The core customer rebate functionality within SAP ERP Central Component (ECC) 6.0 is built around the condition technique, which is an SAP proprietary technology that allows the configuration of complex decision-making scenarios. It is used in many other areas such as pricing, output, and revenue account determination. The condition technique ensures that proper Financial Accounting (FI) accruals are posted upon the creation of a customer billing document.

SAP ERP also provides various scale types to accommodate numerous scale scenarios, which are common in customer rebate agreements because companies often provide higher rebate incentives if larger sales volumes are reached. For example, you can use a standard value base scale type to accommodate a scale scenario in which a 2% rebate is given to a customer if his or her total sales for the year equate to less than $10,000, whereas a 3% rebate is given if the sales for the year go beyond the $10,000 mark. Finally, standard SAP tools are provided to post retroactive accruals if the rebate agreement was not created on time to start capturing the accruals from the starting validity of the agreement.

I’ll walk you though the necessary IMG configuration steps to enable the creation of rebate agreements and automatic posting of FI accruals upon the creation of customer invoices. I’ll also take a close look at how SAP determines the rate at which the FI accrual needs to be posted and compare it to a different logic that SAP uses when coming up with the settlement value of the agreement. This step-by-step guide helps SD analysts make the required configuration changes and start using the SD rebate functionality effectively in their ERP environment.

Configuration Steps

Seven configuration steps must take place before the SD rebate functionality is properly implemented. These seven steps are:

Step 1. Define the agreement type

Step 2. Configure the condition technique

Step 3. Activate rebate processing

Step 4. Define condition type groups

Step 5. Create the rebate agreement

Step 6. Create the billing documents

Step 7. Settle the agreement

Step 1. Define the Agreement Type

Figure 1

Define an agreement type

Next, change the Payment procedure to C (no limits for manual payment) to allow for greater flexibility when issuing the settlement. Setting the payment procedure to C allows the user to manually overwrite the settlement value to be greater or less than the accrual value. Leave the default values of the remaining settings alone. Click on the save icon to save your changes. Figure 1 shows custom agreement type Y002.

Step 2. Configure the Condition Technique

The SD module uses the standard condition technique to determine the proper accrual rate for the customer rebate agreement on the billing document. I defined a custom access sequence (Z001) that incorporates the two standard condition tables 001 (customer/material) and 003 (customer). In my example, the rebate rate is determined based on sales organization, distribution channel, division, customer, and material. You may need to create additional custom condition tables if more factors need to be taken into account when determining the proper rate for the rebate agreement. Use transaction code V/03 if standard condition tables do not meet your requirements. Otherwise, follow IMG menu path Sales and Distribution>Billing>Rebate Processing>Condition Technique for Rebate Processing>Maintain Access Sequences (transaction V/07).

It is important to mention that condition table and access sequence maintenance require cross-client changes in your golden configuration client. Once these changes are made, they affect all clients within the ERP system. This is not typical of IMG changes because you must perform most configuration changes separately in each client, either manually or through a client copy.

Click on the New Entries button to generate the screen shown in Figure 2. Specify a valid technical name (Z001) and a description (Customer Rebate). Next, make sure to specify value 1 (Access Sequence relevant for rebate) in the Ty. (relevant for rebate) field. Figure 2 shows an example of custom access sequence Z001.

Figure 2

Define the custom access sequence Z001

Select the new access sequence and double-click on the Accesses folder in the Dialog Structure on the left side of the screen. Click on the New Entries button and enter two standard condition tables 001 and 003. I used these tables in my example because they cover two typical rebate scenarios. Rebate values are usually determined by sales to a specific customer (table 003) or by sales of a material to a particular customer (table 001). Figure 3 provides an example of this assignment.

Figure 3

Assign condition tables to the access sequence

It is typical for the Exclusive indicator to be unchecked on access sequences for customer rebates. This ensures that the system does not stop checking for possible condition records if it has found one or more records. Instead, multiple condition types are added to the billing document item if multiple condition records are maintained within the rebate agreement. Before exiting this configuration transaction, make sure to select each condition table in the access sequence and double-click on the Fields node of the Dialog Structure so that the key of each table is generated. Click on the save icon to save your changes.

