S/4HANA Cloud for Professional Services

1. SAP S/4HANA
Cloud
Professional Services
Presenter: Nitin Suresh Jain

2. SAP S/4HANA Cloud for Professional Services
Scope & Deliverables
• Project management
• Contract to Cash
• Time and Expense Management
• Project Controlling and Accounting
• Customer Project Analysis
• Operational Procurement
• Procurement Analytics
• SAP JAM Collaboration
• Order and Contract Management
• Intercompany Sales
• Supplier Invoice and Payables Management
• Customer Invoice and Receivables
Management
• Finance Operations
• Accounting and Financial Close
• Treasury and Risk Management
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3. SAP S/4HANA Cloud for Professional Services
Presenter: Nitin Suresh Jain Slide 3 of 23

4. SAP S/4HANA Cloud for Professional Services
Key Highlights of the Solution
• Manage your projects more efficiently with
accurate insights into project cost forecasting,
monitoring and timeline reporting
• End-to-end global project control and
operational visibility
• Reduce cost of operations by using
standardized processes
• Event-based Revenue Recognition calculates
and posts real time revenue and cost
adjustment for professional service for fixed
price, time and material, and periodic service
projects
• Drive operational efficiencies and comply with
regulations
• Staff resources suitably on projects. A
graphical assignment board provides
transparency on resource assignments
• Check and ensure that the consultants or
employees staffed to specific projects or
reporting lines are recording their time entries
correctly
• Simplify and enhance the management of cost
rates with flexible cost-rate maintenance
features
• Drive efficiency and automation; increase
service levels; reduce operational costs
• Make data-driven decisions with predictive
analytics
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5. SAP S/4HANA Cloud for Professional Services
• Key Benefits of the Solution
• Improve performance with real-time
financial management, and increase
efficiency with end-to-end global project
control and operational visibility
• Manage customer and internal projects
with total transparency in real time
• Improve automation, efficiency, and agility
through machine learning
• Project managers can also monitor projects
for financial performance, using criteria
such as cost, revenue, margin
• Increase transparency on profits through
enhanced profit-centre reporting with the
flexibility to assign multiple profit centres
on a billing-item level.
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6. S/4HANA Financial Innovations for Service
Management
Profitability attributes are now available for General ledger Journal entries (assignment in service scenario).
General ledger functionalities are now available for CO postings and revenue recognition. This can be used in the
service scenario to provide Multiple Currencies and Parallel Ledgers for revenue recognition and Profitability.
Settlement between the applications – CO and CO-PA – is obsolete. The profitability attributes are populated in the
service order scenario at the time of posting on the service order item.
With the integration of cost accounting in the Universal journal there is in case of intercompany cost allocation a real-
time consolidation provided. With the availability of intercompany cost rates there can be additional intercompany
margins applied – see chapter 5.
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7. Out-of-Box Fiori Apps (illustrative)
• Create Customer Project
• Plan Customer Project
• Review Customer Project
• Margin Analysis
• Utilization Analysis
• Activity Allocation
• Release Billing Proposals
• Manage My Timesheets
• Approve Timesheets
• Manage PRs
• Manage POs
• Create Supplier Invoice
• Manage SES
• Manage SO Services
• Manage Billing Documents
• Run Revenue Recognition
• Transfer of staffing assignments
• Resource Management for Projects
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8. Enhanced UX in managing projects
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9. Effective Resource Management for Projects
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10. Analyze Resource Utilization
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11. Review Customer Projects
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12. Financial Accounting for Customer Projects
• 3 contract types provided. Based on the contract types, the billing method and the revenue recognition method is
derived for this contract item.
 Time and Expense (T&M) contract enables billing based on the time and expense confirmations. Event-
based revenue recognition simulates T&M billing for every confirmation to determine the realized revenue.
 Fixed Price contract. Billing is based on the amount and dates provided in billing plan. Event-based revenue
recognition calculates the cost-based percentage of completion (POC). We get planned costs from the
resource planning above and the planned revenue out of the billing plan.
 Periodic Service (used for example for licenses). This allows billing based on the amount and date provided in
the billing plan. For this contract type, for every billing plan item there is a valid period required (see screenshot
below). The realized revenues will be calculated by revenue recognition based on the amount and period. This
will be done with a periodic run (in the example below €1000 per month will be realized).
• Flexible cost rate definition (allow an employee grade dependent valuation by providing a new attribute the “service
cost level” in employee master data)
• The processing of intercompany time confirmation (supports a direct cross-company time sheet confirmation by
crediting employee cost center and debiting the customer project update – including mark-up on the costs)
• The interface between Time Sheet and Financial Accounting
• The enhanced management reporting capabilities based on the Universal Journal.
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13. Intercompany Cost Allocations in S/4HANA Cloud
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14. Intercompany Cost Allocations in S/4HANA Cloud
• The Costs are immediately visible on the receiver.
• The direct Intercompany posting provides detailed information on the receiver side. If the recipient is a customer
