Rebates - SAP SD

A rebate is a sales promotion technique that a seller applies to improve sales volume. It is generally a time-bound, after-sale discount that is based on a volume of sales made to a particular customer and has either a prospective or retrospective effect. For example, a customer might be entitled to a 2 percent discount as a rebate for total purchases of more than $100,000 in the next six months. Another example can be a $1 discount on every piece eligible for the rebate, if a customer buys 5,000 pieces of a particular product over a period of four months, including one month in the past and three months in the future. Rebates can also be independent of sales volume. An example is performance rebates.

To provide rebates, the seller generally signs an agreement with the customer that includes all the necessary details such as the agreed sales targets, the time period in which these targets are to be completed, and the discount conditions such as percentage rate, dollars per piece, or lump sum. The seller then tracks the volume of sales made to the customer for the rebate-eligible products and periodically accounts for the rebate accruals as per the organization’s accounting policies. When the targets are successfully achieved, the seller pays the rebate amount to the customer. This step is called rebate settlement.

In SAP, rebates are handled by the rebate processing component of the billing application. Here you can provide rebates based on both sales volume and performance. Performance rebates are manually accrued, whereas sales volume dependent rebates can either accrue manually or be set up for automatic accrual by SAP. The settlement can be made via check or credit memo to the customer. You can also process either partial or full settlements pursuant to a rebate agreement. The partial settlements can be manually processed or automated to run on a periodic basis.

The Rebate Process

In SAP, the rebate process consists of three main processing steps. You initiate the process by creating a rebate agreement followed by the automatic or manual posting of accruals, and you complete the process by running rebate settlements. A detailed explanation of these process steps follows.

Creating a Rebate Agreement

A rebate agreement stores the rebate-related data and controls the overall rebate processing. The pricing condition records for rebate processing are also stored within the rebate agreement. You can create a rebate agreement for a particular customer by using following menu path: SAP Menu ➢ Logistics ➢ Sales And Distribution ➢ Master Data ➢ Agreements ➢ Rebate Agreement ➢ Create (VBO1).In the initial screen that appears, you provide the rebate agreement type and the organizational data for which you want to create a ebate agreement. Standard SAP provides five types of rebate agreements to choose from:

Agreement type 0001 (Group Rebate) This agreement type allows condition records to be created for a combination of customer/material or a customer/ rebate group. The rebate group is a field on the material master Sales Org.2 view.Additional rebate groups may be created through customizing. The customer is the payer, and the rebate is specified in terms of a percentage. If the rebate agreement is not material-specific (as would be the case if you use a customer/rebate group as a criteria), you have to specify a rebate material that will be used in the payment documents, such as credit memos. Typically you have to set up a material master record for a dummy material and then use it in the settlement documents. The delivering plant in the material master record will default into the payment documents for use in determining business areas if needed.

Agreement type 0002 (Material Rebate) This agreement type allows condition records for a customer/material and uses a quantity-dependent calculation. The customer is the payer.

Agreement type 0003 (Customer Rebate) This agreement type allows condition records based solely on the customer and uses a percentage for the calculation. The customer is the payer. As with 0001, a rebate material must be specified.

Agreement type 0004 (Hierarchy Rebate) This agreement type allows condition records for a customer hierarchy node/material or by hierarchy alone. The calculation is based on a percentage. The hierarchy nodes must be established in customer hierarchy maintenance before using this type of rebate agreement.

Agreement type 0005 (Independent of Sales Volume) This agreement type allows a lump-sum payment to a customer. Because it is independent of sales volume, no accruals will be automatically generated. Typically a manual accrual is generated for the amount of the agreement, and payments are made over the life of the agreement until final settlement is carried out.

The next screen is the rebate agreement overview screen. Here you provide all the information related to a rebate agreement. A rebate recipient is a customer who is supposed to receive the rebate and whose sales are to be tracked for rebate processing. Validity period represents the validity of the rebate, and verification level represents the level at which you would review a report on sales volume for this rebate agreement.