To demonstrate the functionality of SD rebate agreements, I use two condition types. Standard condition type BO01 maintains condition records where the scale type can be manually chosen in the agreement. I created a custom condition type Z001 that uses the less-known interval scales that can be very useful in customer rebate scenarios. For example, a customer may receive a 5% rebate for purchases between $0 and $10,000, then an additional 6% rebate for purchases between $10,000 and $20,000, and an additional 7% rebate on purchases beyond $20,000.

Use transaction code V/06 or follow IMG menu path Sales and Distribution>Billing>Rebate Processing>Condition Technique for Rebate Processing> Define Condition Types. First, locate condition type BO01, select it, and click on the details icon . In the Access seq. field, enter the newly created access sequence (Z001). Click on the back icon and then click on the copy as icon to generate the screen shown in Figure 4. Enter a valid technical name (Z001, in my example) for the new condition type and a useful description (% Rebate (Interval) in my example). Change the Scale type to D to enable the interval scale.

Figure 4

An example of the custom condition type Z001

You can use interval scales only if the condition type is specifically configured to D (Graduated- to interval sc) in the Scale type field. You cannot manually select this scale type in the condition record within the agreement. I’ll provide more details on how interval scales work in step 5.

In the final step of configuring the condition technique, you need to assign the two conditions types BO01 and Z001 to all relevant pricing procedures. Follow IMG menu path Sales and Distribution>Billing>Rebate Processing>Condition Technique for Rebate Processing>Maintain Pricing Procedures or use transaction code V/08. Select the pricing procedure relevant to your ERP implementation (ZPCBP1, in my example) and then click on the Control data folder in the dialog structure to generate the screen shown in Figure 5.

Figure 5

Maintain the pricing procedure

Enter the rebate condition types in column CTyp in the appropriate pricing procedure location, depending on your current SD pricing configuration. Although pricing procedures are different for each company, you typically enter the condition types after all the condition types that are relevant to the calculation of the basis for the rebate agreement are already specified.

Try to use a unique subtotal field to identify customer rebates in the pricing procedure. Figure 5 demonstrates the use of subtotal (column SuTot) 6, which stores the values of the two customer rebate condition types in line item field KZWI6 (accessible in billing line item table VBRP). There are six standard subtotals and you need to select one that was not previously used. This makes it very easy to refer to the total value of customer rebates in other calculations within the pricing procedure and makes this total available for reporting and custom ABAP development.

The use of the requirement routine (column Reqt.) 24 ensures that the rebate condition types only appear at the time of billing and are not relevant for sales document processing. I recommend using requirement routine 24 for all rebate agreements. Click on the save icon to save your changes.

Step 3. Activate Rebate Processing

This is a simple, yet very crucial step in your configuration process. It enables the use of customer rebates at the sales organization level and on all relevant billing document types. Start with the activation of rebate processing at the billing document type level. Use transaction code OVB0 or go through IMG menu path Sales and Distribution>Billing>Rebate Processing>Activate Rebate Processing>Select billing document for rebate processing to access this configuration. Ensure that the Relevant for rebate indicator is selected for each relevant billing type, as shown in Figure 6.

Figure 6

Activate rebates by billing type

Follow IMG menu path Sales and Distribution>Billing>Rebate Processing>Activate Rebate Processing>Activate rebate processing for sales organization. You can also use transaction code OVB1 for quicker access. Make sure that the Rebate proc.active indicator is selected for each relevant sales organization (Figure 7).

Figure 7

Activate rebates by sales organization

Step 4. Define Condition Type Groups

In this step you assign the two condition types and applicable condition tables to the new agreement type Y002. First, define a new condition type group. To do so, follow IMG menu path Sales and Distribution>Billing>Rebate Processing> Rebate Agreements>Condition Type Groups>Define Condition Type Groups. Click on the New Entries button at the top of the screen and create a new condition type group (column CTyGr) by providing a valid technical name (Y001) and a useful description (Cust. Rebate Group). Figure 8 illustrates the configuration of condition type group Y001. It is important to leave the Cat. (category) field blank. Make sure to save your changes when you are done.

