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:
- 0CS1 Commission based on Billing Document
- 0CS2 Commission based on Billing Document 2-Step
- 0CS3 Commission based on Billing Document Paid
- 0SC4 Commission based on Billing Document Paid 2-Step
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.
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.
Business Volume Selection Criteria
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.
Sales Organization/Distribution Channel
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.
Material, Material Group, Product Hierarchy
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.
Editor’s note: This post has been adapted from a section of the Settlement Management with SAP S/4HANA: Customer Rebates, External Commissions, and Royalties by Ujjwal Chattopadhyay, Suman Chanda, and Tushar Bhunya.