Creating a rebate agreement, overview

Creating a rebate agreement, overview

Click the Conditions button to reach the condition maintenance screen. This screen looks similar to the transaction VK11, used for pricing condition records. You can enter the rebate condition record on this screen. You can use the Goto menu at the top to navigate to other screens in the agreement. If the agreement type is not material-specific (as in the case of 0001 and 0003), you have to specify a dummy settlement material on the Material For Settlement screen.

Creating condition records in a rebate agreement

Creating condition records in a rebate agreement
Maintaining the material for settlement in a rebate agreement

Maintaining the material for settlement in a rebate agreement

Posting Accruals

Manual accruals may be used in any of the agreement types where the configuration of the agreement type allows them. Most often, manual accruals are used in agreements that are independent of sales volume. The agreed-upon payment may be accrued up front and then be reduced with each payment.

To create a manual accrual, use the Change Material Rebate transaction VBO2. From the overview screen, select Extras ➢ Manual Accrual. On this screen, you can manually enter the amount to be accrued. When you save the agreement, a rebate credit memo request is created. You can then create a credit memo with reference to the credit memo request. The accrual amount is then posted to accounting.

From the manual accrual screen, you can follow the path Goto ➢ Payment Data, which will lead you to an overview screen displays cumulative accrual and payment information for this rebate agreement. Once the billing documents relevant for rebates are processed, you can check the sales volumes from the VBO2 screen; just follow the menu Rebate Payment ➢ Sales Volume. The level at which the details will be shown to you depends upon what verification level you set up.

Carrying Out Settlements

At the end of the rebate agreements, you can carry out the final settlement before closing the agreement. You can also carry partial settlements manually at any time. These are limited to the cumulative accrued amount.

Manual accrual process

Manual accrual process
To carry out the final settlement from the Rebate Agreement screen (change mode VBO2), click Execute Settlement. This allows you to manually check and verify the amount for settlement before a credit memo request is created. If you do not want to verify or change the amount, choose the Create Final Settlement option, which automatically creates a credit memo request in the background.

Before an agreement can be settled, the system will prompt you to update the status of the agreement to B(released for settlement), based on the configuration. This makes sure that you do not accidentally settle and close an agreement. You can carry out the final settlement in batch mode using the menu path SAP Menu ➢ Logistics ➢ Sales And Distribution ➢ Billing ➢ Rebate ➢ Rebate Settlement [VB(7].

Sometimes, when you set up a rebate agreement, the system displays a message that the sales volume is not current. This may happen after changes have been made to the rebate conditions. When this happens, you have to execute the report SDBONT06 (from the transaction SE38) to carry out the proper updates.

Rebate Configuration

We’ll now discuss the major steps in rebate configuration.

Activating Rebates

Rebates are deactivated in standard SAP by default. You have to activate the functionality at three levels: the sales organizations, the billing types, and the customer level. You can activate the rebates at the first two levels—the sales organization and billing type—in customization. The menu path is as follows: IMG ➢ Sales And Distribution ➢ Billing ➢ Rebate Processing ➢ Activate Rebate Processing.

You have two actions to perform here. In the first step, you select the billing documents that are relevant for rebates. In the second step, you activate rebates for your sales organizations.

we have selected billing type Z2 for rebates. we have ensured that sales organization 9090 is ready for rebate processing. The third step is done through master data maintenance. You have to activate rebates for a customer in the customer master record.

On the Billing Documents tab of the customer master, there is a check box for activating rebates. of the sales. Make sure this has been selected for your customers in the payer role.

Activating rebates for billing types

Activating rebates for billing types
Activating rebates for sales organizations

Activating rebates for sales organizations
Defining Rebate Agreements

To set up a rebate agreement, the path is as follows: IMG ➢ Sales And Distribution ➢ Billing ➢ Rebate Processing ➢ Rebate Agreements ➢ Define Agreement Types ➢ Define Agreement Types [VB(2 ].You can check the existing rebate agreement types or define a new one. The following are some of the important fields in the details screen.

Defining rebate agreement types

Defining rebate agreement types

Proposal Valid-From Here you set up a default proposal for the validity start date for your rebate agreement. You can choose the start date as today’s date, the start of the week, the start of the month, or the start of the year, or you can even leave the field blank if you don’t want SAP to propose any start date.

