preconfigured and adoptable rules for selecting, grouping and aggregation of billable items for billing execution and of billing documents for invoicing execution.

You can execute billing and display the billing document and/or immediately continue to execute invoicing and display the invoicing document. The invoicing execution creates an invoicing document and an accounting document in the contract accounting subledger.

You can perform selecting, grouping, and aggregation in two separate steps: first billing and then invoicing. This isn’t necessary in all system architectures, but possible to do so.

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