Novel and Powerful SAP Service Contract Management Billing Solution from Detering Consulting

Service Contract Management Lifecycle - Stakeholders, Partners and Processes

According to SAP, 77% of transaction revenue in the world touches SAP software. The benefits of SAP ERP are well-understood by 92% of Forbes Global 2000 companies that use it, and include:

• Access: Anyone within an enterprise can have access to enterprise information.
• Breadth: SAP ERP can manage information from a wide range of areas, including financials, sales, supply chain, warranty, and human resources.
• Customization: Because SAP ERP has such breadth and configuration options, every SAP user configures SAP to their particular needs. SAP also delivers industry solutions.
• Consistency: Every SAP application uses the same database, eliminating inconsistencies in enterprise data.
• Real time: Every SAP system allows real-time visibility to transactional data, so that analytics and dashboards report changes in real time. This visibility opens the way to predictive analytics in the service contracts realm.

As useful as SAP ERP is, it lacks a built-in module for performance-based service contract billing. This directly impacts the ability of businesses in the aircraft, heavy equipment, construction, utility, and automotive industries to maintain an ongoing service relationship with their customers. In these industries, service contracts ensure that the customer always has properly maintained equipment, and the manufacturer retains the customer for future equipment sales.

For large enterprises, going outside of SAP for a standalone service contract billing application or, worse yet, manually tracking and billing service contracts through spreadsheets and MS Access DBs would be impossible. Data inconsistencies would immediately appear between the service contract database and the SAP database. As a result, your accounting department may possibly need to laboriously reconcile the financial impact of each service contract invoice, annual true-up, and contract closure with the financial system.

Moreover, there would be no automated reminders to add special charges, run billing, or conduct financial close-outs. You may run the risk of missing revenue opportunities and failing to comply with the terms of your own service contracts. As a result, your business would be limited in both the complexity and number of service contracts it could process accurately.

However, an SAP service contract billing solution that is integrated into the application layer of SAP would use the same financial and customer database as the rest of the enterprise. Data inconsistencies never arise because everyone is using the same information. Additionally, the financial impact of each service contract billing and invoice posting automatically ripples through the SAP system without manual reconciliation.

Even more, our solution supports the ability to annually review and true-up as well as final close-out contracts through a rule-based decision support tool:  the contract specialist can click and choose options, the system posts the FI -documents in the background accordingly. We call this "the magic button".  

Service contracts, also known as extended warranties and service programs, entitle customers to parts and services, in exchange for a fee. Service contracts provide customers predictable service costs and assure that the equipment is regularly maintained.

Billing of gold standard service contracts takes two different forms – performance-based billing and time-based billing.

Performance-Based Billing

Also known as “power by the hour,” performance-based billing occurs regularly but reflects an agreed-upon performance standard. For example, a customer may be billed monthly based on the total hours of equipment operation.

Time-Based Billing

Time-based billing also occurs regularly but amounts are fixed within each period.

Although time-based billing is fixed and performance-based billing calculates billing amounts dynamically based on usage during each period, the pricing tier may change based on the age of the equipment. For example, the service contract fee may be low during the early life of the equipment and increases as the equipment becomes older and passes certain maintenance events.

Example of Service Contract Billing

An aircraft includes several systems, such as the airframe, engine, and avionics. A service contract would cover each of these systems. However, different terms may apply to each system. The engine, for example, may be entitled to regular maintenance based on flight hours. Alternatively, the airframe, which is exposed to the environment even when it is not flying, may be due for service at regular time intervals.

To facilitate service contract management in SAP, Detering Consulting developed an add-on, the Billing Workbench (BWB). This add-on rests in the application layer of SAP and is custom-designed to handle complex service contract billing requirements, such as tiered pricing and performance-based billing.

SAP serves as the underlying platform for BWB. By using the built-in features of SAP and drawing from the same database as other departments within your business, BWB enterprise solutions provide fast and efficient administration of service contract billing and reporting.

Once Detering Consulting’s BWB solutions are added to your SAP system, your service contract billing staff can access the BWB services through a user interface.

BWB is accessed through a user-friendly interface.