Proposal Valid-To Here you set up a default proposal for the validity end date for your rebate agreement. Available proposal options include the end of the month, the end of the year, a fixed date of 12/31/9999, a proposal as per settlement calendar, today’s date, and no proposal.

Payment Method Here you set up a default proposal for the payment method that will be used by SAP for the settlement of your rebate agreement. For example, if you leave this field blank, SAP will use credit notes that you can apply against the customer’s outstanding receivables as the method to settle the rebate agreements. If you choose C here, SAP will still create a credit note, but the credit note will post to accounting with a payment method indicator of C. This means that the credit note cannot be applied against the customer receivables and can be settled only via a check to the customer for the credit note amount.

Default StatusHere you set up a default status at the time of creation of the agreement. The default value here is blank, which means that the agreement is in open status.

Verification Levels This field controls the level of detail you want to see in the report when you review the rebate-relevant invoices for a rebate agreement. For example, you can either choose to display each document separately or choose to display totals using grouping criteria such as sold-to party, payer, materials, and so on.

Different Validity Period You select the Different Val.Period check box if you want to allow the rebate agreement and the underlying condition record to have different validity periods. An example of a business scenario where you may want to select this check box is seasonal rebates. You may agree to give an additional 0.5 percent rebate to your customer for purchases they make during Thanksgiving week. If this check box was already selected in customizing, you would be able to create another condition record in your rebate agreement for the Thanksgiving season with a validity of one week. SAP will be able to track and provide additional 0.5 percent rebates on the sale during that period.You should leave this check box deselected if you want the agreement and condition records to always have the same validity.

Manual Accruals Order Type In the ManAccrls Order Type field, you define the default order type for any manual accruals such as accruals for performance rebates or accruals for retroactive rebates. When you process the manual accrual for a rebate agreement, SAP uses this sales document type to create the credit memo request for manual rebate accrual.

Manual Accruals This check box controls whether manual accruals should be allowed for a particular agreement type. In standard SAP, agreement types 0002 and 0005 are set up for manual accruals.

Arrangement Calendar An arrangement calendar defines the end of the validity period for a rebate agreement and also helps in extending the rebate agreement to the next period. SAP provides report RV15C005 for extending rebate agreements to the next periods. You can access it using transaction code VB(D.

TIP:You can only extend a rebate agreement to the next period if the agreement type had an arrangement calendar defined in customizing.

Payment Procedure The value in this field controls the upper limit for making manual payments against a rebate agreement. Here, you can choose A to allow the manual payments up to the accruals value, B to allow the manual payments up to the value of pro-forma settlement, or C for no limits, or you can leave the field blank, in which case SAP will not allow the manual payments.

Partial Settlement This field tells what order document type SAP should use when partial settlement needs to be made for a rebate agreement. When you execute the partial settlement process, SAP will use this document type to create a credit memo request for the partial settlement value.

Reverse Accruals This check box controls whether you want SAP to reverse the accruals when a manual payment is made.

Settlement Periods If you want to make periodic partial settlements, you can attach a calendar here with the required settlement dates. If you schedule a batch job for settlements (VB(7, discussed earlier in the chapter), the rebate agreement will come up for partial settlement on the dates in the calendar.

Final Settlement and Correction In these fields you can specify the document types that will be used for final settlement or corrections, respectively.

Minimum Status This field specifies the minimum status that is required before you can process a rebate agreement for settlement. For example, if you enter B here, the agreement needs to be in this status (or higher) before settlement can be carried out. Configuring Rebate-Related Pricing Conditions

The rebate functionality requires some special pricing condition types. The basic concept and settings are similar to standard pricing using condition techniques. You must add the rebate-related pricing conditions to your pricing procedure.These conditions are called during pricing, only in billing documents. To define these settings, the path in customization is IMG ➢ Sales And Distribution ➢ Billing ➢ Rebate Processing ➢ Condition Technique For Rebate Processing.We’ll now discuss the major points to be noted in rebates configuration.

