The traditional rebate solution available in the SAP ERP 6.0 system was not flexible and suffered from major blockages every time the table containing rebate entries (table VBOX) had to be rebuilt due to changes in a customer’s scenario.
For this reason, with the release of SAP S/4HANA, a new central and standardized solution, called condition contract management, was introduced to create and settle all types of conditions for both suppliers and customers. The new condition contract management functionality in SAP S/4HANA has numerous advantages over traditional rebate agreements in SAP ERP 6.0, such as a single transaction code (or SAP Fiori app) to create and maintain condition contracts for customers and suppliers and real-time access to actual business volume data directly from transactional documents (e.g., billing document header and item tables VBRK and VBRP). Therefore, running a program periodically to update the sales volume to be settled in the rebate agreement is no longer required.
For the SAP S/4HANA Sales certification exams, you must have a high-level understanding of condition contracts with a customer as the contract partner.
Condition contracts allow you to work with the following two types of conditions:
These conditions are all the condition types that are valid with immediate effect, which can alter the value of a sales order item. Prices, discounts, and surcharges are examples of conditions that accompany an invoice. You can store and edit these conditions in the condition contract, which acts as the central object where you can define validity periods, mark specific conditions as active, and add notes in the available text elements.
These conditions are settled at a later date. When creating a condition contract with condition types that require subsequent settlement, you must provide settlement dates, the information needed to calculate the business volume, which determines the settlement amount and validity dates. Accruals can be posted when invoices are created. Alternatively, if you don’t want to impact the billing process, you can configure the creation of accruals for customer rebates to be carried out separately. For example, accruals can be calculated on a daily or monthly basis. You can settle condition contracts manually or automatically, and you can create condition contracts with a start date in the past. This feature is a nice addition in the SAP S/4HANA solution since the condition contract can be created after the transactional documents used to calculate business volume are posted.
Generally, organizations engage external sales agents with an aim to grow their business and sales faster.
As part of the agreement, the sales agent refers the products or services of the organization to potential customers and negotiates sales deals for the organization. In return, the organization is required to pay sales commissions to the agents for their services. Depending on the sales revenue earned by the organization from the referred customers or sales deals, the company pays a certain percentage of this revenue as commissions to the sales agents.
You can use the condition contract functionality within settlement management in SAP S/4HANA to map this business process in the system as it is used to capture the agreed terms of negotiation with the sales agent. The following details are specified in the condition contract.
The Contract Type field specifies the condition contract type. For sales commissions, you have four options:
In the Supplier (commission recipient) field, you specify the business partner who will receive the sales commissions. As sales agents are external partners to the organization, they are set up as suppliers in the system so that the system can process an account payable for them.
The From and To fields (validity period) refer to the period of the contract is specified.
The External Identifier field can be used to enter an alphanumeric identifier to quickly identify and search for contracts in the system. For example, when converting contracts from a legacy system, this field can store the legacy contract number. The figure below shows the Basic Data tab of the condition contract.
Organizational Data
Because sales agents are set up as suppliers in the system, you need to specify the organizational data on the purchasing side, such as Purch. Organization, Purchasing Group, and Company Code that is relevant for the contract on the Purchasing tab, as shown below.
On the Business Volume Selection Criteria tab, you specify how the system should determine the sales volume for the condition contract as the commissions will be calculated based on this volume. Sales volume refers to the billing documents created for the customers in the system. The business volume can be specified by selecting the relevant field combination, as shown here.
You need to enter the supplier (sales agent) in your selection criteria so that the sales transactions with the specified sales agent are selected for calculating the commissions. The sales agent is specified in the sales transactions using the partner function ES for external sales agent.
For example, when a sales agent refers a new customer, the sales agent is maintained using the partner function ES in the customer master. This ensures that in any of the sales orders placed by the customer, the ES partner is copied from the customer master to the sales orders and subsequently into the billing documents.
You can specify the sales organization and distribution channel if you want to only include the sales revenue from a particular sales organization or distribution channel in the business volume selection criteria.
You can specify the material, material group, or product hierarchy if you want to only give commissions on the sales of certain products. Only the sales revenue earned on the selected products will be included in the sales commission calculations.
You can specify the customer or customer hierarchy if you want to only give commissions on the sales transactions of certain customers. Only the sales revenue earned on the selected customers will be included in the sales commission calculations.
Several field combinations are available in the standard delivery, such as Sales Order Reason, Plant, Customer Group, Payer, Ship-To Party, and so on, that can be used depending on your business scenario. You need to specify the inclusive/exclusive indicator to specify whether to include or exclude that field combination from the selection criteria. This can be useful, for example, if you want to include all the materials in the selection except materials belonging to a specific material group. You can make use of the exclusive indicator to specify the material group.
On the Settlement Data tab shown in the figure below, you specify what will be the basis for calculating the commissions in the Amount Fields Group field. For example, will the commissions be calculated based on the net amount in the selected billing documents, or based on the pricing subtotals 1 to 6, or based on the rebate basis in the selected billing documents?
For example, if you want to include only the net price and exclude any shipping charges from the commission basis, you need to set up the pricing procedure on the sales order to populate the net price in one of the six pricing subtotals and use the amount fields group corresponding to that subtotal while setting up the condition contract. This ensures that the system considers that subtotal value during the commission calculation.