Figure 8

Define a new condition type group

Now define the assignment of condition types and condition tables to your new condition type group (Y001). This may seem unnecessary at first, as you’ve already maintained a similar assignment when you defined the access sequence in step 2. However, this particular configuration item is responsible for which condition records can be maintained within each specific agreement type and in which order these records are displayed in the agreement.

On the other hand, the access sequence configuration in step 2 is responsible for how the condition records are searched during pricing determination at the time the billing document is created. Simply assign condition types BO01 and Z001 and the two applicable condition tables 001 and 003 to the condition type group Y001, as demonstrated in Figure 9. As a good practice, leave some space between the counter values (column Cntr) to allow potential insertion of new entries later. Click on the save icon to save your changes.

Figure 9

Assign condition type and condition table to condition type group

Finally, you need to assign the condition type group to the rebate agreement type. Use transaction code VB(5 or IMG menu path Sales and Distribution>Billing>Rebate Processing>Rebate Arrangements>Condition Type Groups>Assign condition type groups to rebate agreement types. Refer to Figure 10 for an example of this simple assignment between agreement type Y002 and condition type group Y001. Click on the save icon to save your changes.

Figure 10

Assign condition type group to rebate agreement type

Step 5. Create the Rebate Agreement

Now you are ready to create your customer rebate agreement. Use transaction code VBO1 or SAP Easy Access menu path Logistics>Sales and Distribution>MasterData>Agreements> Rebate Agreement>Create. Select your new agreement type Y002 and press Enter. In the pop-up screen that appears, specify the appropriate sales organization, distribution channel, and division. When you are finished, click on the copy as icon to generate the Create Material Rebate screen shown in Figure 11. In this screen, specify the rebate recipient (1022806) and the appropriate validity dates (01/01/2007 to 12/31/2007).

Figure 11

Create the agreement overview screen

Click on the Conditions button at the top of the screen. The pop-up screen that appears depends on the assignment within that condition type group that you performed in step 4. For example, if you follow the steps in this article exactly, the pop-up screen would look like Figure 12. A list of available condition types and condition tables to create condition records within a particular agreement type is displayed. Now you’re ready to maintain the condition records. First, maintain a record for condition type BO01 in table 001 (Customer/Material) with a regular base scale by selecting the first row of the condition record pop-up and click on the New Condition Record button.

Figure 12

Select the condition type and condition table

The header section of the condition record defaults from previous information so all you need to do is specify a valid material number (20002549) and press Enter and the screen shown in Figure 13 appears. Now, in your new condition record, select the check box to the left of the material number and then click on the scales icon. The Accruals value that you specify dictates the rate of the accrual on the billing document. It is important to understand that scales functionality and the Amount field are generally not used to determine the appropriate accrual rate at the time of billing.

Figure 13

Create the condition record for condition type BO01

For any given condition record in a rebate agreement, you must maintain a value for amount and accruals. If you use scales, you need to maintain multiple values for the Amount field, but only one value for the Accrual field. The accrual value is used when FI accruals are posted upon creation of the billing document. The reason the accrual rate needs to be permanent is because you don’t want to be posting and then reversing those accruals each time a customer reaches a new scale and a new rebate rate is in effect.

Therefore, you need to guess which scale the customer will most likely reach and set your accrual value to reflect the amount value for that scale. Different amount values specified in scales are only used when you actually settle the agreement, which occurs after all invoices are posted and you issue the customer credit. The settlement value that is automatically proposed by the system can either be greater than, less than, or equal to the value of the accruals posted to date, depending on how well the accrual value was chosen when the agreement was created.

The better your accrual rate estimate, the closer the settlement value is to the accrual amount and the fewer variances are seen in FI during settlement. Notice that I left the Amount field blank. I will maintain it next in the scale.

Condition type BO01 is selected in this particular condition record to use all scale types, except interval scales, which you use to create the second condition record under condition type Z001. However, in this example, I use a standard value base scale as opposed to an interval scale, as shown in Figure 14.

Figure 14

Maintain the base scale

The base scale information in Figure 14 should be read as follows:

1. If the total value of invoices that include this condition record is between $0 (Scale value) and $1,000 the customer receives a 1% (Amount) rebate during settlement. This is reflected in the first row of the Scales tab in Figure 14.

