How Revenue Accounting Works In SAP S/4HANA

SAP’s 1809 release brought with it SAP S/4HANA Sales with the add-on SAP Revenue Accounting and Reporting. Thanks to forward compatibility, SAP is likely to release new reporting and accounting updates up to SAP S/4HANA 1909 that work seamlessly with the core components of previous SAP versions. Further version changes would require users to check out SAP Note 2656669 and keep up with the changes. However, for those up-to-date users with SAP 1909, a few handy additions make for a much more streamlined interaction with users.

With SAP S/4HANA 1909, users could access optimized contract management (OCM). OCM is an extension of the existing classic revenue accounting and reporting module. Since OCM was designed to be backward compatible, it works seamlessly with classic accounting and reporting. There’s a very low risk of upgrading, and with so many new features available, it’s the best option for most companies to upgrade. There are noticeable changes, but they’re mostly cosmetic. The core elements of the accounting and reporting system remain intact over the upgrade, keeping it familiar for users as they migrate to the new version of the system.

Updates to the System

So what has changed in OCM? Several business add-ins have been changed because they’ve become obsolete. Many have been replaced with newer versions that perform similar actions but are updated to work with the new system. SAP has realized users’ existing issues with a complex accounting and reporting system and has simplified OCM. While the system still offers efficient performance, it’s become far more accessible for regular users to perform routine tasks within the module. For example, when building a sales order, a revenue contract is created alongside it in real-time. This makes for a more efficient flow of paperwork. In SAP S/4HANA 2020, background jobs needed to be scheduled to accomplish the same tasks. OCM removes the need for these background jobs and makes the entire thing more transparent for users.

Inbound processing is another innovation that the newest version of SAP S/4HANA brings to the fore. SAP S/4HANA (as of 2020) supports real-time processing of inbound data, making it far more efficient to deal with revenue accounting on the fly. Previously, SAP S/4HANA dealt with this as a batch job. This new version uses API integrations to make it more efficient and to tap into incoming data streams so that processing can take place. This is popular among health care providers such as GA Family Dental & Facial Aesthetics. One of the drawbacks of the new system is the limitation in statuses. Previously, a whole slew of statuses could be used to describe where the revenue accounting for a particular item was in the process. The newest system simplifies this to just two: processed or postponed.

While this is the current release of the OCM, SAP continues to support it. Over time, updates will be coming out that edit or change some parts of the system or overhaul them entirely in keeping with SAP’s push to make the system more user-friendly.

Understanding the Solution Architecture

The architecture for the system was designed to support integration with both SAP and non-SAP components. It’s also been revamped to comply with revenue recognition regulations. The architecture, therefore, demonstrates a five-step model:

  • 1 – Identify the customer’s contract
  • 2 – Determine the separate POBs
  • 3 – Work out the Transaction Price
  • 4 – Allocate a transaction price by utilizing the SSP
  • 5 – Check revenue and verify when the POB is satisfied

Within the architecture are four key components that form the foundation of the entire system. These are:

Operational Systems

Three operational systems work with the revenue accounting and reporting model: SAP S/4HANA sales and distribution functionality, SAP S/4HANA for billing and revenue innovation management, and non-SAP systems. The model also works with a combination of one or more of these systems, although overlaps in functionality may occur.

Optimized Inbound Processing

Optimized, application-specific APIs are the heart and soul of this new inbound processing. For non-SAP solutions, generic APIs work just as well to access incoming data streams for processing. The system also has a built-in way to display processed, pending, and erroneous revenue accounting items. Manage Postponed RAIs app offers an in-system way to deal with these issues.

Business Rules Framework Plus Enablement

Business Rules Framework plus (BRFplus) is a specific user interface for applications. This interface can be used to create business rules. The BRFplus module processes invoices, orders, and fulfillment while offering revenue accounting and reporting functionality. IMG activities allow users to make a copy of an existing BRFplus template and assign those templates to the relevant operation systems.

Revenue Accounting Engine

The revenue accounting engine forms part of the core SAP S/4HANA release. Revenue Accounting and reporting utilize a sub-ledger system that uses three different categories of transactions to classify the reports:

  • FARR_LIABILITY_CALC: Calculation and transferring of contract liabilities or assets. This transaction doesn’t post any real-time changes but uses a ledger to update later (like a batch processing system).
  • FARR_REV_TRANSFER: Transfer and calculate revenue based on time-based POBs. Another system that doesn’t do real-time posting and uses a sub-ledger to finalize the details.
  • FARR_REV_POST: The revenue posting program offers real-time posting and provides all the revenue for the current posting period. There’s also the option to close the posting period altogether.
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