This interface takes users directly to the data entry screens used to set up and manage service contracts. These pages allow users to input the terms of the service contract into the SAP database by customizing the pricing terms for the service contract. The interface also provides many configurable options, also known as VC or variant configuration.

The contract terms and options are configured through standard SAP service contract transactions (VA41/VA42).

The terms can be set on header, or a highly granular level, with different terms applying to separate systems or parts. Moreover, each term is tied to a separate part or system record within SAP. 

SAP service contracts can also be interfaced from SalesForce (SFDC), in case your sales teams use SalesForce as the CPQ  to key in the service contract while communicating with the customer (interface not included in BWB). 

Entitlement Management Within BWB Services

The key to providing service and parts under a service contract is entitlement management. Since the service contract and warranty terms define the conditions under which services are performed, and parts are supplied, any claim under the service contract must be verified.

The contract terms that are entered into the SAP service contract billing solution define the entitlement to service. When a customer or service center orders spare parts or submits a service order, the BWB conducts an automatic entitlement check during the sales order process. This automatic entitlement check returns coverage options to the customer service representative (CSR) or customer when the order is processed.

The system may determine that the parts or services are covered by a spare parts warranty, technical service bulletin (recall), equipment warranty, or service contract. This entitlement check might also determine that the service contract does not cover the requested parts or service and that the customer must pay for them.

BWB Solutions Support Tiered Pricing Structures

Pricing tiers are used to reflect the reality that equipment is relatively maintenance-free during its earlier life but becomes very maintenance-heavy as it ages and approaches significant overhauls. As a result, lower pricing is often offered immediately following the acquisition, with the prices increasing later in the equipment’s life cycle.

For example, a service contract billing rate could be defined for the first 60 months as $140 per hour for the first 3,000 hours of equipment use. When equipment use exceeds 3,000 hours, the rate may increase to $440 per hour for up to 5,000 hours of equipment use, then $794 per hour for more than 5,000 hours of equipment use. Once the equipment has been in use for more than 60 months and 5,000 hours, the hourly rate may increase to $813.

When defining the contract terms in BWB, these tiered prices are written out. This allows the SAP standard system to use prior billings to account for cumulative pricing and increasing the price tiers as the hourly or time conditions are met.

BWB Services Provide Immediate and Accurate Billing

With the service contracts entered, the SAP service agreement program billing module can be used to generate invoices for service agreement customers.

For customers and equipment that use time-based billing, the SAP service contract billing solution can generate all the invoices due to be billed for a selected billing date. For customers and equipment that use performance-based billing, the SAP service contract billing solution can pull usage data, such as hours of operation, from performance data recorded in the SAP database.

It is possible to use both time-based and performance-based billing in one service contract.

The integration of the contract management software with SAP provides service contract providers, whether they are manufacturers, vendors, or service providers, with many benefits, including:

• Accurate billing: By pulling performance dates directly from SAP, contract management SAP customers minimize the risk of data inconsistencies and data entry errors in performance-based service contract invoices. This also reduces administrative overhead. As the IT department adds more automated data collection and reporting features, BWB SAP service contract billing solutions can use them since it sits on top of the SAP platform.
• Improved cash flow: Batch billing and immediate invoice generation on billing dates and after performance data is recorded in SAP facilitates quicker payment by service contract customers. Moreover, the SAP service contract billing solution can be programmed to reduce revenue leakage by monitoring billing activities and reminding billing staff to add individual additional fees that might otherwise be overlooked.
• Flexible: Special charges or discounts, like contract initiation fees and marketing discounts, can be added before generating invoices.
• Customizable: Pricing tiers can reflect the special service contract terms for type and use of equipment, such as “first 100 hours of service is free of charge.”

