Reply from PSD Rajan on Dec 25 at 11:20 AM Oops! Looks like Adriano generates a free of charge sales order and is
left holding the accrual. FOC would not allow him to apply the accrual
and there is no way around either. Shows his process is flawed. He should
apply the accrual as 100% discount and reduce it from the amount owed by
the customer.
| | | ---------------Original Message---------------
From: Rajan Subbaraman
Sent: Sunday, December 25, 2011 10:04 AM
Subject: Order that Should be Fully Paid from Accruals not Related with SAP Rebates
TW, thanks for your vote of confidence.
Dave hit the nail on the head and exposed the gap between the standard
rebate process and the desired process. We can't settle a rebate agreement
to generate a free of cost sales order.. process broken.
Let us see what is Adriano's process is doing today -
a) Billing generates accrual entries (rebate/discount debit accrual
credit). Shows intention to compensate the customer.
b) Pulls out a periodic report (abap) to find out the amount accrued.
c) Creates a sales order where the amount accrued is applied as
discount such that the customer need not pay anything. Billing generates a
debit (sales deduction) to rebate/discount account.
d) Accountant posts manual entry to reverse the accrual entry. (accrual
debit rebate/discount credit).
e) Maintains all these in an excel sheet for audit purposes.
Obviously, the process is inefficient, lacks active controls and traverses
through multiple departments (sales and accounting). The accrual account
gets messy and out of control. Strained customer relationship. Strained
inter-departmental relationship. The process could still work - under a
huge strain.
There is evidently an opportunity to optimize the process. A process is
defined by the controls around it. While the gap breaks the process from
an active control point of view, a hybrid -active and passive - control
approach is possible. Controls are extremely detail oriented and I am only
going to give a high level process approach.
a) Rebate/Discount needs to be accrued. Create a Rebate Agreement to
enable this. We don't want a payment to be made to the customer at the
time of settlement. So, set the scale condition high enough such that
rebate settlement will never generate a payment, but only the reversal of
open accrual.
b) When it is time to evaluate the accrual and send the
free/discounted goods to the customer, find out the open accrual against
the rebate agreement (say $500). Create a sales order for a quantity of
the material that matches $500 and provide 100% discount. Assign the
agreement number to the sales order header.
c) Post a manual reversal of accrual to the extent of the value
applied in the sales order. This will generate a credit memo request and
post a reversal entry (debit accrual and credit discount).
d) Ship and bill. This will apply the discount.
e) Enable passive control by generating a monthly report that will
show the following in the minimum. This report can also be used for step
b) above.
1. Customer Number
2. Rebate Agreement
3. Agreement Status
4. Rebate Accrued
5. Rebate Reversed
6. Rebate applied to Sales Order (use the agreement number in the
header)
7. Rebate applied to Billing Document (use the agreement number in the
header)
f) At the end of the term, when all the rebate is applied, go ahead
and settle the agreement. A credit memo request with reversal of remaining
open (small change) accrual will be generated.
The report in step e) can be taken with the status as a selection criteria
and can be used for both control and audit. The focus is on the
discount/rebate value and not quantity. All traceability applicable to
standard rebate process is available. Only one department is
involved. Better
customer relationship. Controlled process. One happy accountant!
Cheers! |
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