Sales Commission Calculation & Settlement Handling through Order Processing Applies to: SAP Sales & Distribution & Incentive and Commission Management in ECC 6.0. For more information, visit the Enterprise Resource Planning homepage. Summary Business Process used almost in all industries for calculates sales commission for sales partners and do the commission settlement. The commission is calculated on order net value and based on Fixed Percentages, Mark up Value and Mark down Value.. Especially in the Telecom industry used this scenario to calculate sales partner commission regularly. Author: Sanjay B Wayal Company: IBM Created on: 17 May 2010 Author Bio Over all 10+ years of total experience and 6+ years in SAP SD/CS/Warranty Claim Management/ICM with all project stages including, Business Development, Project Scoping, Project Management, Requirements Definition, Gap Analysis, Issue Resolution, Configuration,Custamization, Training, Documentation, Go-Live Assistance and Post Implementation Support in SAP R/3 System. Besides SAP, strong 3+ years of domain experience with Manufacturing / Electronic giants in Sales and Distribution and Customer Services. 2010 SAP AG 1
Table of Contents Description... 3 General Description... 3 Commission calculation... 4 Fixed percentage:... 4 Commission based on the Mark Up value :... 4 Commission based on the Mark Down value:... 4 Process Flow... 5 Prerequisites Master Data... 6 Main Steps... 6 Activities (Transactions)... 7 Reports... 8 Related Content... 8 Disclaimer and Liability Notice... 9 2010 SAP AG 2
Description General Description A sales order is an agreement between a sales organization and a sold-to party to deliver products or provide a service for defined prices, quantities and time. Similarly, sales commissions are agreements between an organization and the sales employee involved in the sales order/contract. Through commissions Company can keep sales representatives motivated, and in turn keep the company business growing. For each order placed, the involved salesman/salesmen will accrue a percentage of the sales which in the end is paid as an incentive when the order is closed. One or more salesmen may be responsible for a sales order. If more salesmen are involved, the commission has to be shared among them. The commission is settled to the sales representatives at the end of the period, but only when the ordered material is delivered and after the customer has fully paid the related invoice. In case that the invoice is only partially paid, the accrued commission is not passed on to the sales representatives. The commission is calculated on order net value and based on: 1. Fixed percentages 2. Mark Up Value 3. Mark Down Value The commissions for internal and external sales representatives should be treated separately. Below is a more detailed description on each of these calculations (section 1.2). In order to collect (accrue) the commission for each sales employee across many orders, and across time, rebate agreements are used. The rebate agreement is created with the sales rep as a customer. A product group is entered in the rebate agreement, for which the rebate (commission) will be valid. When the sales order is created with the corresponding sales rep assigned, the rebate agreement is recognized in the sales order and the pricing will start calculating how the commission should be accrued. If there are more than one sales rep assigned in the order, each sales rep s rebate agreement will be found in the pricing of the order and the different commission condition types will be populated accordingly (for example, if mark up method is used, the mark up pricing condition will be repeated as many times as sales reps in the order). To determine the commission split in the order, each sales rep partner will have an assigned split % in the order header. Example: Sales rep 1 = 10% of total commission in order Sales rep 2 = 40 % of total commission in order Sales rep 3 = 50% of total commission in order Each sales order must have a total of 100% assigned commission. At a predefined time (for example by month end), the rebate agreements are settled and commissions paid to the respective employee. As already mentioned, it will be checked if the invoice is completely paid by the customer, before the commission payment to the employee will be allowed. If only one sales rep is assigned in the order, this person by default gets 100% of the commission. 2010 SAP AG 3
Commission calculation Fixed percentage: In this case, the sales commission of the document is calculated through a fixed percentage. This amount is then divided among the number of sales representatives involved in this sales order according to their percentage share. This is the scenario mostly used in Company. Commission based on the Mark Up value : In this case, the mark up determines the commission on the sales order. The definition of mark up is the item net profit (Selling price of product cost of product = Mark up). When the mark up value is calculated, a predefined table is used to retrieve the corresponding commission % based on the Product hierarchy and Mark Up % that will be used in the sales order. This commission percentage will be divided among the number of sales representatives involved in the order, if more than one. This scenario is used in Sarnafil, for Insulation products. Example: Selling price $ 1.00, Cost of product $ 0.80. Mark up value = $ 0.20. Mark up % = (0.20 / 0.80) x 100 = 25 For each mark up value calculated, a commission % will be retrieved from the predefined table. It means that the mark up % will in this case be the corresponding % value of 25 in the mark up table. The % will calculate the total commission on the order, and will in turn be split by the sales employees assigned in the order. Commission based on the Mark Down value: In this case, the mark down value will decide the commission % of the sales order. Mark Down represents the price that is below the net selling price with which the product is sold to the customer (List price of product discount price = Mark Down). Example: List price = $2.00 Discount = $0.10 Discount price = $1.90 Mark down price = $2.00 $1.90 = $0.10 Mark down % = (0.10 /2.00) x 100 = 5 For each mark down value calculated, a % percentage will be retrieved from a predefined table with the combination of above percentage and product hierarchy up to 4 th level. It means that the mark down % in this case will be the corresponding % value of 5 in the mark down table. This commission percentage will decide the value of order commission, which again will be divided among the number of sales representatives involved in the order. 2010 SAP AG 4