Key Features of Extended Warranty Programs and Contract Management in SAP

The key features of BWB solutions include:

• User-friendly: BWB services can be configured for each service contract through a graphical user interface.
• Adaptable: The SAP service agreement program can accommodate both performance-based billing and time-based billing. It presents a framework that can be adapted to new customer requirements easily.
• Configurable: BWB SAP service contracts can be highly configurable for each customer, which improves service contract renewal rates by up to 48%.
• Automated: BWB solutions can be customized to automatically apply pricing tiers, balance billing, and financial close-outs. Moreover, data for billing runs can be automatically drawn from reports of aircraft and engine measurements, operating hours, and operating cycles that are entered into the SAP database.
• Comprehensive: The SAP service contract billing solution is self-contained and provides end-to-end SAP-service contract management.
• Improved compliance: By supporting annual review and financial close-outs of cost of operations (COO) contracts, BWB solutions provide the tools to maintain compliance with vendor contract terms and avoid overbilling.

SAP S/4HANA and ECC connect key business areas within your enterprise, including materials management, equipment counters, contracts, pricing, finance, and reporting. By resting within the SAP platform, BWB data is available to help other areas within your enterprise, including departments responsible for spare parts orders, warranty claims, maintenance, and repair with all interrelated data and documents accessible from the SAP database. Similarly, BWB collects data from equipment counters and generates accurate invoices for performance-based service contracts.

For example, aircraft manufacturers and vendors maintain records of the airframe, engine, APU, and avionics in SAP and receive regular counter usage updates. This data is available across the enterprise for many uses. The SAP service contracts billing solution uses this same data for performance-based service contracts, such as the “power by the hour” contracts used by the U.S. military.

SAP also supports extensive reporting features. The SAP service contract billing solution integrates with the SAP dashboard reports to provide reports on service contract billings. Moreover, detailed reports can be run from the SAP service contract billing solution data, including contract performance, pricing, and revenue. This provides you with clear markers of your enterprise’s service contract billing trends.

In addition to integration with SAP, BWB supports seamless “quote to cash” Salesforce integration. With this integration, crucial contract data is defined in Salesforce, and the contract details are reflected in SAP without re-entering the information. The SAP service contract billing solution can use this information to generate service contract invoices.

The SAP service contract solution represents a software package, the Billing Workbench (BWB), developed with advanced consulting experience and knowledge in SAP and service contracts. The BWB software package provides features not otherwise available in SAP. This not only adds performance-based billing revenue to your bottom line but also increases the return on investment (ROI) of your SAP system.

The benefits of the BWB software tool used to implement SAP service contract billing solutions are widespread and include:

Benefits for Your Customers from BWB Software

Your business can offer more accurate billing and can easily and quickly resolve customer service issues relating to service contracts when the contract data is widely available through your SAP system. By offering customers an ongoing service contract with predictable service, maintenance, and repair costs, you’ll develop a better relationship over the long term.

BWB Leverages the Benefits of SAP

By adding on to the standard SAP system and using SAP best practices, the SAP service contract billing solution leverages the best features in SAP, while BWB adds new features, like entitlement verification, to the features of SAP that you’re already familiar with and use. Since you have already purchased your SAP license; additional licenses are not required from SAP to add the SAP service contract billing solution to your system. The solution itself is available from Detering Consulting for a small annual fee that covers the software, configuration, manual settings, consulting, and documentation.

New or Expanded Revenue Opportunities from BWB

The SAP service contract billing solution was created for manufacturers and vendors of complex equipment who already offer service contracts. The service contract billing solution is also ideal for SAP users who have not previously offered service contracts but now plan to start offering them. By providing a range of options for customizing service contracts, extended warranties, and service programs, the SAP service contract billing solution can be tailored to any industry, including aircraft, automobiles, construction and farm equipment, drilling and mining equipment, electronics, and manufacturing companies.

Moreover, since the contract conditions can be adapted within the SAP contract billing solution to meet your customers’ needs and requests, you can offer performance-based service contracts for military and other “power by the hour” customers and time-based billing service contracts for other customers. This allows you to capitalize on the revenue from service contracts, regardless of the type of service contract billing used.

BWB Accommodates Large Volumes of Service Contracts

The user-friendly BWB interface and automation tools allow the SAP service contract software to process large volumes of service contracts and service contract invoices with little or no additional overhead. In fact, if your enterprise currently manages and bills service contracts manually, you may even reduce your overhead or be able to shift service contract billing employees to other, more productive tasks.