project using resource-related billing, information such as the activity type, the service rendered date, the employee
and the employee’s note are transferred, for the itemization of the billing document. This applies to expenses
recorded in Concur: here, the trip data is important for the project.
• Directly trace the costs of the receiver object back to the sender object.
• On the sender object you get the debit of the sending cost center with a link to the cost object in the other company
code, which has the received the service.
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15. Real-Time Intercompany Postings including Margin
posting
For a customer project staffed by resources from different companies the requirements are:
• real-time update of the intercompany confirmation on the ordering customer project to allow immediately customer
billing,
• employee should enter only one confirmation and not 2 for both companies,
• there should be intercompany costs allocated to the customer project including a margin.
In the professional service industry it is very common that the intercompany rate is defined by the sending company
and independent of the receiving company. For this use case there is a simplified cost rate maintenance available. If
you flag “ICO rate” and leave the receiving company empty, the rate is valid for all receiving company codes
maintained in the system.
In case the sending and receiving companies have different local currencies, a frequent requirement is that the
receiving company expects stable “intercompany prices” – without exchange rate fluctuations. For this purpose the
intercompany rate can be maintained in the currency of the receiving company. The currency maintained in the cost
rate app is taken as the transaction currency.
Relevant for consolidation is the trading partner. This is used as the basis for eliminating profits between affiliated
companies during the consolidation process. As only P&L accounts are used and a balance of zero is ensured, there is
no consolidation impact.
Please recognize that there is only a mark-up for intercompany activity postings available. There is no mark-up for
intercompany expenses and intracompany activities (for example cross Profit center intracompany).
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16. Intercompany Cost Allocations in S/4HANA Cloud
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17. Time sheet – Financials integration
• In line 1 – the confirmation line item – you see text and work item is persisted in
Universal Journal and available for T&M billing. Line 2 and 3 are revenue recognition
documents, where the notes are provided too.
• The profitability attributes customer and product sold provided for all items
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18. Employee Profitability in SAP S/4HANA cloud
Information about employee profitability is very important for the professional service industry. The
margin by employee is calculated with the employee’s realized revenue minus the employee’s
confirmation costs (quantity multiplied with employee specific cost rate)
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19. Service rendered date, time confirmation in closed
periods
• To ensure correct HR utilization reporting and correct confirmation date in Time and Material billing
document system allows time sheet confirmation in closed periods.
• A journal entry will be created including new field “service rendered date”, for which the consultant
entered the confirmation. The service rendered date is stored in the journal entry and forwarded to
Time and Material billing. With the service rendered date the cost rate is derived.
• The service rendered date is relevant for T&M billing – pricing date and service confirmation date
provided on the billing document to customer.
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20. Time confirmation for Subcontractors
The time confirmation of a subcontractor employee leads to two value flows:
1. Just as for the internal employee, a Financial activity allocation is triggered. It credits the cost
center of the subcontractor and debits the WBS element. The cost rate definition is the same as
above, and if maintained the service cost level will be taken in account. Intercompany posting is
possible too.
2. There will be a confirmation for the purchase order, which is assigned to a cost center
maintained in the purchase order item.
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21. Flexible Hierarchies for Profit Centers:
We can now assign every Profit Center of the organization to
• A region it is working in
• An industry it delivers to
• A line of service it belongs to
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22. Flexible Hierarchies for profit centers:
1. Custom Fields and Logic app: Add additional attributes to the profit center master: region,
industry, line of service
2. Manage Profit Centers app: Maintain the profit center attributes
3. Manage Flexible Hierarchies app: Build flexible hierarchies and release for reporting
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23. Slide 23 of 23
References:
Blogs on the SAP S/4HANA Cloud for professional services by Stefan Walz
1. https://blogs.sap.com/2019/05/16/an-introduction-to-event-based-revenue-recognition-with-customer-projects-in-
sap-s4hana-cloud/
2. https://blogs.sap.com/2020/06/01/intercompany-cost-allocations-in-s-4hana-cloud/
3. https://blogs.sap.com/2018/07/24/financial-accounting-for-customer-projects-in-sap-s4hana-cloud-part-2-
enhanced-activity-confirmation-for-service-industry-including-intercompany-margin-posting/
4. https://blogs.sap.com/2018/07/27/financial-accounting-for-customer-projects-in-sap-s4hana-cloud-part-3-
professional-service-industry-reporting-including-margin-per-contributing-profit-center/
5. https://blogs.sap.com/2019/01/27/financial-accounting-for-service-industry-in-sap-s4hana-cloud-part-4-market-
segment-reporting-based-on-flexible-profit-center-hierarchies/
Blog on the SAP S/4HANA Cloud for professional services by Shubham Srivastava
https://blogs.sap.com/2019/10/23/managing-projects-sap-s4hana-cloud-for-professional-services-vs-sap-project-
systems/
Blog on the SAP S/4HANA Cloud for Professional Services by Katharina Stopf
https://blogs.sap.com/2018/08/28/sap-s4hana-cloud-for-professional-services-the-collection/

24. Thank You !
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