Process Flow The following diagram shows the commission process 2010 SAP AG 5
Prerequisites Master Data Maintain the customer master data records that represent the sales representatives. Those are used for the commission settlement. In this customer master, in General Data controlling view maintain the sales representative number for which basically this customer is created. Rebate agreement for the Sales Commissions is maintained (using standard rebate functionality, the sales rep is the customer) The requested material and the end customer have to be maintained for the organizational units in the delivering plant, sales organization, distribution channel and division. Credit master for the customer (both sales man and end customer) has to be maintained by the finance department. The custom tables to determine the commission percentage depending on the mark up or mark down percentage should be maintained. Condition records for fixed % commission must be created. For mark up and mark down commissions the condition records in agreement should be maintained as 0 %. Main Steps For each sales representative that is eligible for commission, a rebate agreement has to be created. When the sales order is created, the sales representative responsible (one or many) is assigned. For each order there can be up to 4 sales reps assigned, by using the partner functions Y1, Y2, Y3 and/or Y4. These can be copied from the customer master or entered directly in the sales order when created. In case a contract is used, the partners can also be copied from the contract into the sales order. These partner functions are used for commission calculation and represent the parties being responsible for the sales order. Each sales representatives commission share is stored in the field called condition group 1 to 4. This will be maintained in the following sequence: Commission percentage of sales rep 1 will be stored in KDKG1 (condition group 1) Commission percentage of sales rep 2 will be stored in KDKG2 (condition group 2) Commission percentage of sales rep 3 will be stored in KDKG3 (condition group 3) Commission percentage of sales rep 4 will be stored in KDKG4 (condition group 4) If only one Sales Representative exist in the order, there is no need to maintain a commission percentage split in the condition group field. Instead, SAP will by default assign 100% of the commission to the only sales rep in the order. The sales order will automatically find any rebate agreement that is matching with the sales rep and material group in the order, and from there the commission calculation starts (as explained in section 1.2 Commission Calculation above. At the end of the period, the rebate agreements are settled and credited to the sales representatives according to their accrued values. A check is made in the system so that the invoices related to the settled rebate agreements are fully paid by the customer. Custom reports are also available in BI, so that the sales men can follow their prospected commission payments. 2010 SAP AG 6
Activities (Transactions) Activity Description Transactio n Code Role Create the Commission Agreement Create the commission agreement (as a rebate agreement) VBO1 Customer Service Enter create sales order: initial screen When an order is received, the customer service creates the order. Select order type Depending on the scenario, the correct order type has to be selected via the match code Enter organizational data This activity is optional because the sales area is also copied from the customer master during partner determination. If the customer exists in multiple sales areas, the entered sales area is selected. Enter the Sold to party, ship to party, PO no, material, plant, quantity In this activity enter the order details like sold to, ship to party, material number, plant and required quantity Customer Service Enter the sales representative responsible for order, if not copied from contract or customer master In this activity partner functions Y1 to Y4 are added in the order header Customer Service dept Enter commission % split in order header If more than one sales rep is assigned in the sales order, a % split has to be added in the order Customer Service dept Create the delivery In this activity the responsible person will create the delivery, picking, packing, VL01n (or delivery due list) Shipping and transportation Create the Shipment Create the shipment for the delivery VT01N Shipping and transportation Create the shipment costing Do the shipment costing for the shipment done VI01 Shipping and transportation Create the invoice In this activity create the invoice document VF01 Billing Invoice settlement Here when customer payment is received, the invoice account document is cleared against that payment FB32 Billing Commission settlement In this activity the billing clerk will do the commission settlement for the invoice documents which are cleared completely in the accounting VB02 or VB(7 Billing 2010 SAP AG 7
Reports Description Transaction Code Role List of Rebate Agreement BI reports for planned commission payments to sales representative VB(8 BI employee employee or sales rep Related Content http://help.sap.com/saphelp_telecom472/helpdata/en/9b/084736be07e421e10000009b38f889/frameset.htm http://help.sap.com/saphelp_crm40/helpdata/en/ac/c4b8f0679246e0a0bdf94ef0a2c127/frameset.htm 2010 SAP AG 8
Disclaimer and Liability Notice This document may discuss sample coding or other information that does not include SAP official interfaces and therefore is not supported by SAP. Changes made based on this information are not supported and can be overwritten during an upgrade. SAP will not be held liable for any damages caused by using or misusing the information, code or methods suggested in this document, and anyone using these methods does so at his/her own risk. SAP offers no guarantees and assumes no responsibility or liability of any type with respect to the content of this technical article or code sample, including any liability resulting from incompatibility between the content within this document and the materials and services offered by SAP. You agree that you will not hold, or seek to hold, SAP responsible or liable with respect to the content of this document. 2010 SAP AG 9