Improved Compliance Through BWB

Since the SAP service contract billing solution includes integrated reconciliation and financial close-outs, your business will reduce the risk of non-compliance in issuing service contract credits and increase the revenue from balance billing of debits.

BWB Streamlines Operations

BWB can also improve your operations by streamlining the flow of data for staff responsible for ordering spare parts. Knowing the status of service contracts can also improve maintenance scheduling and processing of recalls or other technical service bulletins, repairs, and warranty requests. This can be especially valuable when your service centers are spread out geographically, or your enterprise outsources service and maintenance to third parties.

The SAP service contract billing solution is a novel combination of advanced consulting services and BWB software and configuration. Some common questions people ask about service contract billing and SAP include:

What is an SAP billing system?

An SAP billing system is a feature in SAP’s SD sales module that creates invoices. This SAP standard billing system is not adapted for usage-type service contracts because it does not accommodate performance-based billing out of the box. Detering Consulting's SAP service contract billing solution overcomes this shortcoming of the SAP billing system by processing time-based as well as performance-based service contracts.

What is an SAP Billing Plan?

SAP billing plans are schedules of billing dates. While billing plans are necessary for SAP service contract billing solutions, they do not apply and cannot be used for performance-based billing scenarios. SAP lacks a built-in module to manage performance-based service contracts for billing. To combine an SAP billing plan with performance-based billing for service contracts, you need BWB. 

What is Periodic and Milestone Billing in SAP SD?

Periodic billing and milestone billing are types of billing plans built into SAP. Periodic billing occurs based on time, while milestone billing occurs based on events. While SAP does support milestone billing, for example in the construction industry, usage-type billings, which are typical in Aviation and other such industries, need to be billed periodically. BWB provides a solution for this requirement. 

In a nutshell, time-based and performance-based billing, are supported with Detering Consulting's BWB.

Which SAP contract solution do you guys use for your BWB Billing solution? CLM, ECM, C4C, ECC, or S/4?

Our BWB solution is built in S/4HANA SD - Sales and Distribution (equivalent to ECC SD), in conjunction with CS - Customer Service, Classification, and SAP Finance. The UI is built in the traditional SAP GUI which is simple and extremely performant. Fiori as a UI is available optionally. 

Every Customer Is Unique

Though every customer has unique characteristics that form the basis for its Unique Value Proposition, there are often common processes and business requirements.

Our Quickscan Solution Helps You Scope Out Your Unique Project Requirements

The Detering Consulting Service Contract Billing Solution Add-On took years to develop.  It was developed to help our customers achieve results fast while simultaneously reducing implementation risk.  It incorporates proven best practices, advanced consulting skills and industry 'know how'.

How Do We Deliver The Solution

Of special importance is that, during this time of COVID-19 crisis, everything can be delivered remotely. 

What does 'everything' consist of:

• Software (via Transports)
• Consulting
• Documentation
• End User Training
• Project Management
• Proprietary content

Two Project Delivery Approaches Available

• Fixed price for the fixed scope of the add-on software solution
  
  
• Fixed price after scoping workshop
  • A Complete Time & Materials delivery approach is also possible.  In the case of a T&M approach, there is no separate scoping workshop required.
  • Expected Timeline
    • Depending on the project scope the entire Service Contract Solution can be delivered in 3 - 6 months. Additional, new scope may require up to 8-9 months total. For a very large company it may take longer.

INITIAL SCOPING EXERCISE (Optional)

This is our Quick-Scan Workshop for our Service Contract Billing Solution

• The cost is USD 4-8k depending on the number of days (Typically 2-3 days workshop) + travel expenses.

• Workshop is preplanned and organized per the details available here.

FIXED SCOPE Service Contract Billing Solution 

Covering all elements of scope required for an E2E Service Contract Billing solution, including all features for your reference.

Fixed Price of USD $100k

We estimate the fixed price implementation project cost during our QuickScan scoping workshop (see above). Optionally you can choose T&M  as the delivery type for your implementation project. 