2. If the total value of invoices that include this condition record is between $1,000 (Scale value) and $3,000, the customer receives a 2% (Amount) rebate during settlement. This is reflected in the second row of the Scales tab.

3. If the total value of invoices that include this condition record is greater than or equal to $3,000 (Scale value), the customer receives a 3% (Amount) rebate during settlement. This is reflected in the third row of the Scales tab.

4. The accrual rate on the billing document is 2% (Accruals) throughout the life of the agreement because you are expecting the customer to post somewhere between $1,000 and $3,000 of invoice value with the material that you specified

Next, maintain the second condition record with condition type Z001 that uses interval scales. Remember, the rebate defined in this record will be compounded. This means that when material 200002549 is sold to customer 1022806, that particular sale is subjected to both condition records — a rebate from condition type BO01 (base scale) and a rebate from condition type Z001 (interval scale). Double-click on the back icon and then select the Customer key combination, which is now displayed in condition type Z001. Your screen should look similar to Figure 12, only with the addition of the Customer key combination. Now, click on the New Condition Record button.

In the screen that appears, specify the customer number (1022806) and the expected Accruals rate (5.333, in my example), as shown in Figure 15. Select the new condition record and click on the scales icon.

Figure 15

Create the condition record for condition type Z001

The interval scale in Figure 16 indicates the following:

Figure 16

Maintain the interval scale

1. The customer receives a 5% rebate on all of the purchases up to $10,000

2. The customer receives an additional 6% rebate on all of the purchases from $10,000 and up to $20,000

3. The customer receives an additional 7% rebate on all of the purchases from $20,000 and up

4. You estimate that this customer will post roughly $15,000 sales for the duration of the agreement and specify a 5.333% accrual rate. This approximation is based on the fact that the first $10,000 receives a 5% rebate and the remaining $5,000 receives a 6% rebate.

Click on the save icon to save your changes. A screen appears and prompts
you to specify a settlement material for the second condition record. Enter a valid material number (200002549, in my example). You can either create or use a generic rebate settlement material, which includes any billable material master data record.

Step 6. Create the Billing Documents

Because customer billing documents are created through transaction codes VF01 and VF04, your new rebate agreement accrues the appropriate amounts on all invoices that match the customer and material that you’ve specified in the condition records. Figure 17 illustrates the pricing detail of an invoice that accrued against the two condition records that you maintained in the agreement.

Figure 17

Rebate accruals upon invoice creation

The total value of the invoice item is $15,000, which will be important during the calculation of the settlement value via scales. A 2% accrual has been posted for condition type BO01 and a 5.333% accrual has been posted for condition type Z001, based on the accrual rates that I maintained in the condition records.

You should give special notice to standard transaction VBOF (update billing documents), which you can use to make retroactive rebate accrual postings. Consider a scenario in which the rebate agreement is created late and a number of customer invoices were already posted that should have accrued based on the agreement condition records. In this case, transaction VBOF can update those billing documents. Remember that all of the retroactive financial postings via transaction VBOF can only be posted to the periods that are open in the FI module.

Step 7. Settle the Agreement

When you are ready to issue the credit to the customer for the rebate agreement, simply execute transaction code VBO2 to view the screen in Figure 18. Specify the number you created in the agreement (step 5) and press Enter. Although partial settlements are possible within SD rebate agreements, I discuss a scenario in which the final settlement is issued and the agreement is closed. Set the agreement status field to B and then use the top menu path Rebate Payments>Final Settlement>Automatic. Click on the save icon to save your changes.

Figure 18

Create the final settlement

A credit memo request sales document is created. The amount of the credit is automatically calculated based on the invoice value that has been posted against each condition record and the appropriate scale that has been reached as a result of those values. This credit memo request can be billed via standard transaction code VF01 to complete the process.

Anton Karnaukhov

Anton Karnaukhov is a senior IT manager at Pacific Coast Companies, Inc., in Sacramento, California. He earned an MBA degree at Heriot-Watt University and a BS/BA degree with a specialization in computer information systems at Western Carolina University. Anton has more than eight years of SAP implementation and development experience focusing on business intelligence and logistics modules in the manufacturing and resale industries.

You may contact the author at anton.karnaukhov@paccoast.com.

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