On the Settlement Calendar tab, you specify the agreed-on settlement schedule with the sales agent. You have two options: either you can specify the Final Settlement Calendar, Partial Settlement Calendar, Delta Settlement Calendar, and Delta Accruals Calendar and the system generates the settlement dates automatically, or you can enter the individual settlement dates (Settlement Date) and the type of settlement (Settlement Date Type) manually in this tab. This is shown below.
The settlement date types of Final Settlement, Partial Settlement, Delta Settlement, and Delta Accruals are available.
In the Condition Table section of the condition contract screen, you specify the conditions that are applicable to the condition contract. As shown below, you specify the accruals Cond. Type (condition type) “RCA1” and commission Cond. Type “RCS1”. Both these conditions can be specified either as a percentage based on sales revenue or as a quantity based on sales volume or as a fixed amount. You can maintain scales as well if the commission is based on tiers.
As you can see in this table, the commission is 5% for sales revenue from 100K EUR, 13% for sales revenue from 200K EUR, and 15% for sales revenue from 300K EUR.
While maintaining the conditions, the validity period needs to be specified. This is useful, for example, if the commission rate is not the same for the entire contract duration. You can specify the conditions along with the appropriate validity dates so that the system can pick up the correct commission rate depending on the settlement date.
You can maintain the settlement conditions at the condition contract level if the commission rate is the same for all the materials in the business volume. It’s also possible to maintain the settlement conditions at the condition contract and material level if the commission rate is different for materials. For example, the commission for certain materials is higher than the rest of the materials.
In terms of configuration, the customizing settings related to condition contract management can be found in the IMG menu path Logistics - General > Settlement Management > Condition Contract Management.
The main three configuration areas are as follows:
This configuration step concerns two areas: general settings for sales-related pricing and specific settings for contract conditions related to condition contracts with a customer as contract partner.
First, as in pricing for sales orders, you must define condition tables, access sequences, condition types, and pricing procedures.
The next step is to define sales condition types and activate them for condition contract management. In the standard system, the following condition types are available:
Then, you’ll need to define sales condition type groups and assign sales condition types to a sales condition type group.
In this second configuration step, you must define and configure parameters for condition contract types, such as number ranges, condition contract categories, field status groups, status profiles, action profiles, and text determination procedures.
Then, you’ll define condition contract types with the configured parameters to determine how a condition contract will be processed. When defining condition contract types, the Type of Contract Partner field is mandatory since this field controls whether the contract partner is a customer or a supplier. The Type of Eligible Partners field is also mandatory and specifies whether or not eligible partners play a role for the condition contract type.
Finally, you must maintain the following settings to allow the system to process the condition contract settlement and calculate the settlement amount for a given period:
Let’s now review the processing of condition contracts and the settlement process. For condition contracts requiring subsequent settlement, you can perform the following business activities in SAP S/4HANA.
The condition contract management solution revolves around the condition contract document. In this document, you can manage conditions, specify administrative data, define the criteria for business volume selection, specify eligible partners, and maintain settlement calendar information. To create or change a condition contract, use Transaction WCOCO or, from the SAP Fiori launchpad, use the Maintain Contract – Condition Contracts app. The figure below shows a condition contract as displayed in Transaction WCOCO.
Once all the required fields have been maintained, you can save a condition contract.
When a condition contract is created, you’ll see the status icon in the header line, which means the contract is inactive for operative use. To release a condition contract, switch to change mode by selecting the menu option Condition Contract > Change in Transaction WCOCO and click on the function from the toolbar. The status icon in the header changes to . You can also release (or lock) condition contracts in mass via the transaction codes and SAP Fiori apps shown in this table.
As mentioned earlier, by executing the settlement process, you create the corresponding amounts receivable and payable in financial accounting for a specific period and the relevant business partners.
You can carry out the settlement of a condition contract in SAP S/4HANA with a customer as the condition contract partner via Transaction WB2R_SC or the Settle Condition Contracts app. The key figure used for the settlement, also known as business volume base, is determined from the transactional document (e.g., billing document) and constitutes the basis for the settlement. For instance, you can use weight, quantity, volume, or monetary amount as the business volume base.
In the condition contract header, under the Settlement Calendar tab, you can also specify the settlement dates and which of the following four settlement types must be used when settlement is performed:
In addition to Transaction WCOCOALL (Condition Contract List), the standard reports shown in this table are also available to review condition contract conditions and settlement-related data for condition contracts.
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Editor’s note: This post has been adapted from sections of the books SAP S/4HANA Sales Certification Guide: Application Associate Exam by Darío Franco and Jon Simmonds and Settlement Management with SAP S/4HANA: Customer Rebates, External Commissions, and Royalties by Ujjwal Chattopadhyay, Suman Chanda, and Tushar Bhunya. Darío is an experienced SAP S/4HANA business analyst who has more than 18 years of functional and technical SAP experience. Jon is an experienced IT architect who has specialized in SAP systems for the past 19 years. Ujjwal is a certified SAP S/4HANA sales and distribution and materials management senior consultant and architect at IBM who has fifteen years of SAP experience and ten years of domain experience in sales, distribution, and service management in consumer electronics. Suman is a certified SAP S/4HANA sales senior consultant working at IBM who has more than 11 years of SAP experience. Tushar is an IBM consultant and IT professional with more than 18 years of SAP experience, including multi-country implementations, upgrades, and roll-outs.
This post was originally published 2/2022 and updated 8/2025.