• Minimally Required External Resources:
  • One functional SAP consultant (Full-time)
  • One technical development consultant (Part-time)
  • One Project Manager (Possibly combine Project Manager and Solution Architect in one role)
    • Full-time towards blueprint and testing, go-live. Part-time during implementation  

What's In The Solution

Why Detering Solutions?

• One-stop shopping UI for all contract billing specialist activities

• Solving white space for usage-type billing

• Integrate with equipment counter readings

• Mass-creation of invoices for both time and usage-type billing

• Invoice integration to GL account determination

• Tagging of GL postings with contract data managing contract liabilities and revenues financially

• Fully configurable contract options

• Flexible contract pricing, we deliver one example best practice which can be changed and expanded

• Tier’d pricing solution included

• Integrated Vendor Contract Payments (customer contract to vendor contract mirror’d payments)

• Annual True Up process support

• End-of contract completion variants integrate completion steps with calculated % for finance posting rows (available during project)  

Workbench Solution Available after 3 weeks 

Our solution provides a fully functional application, and SAP best practices for your contract specialist, developed for service contracts professionals without the headaches of developing your own solution from scratch, or possibly interfacing to another system.

Designed in SAP, For SAP

Our solutions are entirely built on standard SAP functionality. Our applications exclusively use ABAP, SAP GUI, and Fiori / UI5. This means:

• NO Additional Hardware
• NO Additional Skills
• NO Additional Staff

Real Business Experience

All of our SAP architects and consultants have 15+ years or more of SAP industry experience. We have all spent time in several industries and businesses, giving us unique insight into the needs of our clients.

Solutions Designed with the End User in Mind

Our solutions are designed to help your service and warranty specialists and managers spend more time monitoring and managing SAP, instead of clicking through screens and typing info into SAP. We focus on simplifying the interface and the process, making life easier for your professional users

Fully Configurable / Changeable and Expandable

All Detering applications are designed to be changed and expanded to fit your business needs. Your business owners decide which fields to show on a report in what sequence and even change descriptions to fit your terminology. During the custom implementation project following the BWB installation and handover, your business’s unique requirements are implemented in the BWB. Which means your business gets the best of both worlds: Leveraging a prepackaged solution “off the shelve” as well as adding features and functionality making the solution uniquely yours. Driving competitive advantage and maximizing your SAP investment.

Simple Installation

Installation is straight forward because our add-on packages are designed completely in SAP using SAP’s tools. A conference room pilot will be ready to be used in your Dev or Sandbox system in 3 days.

Seeing is Believing. That's why we encourage you to request a demonstration of the Detering Consulting Service Contract Billing Solution.

SAP is a powerful platform, but it does not offer a natural, built-in process for handling service contracts end-to-end. The BWB SAP service contract billing solution software closes this gap by adding a flexible, user-friendly service contract creation and billing module to your SAP system.

Perhaps you're like many of the SAP customers we come across and don't currently offer a service contract to your customers, but would like to.

That is why we have decided to offer a service for companies to build their service contract offering from the ground up.

Our All-Inclusive Packaged Service Contract Offering

Designed for a company that doesn't currently offer a service contract but wants to start offering them.

Our Offering Consist of:

• Business Value Assessment
• Development of a Legal and Regulatory Framework for this company's service contract offering
• Scope decisions for service contract
  what is included in this project and what is going to be tackled in phase 2
• Process review – How does the new service contract offering fit into existing sales, service, and finance including payment processes
• Pricing workshop – Determine pricing options for service contract (and contract configuration options)
• Channel Partner Management Best Practices. How to enable partners like HD, Best Buy, Dealerships to sell service contracts
• Insurance partner integration in case company wants to leverage an insurance or financial institution
• Example Service Contract
• SAP Service Contract Solution Add-on
• Analytics Insights reporting and dash-boarding solution as an optional add-on component, either in SAP using Cloud Analytics or in Power BI 
• SAP Implementation Project services
• Post Go-Live Hypercare - 3 months of service coverage
• Monthly check-up service (including Power-BI data validation and confirmation)
• Business Value Achievement Review in Month 3,6,12 after Go-live

Interested?  Then request the SAP Service Contract Enablement Service by clicking the button.