Setting up rebate condition types SAP offers the standard condition typesBO01 to BO06 for use with rebates. The setting that differentiates the rebate condition types from other pricing condition types is condition class. For rebate condition types, the condition class is C. Fewer fields are required to be filled up for such conditions. It is this value in condition class that makes sure that the condition type for a rebate cannot be processed via any of the pricing maintenance transactions such as VK11 and VK12. the pricing conditions, access sequences, and condition tables used in rebates.

Setting the pricing procedure In standard SAP, rebate condition types BO01 to BO06 are assigned to the pricing procedure If you are setting up your own rebate conditions, make sure that you have attached requirement routine 24. This ensures that the conditions are called up in billing documents only. Also note that account keys ERB and ERU must be assigned to the conditions. We will discuss the account assignment aspects later in this chapter.

Condition Types in Rebates

Condition Types in Rebates
Pricing procedure with rebate conditions

Pricing procedure with rebate conditions

Defining condition type groups The next step in customization is to assign one or more rebate conditions to a condition type group. Then, you attach this group to the rebate agreement type. This way, you can create the rebate agreement and the associated rebate conditions using the same transaction.

To define the condition type groups, the path is IMG ➢ Sales And Distribution ➢ Billing ➢ Rebate Processing ➢ Rebate Agreements ➢ Condition Type Groups ➢ Define Condition Type Groups.Here you can define a condition type group and assign it to a condition type group category.

Defining the condition type group

Defining the condition type group

Assigning rebate conditions to the groupFollow the menu path IMG ➢ Sales And Distribution ➢ Billing ➢ Rebate Processing ➢ Rebate Agreements ➢ Condition Type Groups ➢ Assign Condition Types/Tables To Condition Type Groups. Here you assign the rebate condition types and the underlying condition tables to a condition type group. For example, consider the condition type group 0001. The condition type BO01 is assigned to this group. You can maintain condition records for BO01 either for the customer/material (in condition table 1) or for the customer/rebate group . Hence, there are two records for condition type group 0001.

Assigning condition types to condition type groups

Assigning condition types to condition type groups

Attaching the group to rebate agreement types To perform the last step in the assignment process, follow the menu path IMG ➢ Sales And Distribution ➢ Billing ➢ Rebate Processing ➢ Rebate Agreements ➢ Condition Type Groups ➢ Assign Condition Type Groups To Rebate Agreement Types.

Assigning condition types group to rebate agreement types

Assigning condition types group to rebate agreement types

Select the rebate agreement type that you plan to use, and assign a condition type group to it.Thus, in our example, agreement type 0001 has condition type group 0001 linked to it. Further, the group is linked to condition type BO01 with two condition tables, 1 and 2, thus completing the assignment.

Configuring Account Assignment for Rebates

Account determination for rebates consists of two account keys: account key ERU for posting the accruals and account key ERB for posting the actual rebate expenses. We have attached these keys in the pricing procedure illustrated. The account key ERU points to two accounts: an accrual G/L account and a rebate expense provisional account. Account key ERB points to the actual rebate expense G/L account. Between accrual and settlement, having two separate GL accounts helps in tracking the rebate expenses separately. However, you can use the same G/L account. Please consult your FI/CO team before making these settings. When SAP posts an accrual (either automatic or manual), the G/L account for posting the accruals into accounting is taken from the ERU account key, and the accounting entry is posted by debiting the rebate expense provisional account and crediting the rebate accrual account. When you run the rebate settlement, SAP takes the G/L account from ERU and reverses the previously posted accruals and the G/L account from ERB to post the entry into customer receivables and rebate expense account.

We will discuss account assignment. However, at this stage, we will cover how accounts are maintained for rebates processing by using the menu path IMG ➢ Sales And Distribution ➢ Billing ➢ Rebate Processing ➢ Account Determination For Rebates ➢ Assign G/L Accounts (VKOA).we have assigned G/L accounts for the posting keys ERB and ERU, as discussed earlier. depicts the impact of accrual and settlement transactions on the G/L account posting.

Account assignment for rebates

Account assignment for rebates
Accounting postings

Accounting postings


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