2007 How To Use SAP Project System For Revenue Recognition in Professional Service Organizations

Orange County Convention Center
Orlando, Florida | June 3-5, 2014
Project system for Revenue Recognition in Professional

Service Organizations
by Pramod Patil
LEARNING POINTS

NTTDATA & Global SAP Practice

SAP PS Result analysis (RA) & Settlement
FMV and Billing Plan
WBS revenue planning
Enhancements
Implementation challenges
Business Benefits
NTT DATA Global IT Innovation Partner

6th Ranked Global IT Services and
Systems Integrator
>$13B In annual revenues
~75,000 Professionals operating in
40 countries
Balanced global delivery 10,000
strong in India
Founded 1967 in Japan as the
technology arm of NTT Group
25 years of annual growth
Services span applications,
infrastructure, cloud, and industry
solutions
NTT DATA Corporate Headquarters, Tokyo
Executing aggressive globalization strategy
2014 NTT DATA, Inc.
SAP Implementation at a Glance

Value Proposition
Full-Services Approach
Glocal
Integrated Service Delivery approach
for SMB, Mid-large and LE
Unique signature solutions by
industry, technology and product
areas
Lifecycle tools and accelerators
Services that cover Plan, Build,

Manage and Improve phases of
lifecycle.
Resources with both industry and
product skills
Solutions : On promise, hosted and
cloud
Global capabilities - Local presence

Go-to-Market: Portfolio and Sales
Approach
Strong industry play in 18 out of 24
segments identified by SAP
Dedicated local sales per industry for
net new and installed base
Shared services & prescriptive
approach for SMB and Mid-Large
Copyright 2014 NTT DATA Corporation
Delivery Model
Adaptive Shore-wise delivery
Globally integrated One Method
delivery methodology
Dedicated PMO for ERP services
Business Scenario
Professional Service organization
Product and Services sales as part of one Project
Revenue Recognition is based Fair Market Value
(FMV), different than Sales order billing plan
Revenue adjustment to occur every month
throughout the life of the project
Cost adjustment occur every month throughout the
life of the project and calculated based on revenue
recognized.
Revenue to be recognized should never be greater
than actual revenue.
SAP PS RVENUE RECOGNITION

WBS Revenue and Cost Recognition via Results
Analysis (RA) and Settlement
Revenue planning and cost planning for WBS is
required
RA compares actual revenue versus planned revenue,
no postings happened during result analysis
RA determines if billing is exceeding planned revenue
or planned revenue is exceeding billing

Revenue to be recognized value is always less than or
equal to actual revenue.
If revenue to be recognized is less than actual
revenue, difference is posted as deferred revenue
Based on planned revenue and revenue to be
recognized, cost to be recognized value is determined
Cost to be recognized is always less or equal to Actual
cost.
Via settlement revenue adjustment is posted for
temporary correction of the posted revenue up or
down depending on previous point.
7

Billing to actual revenue

Actual Cost
Revenue to be recognized
Cost to be recognized
Deferred cost adjustment
Deferred revenue adjustment
Settlement
Adjustments of revenue and cost does not create postings in

COPA.
Later when actual revenue is recorded, a portion of the billing is
recognized by adjusting corresponding deferred revenue and
transferred to COPA as the true revenue.
In the same proportion cost would be recognized
9
BILLING PLAN and FMV

Billing Plan
FMV
Deliverable value based on discount

Milestone Billing plan
Periodic billing plan
Discount based FMV

Revenue to be recognized
based on FMV
Deliverable
Billing Value
Discount
Deliverable
FMV
Software
Licenses
25000
50%
Software
Licenses
50000
Implementati
on services
100000
Implementati
on services
77250
Hardware
components
50000
Hardware
components
50000
Support
Maintenance
50000
Support
Maintenance
38250
30%
WBS REVENUE PLANNING

Revenue Planning with project through WBS revenue
planning and not sales order billing plan
WBS Revenue Planning = Revenue recognition
planning
Planned revenue (FMV) at WBS side supersedes the
sales order billing plan
Billing with respect to milestone or periodic billing
plan
Revenue recognition with respect to FMV
WBS REVENUE PLANNING

Reason for two separate revenue plans:
FMV based revenue recognition
Revenue recognition plan is different that Billing plan
CUSTOM ENHACEMENT
1. WBS revenue planning upload from Excel

FMV is calculated outside SAP

Period based revenue recognition plan
Sometimes planning is spanned across two years.
Program creates WBS revenue plan by excel
upload
CUSTOM ENHACEMENT
2. Result Analysis enhancement
Revenue to be recognized always same or less
than Actual billing
Cost to be recognized always same or less than
actual cost
PROJECT REPORTS
CJI3
FS10N Line items drill down
PROJECT REPORTS
KE24
This is the single entry in COPA that shows both revenue and cost that have been
recognized. One observation here is that the cost element display only shows one of the
cost elements used in the transaction (in this case 7111123). For greater split you should
refer to report CJI3.
IMPLEMENTATION CHALLENGES
Business process change in how project needs to be
created
Cost and revenue planning is essential for each project
BUSINESS BENEFITS
Improved project control
Project managers responsibility and involvement is
month end closing financial processes
Revenue recognition based on project progress and
results
Automatic cost recognition with respect to revenue to
be recognized
Reduced finance effort due to automated period end
closing process.
Reduced finance efforts due to FMV based revenue
recognition
FOLLOW US
THANK YOU
THANK YOU FOR PARTICIPATING
Please provide feedback on this session by completing

a short survey via the event mobile application.
SESSION CODE: 2007
For ongoing education on this area of focus,
visit www.ASUG.com

2007 How To Use SAP Project System For Revenue Recognition in Professional Service Organizations

Uploaded by

Document Informationclick to expand document informationHow to Use SAP Project System for Revenue Recognition in Professional Service Organizations

Document Informationclick to expand document information

Copyright:

Available Formats

2007 How To Use SAP Project System For Revenue Recognition in Professional Service Organizations

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

2007 How To Use SAP Project System For Revenue Recognition in Professional Service Organizations

Uploaded by

Copyright:

Available Formats

Orange County Convention Center

Orlando, Florida | June 3-5, 2014

Project system for Revenue Recognition in Professional

NTTDATA & Global SAP Practice

NTT DATA Global IT Innovation Partner

Executing aggressive globalization strategy

2014 NTT DATA, Inc.

SAP Implementation at a Glance

Services that cover Plan, Build,

Global capabilities - Local presence

Copyright 2014 NTT DATA Corporation

SAP PS RVENUE RECOGNITION

SAP PS RVENUE RECOGNITION

SAP PS RVENUE RECOGNITION

Billing to actual revenue

SAP PS RVENUE RECOGNITION

Adjustments of revenue and cost does not create postings in

BILLING PLAN and FMV

Deliverable value based on discount

Discount based FMV

WBS REVENUE PLANNING

WBS REVENUE PLANNING

FMV is calculated outside SAP

FS10N Line items drill down

THANK YOU FOR PARTICIPATING

Please provide feedback on this session by completing

You might also like