Sales Contract Management with SAP S/4HANA

Get an overview of sales contracts in SAP S/4HANA in this blog.
SAP S/4HANA supports the creation, processing, and analysis of sales contracts with customers. Through the use of SAP Fiori apps, expiring contracts can be easily addressed, and contracts can be better analyzed to determine fulfillment rates. There are two main types of sales contracts:

• Quantity contract: This is an agreement between company and customer for the customer to purchase a specific quantity of a material at a certain price within a specific time period.
• Value contract: This is an agreement between a company and customer that contains the materials and services the customer will receive within a specific time period, up to a specific value.

Contracts can be fulfilled through a single sales order or through multiple sales orders that are called from the contract during the specified time period. These release orders must be created with reference to the contract. If the customer knows the dates of fulfillment at the time of creation, a scheduling agreement can be created in place of the contract.
Let’s look at key SAP S/4HANA functionality for sales contract management.
Create, Change, and Display Contracts
With SAP S/4HANA and SAP Fiori, users can easily find and analyze contracts within the system, which is helpful for both users and managers to better understand and process their contract pipeline.
In SAP S/4HANA, after it has been determined that a contract is required, the user will access an SAP Fiori app called Manage Sales Contracts. With this application, you can search for sales contracts according to filter criteria and display them in a list. In the example in the first figure below, 29 sales contracts are listed.
You can also navigate from the same page to the Create Contract screen shown in the second figure.

Additional customer information is entered into the contract, including sold-to, ship-to, purchase order number, and the validity dates of the contract. Validity dates are a required element for contracts. Supplemental information, such as order reason, description, and master contract, can be added to the contract header details if required. The materials or services that are part of the contract are added to the document, along with the agreed-upon specific quantity. The agreed-upon value for the products and services is also included in the contract. After the contract is saved, you can access it again using the Change Contract or Display Contract apps in SAP Fiori.
With SAP S/4HANA 1809, a new feature for exporting to a spreadsheet was added to the Manage Sales Contracts app. Thanks to a new OData service, you can now retrieve sales contracts that are blocked for negative credit check and can perform check, read, and release operations. You can also update and delete sales contracts in the SAP Fiori frontend.
List Incomplete Sales Contracts
After the incomplete contracts list is displayed, the user can access the contract directly from the application instead of accessing a different transaction to change the contract.
By running the List Incomplete Sales Contract app, you can easily check which documents and data are incomplete. A new version of this app released in SAP S/4HANA 1809 allows users to identify contracts with various incompletion issues. The figure below shows the flexible search options provided through this SAP Fiori app; in our example, we haven’t added any search parameters to return all incomplete contracts.

Users can then drill into a particular contract to access the incomplete details, as shown below.

In the following figure, you can see that the contract has missing Valid-From Date and Valid-To Date data, per the incompletion log of the document.

After addressing issues in the contract, the user is taken back to the incompletion list and can continue resolving the incompletion issues.
Users can also list contracts based on a variety of selection criteria, including customer, material, the person responsible, and validity period, using the List Contracts app. For ease of contract handling, SAP Fiori also provides apps to list completed contracts, expired contracts, and contracts that are expiring soon. Again, SAP Fiori allows you to directly access the contracts through these lists instead of finding the contract number with the list and accessing the contract through a different transaction.
Sales Contract Fulfillment Rates
Sales Contract Fulfillment Rates is a powerful SAP Fiori app that management can use to identify contract fulfillment rates across sales organizations, customers, employees, and materials. The example below shows a completion rate of 61.13%. Users can also quickly identify the top 10 contracts by target value. Further drilldown capability based on real-time data is available. Managers no longer need to wait for contracts to expire or periods to close in order to analyze the sales contracts.

Manage Subscription Contracts
Subscription contract management helps to manage complex contracts that can be bundled across multiple product and service offerings. Users can manage contracts for customers by adding items, modifying terms, tracking usage, and removing contract elements. It can be handled in one of two ways in SAP S/4HANA.
For simple subscription scenarios, where a customer is paying a set amount over the course of a time period, such as a monthly payment over the course of a year, a value contract can be used to manage the process. The value contract will have a billing plan outlined at the item level. Based on the billing plan, down payment requests are generated and posted to the customer’s account when payment is made. Deliveries can be called against the value contract throughout the validity period. At the end of the contract, the down payment balances are used to clear the open balances from the deliveries, and the contract can be closed or extended.
The Manage Sales Contract app is used to process subscription contracts in SAP S/4HANA. Below you’ll see a settlement against the contract over the course of a year through monthly payments based on a defined billing plan. These monthly payments are achieved by creating down payment request documents. After all items are delivered and open balances cleared, this subscription contract can then be closed.

The Manage Customer Down Payment Requests app shown below helps to create down payment requests that are posted to customer accounts and against which payment is made.
For more complex subscription scenarios, the cloud applications in SAP C/4HANA can be used to support subscription order management.

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Excerpt from the book Logistics with SAP S/4HANA: An Introduction by Deb Bhattacharjee, Vadhi Narasimhamurti, Chaitanaya Desai, Guillermo B. Vazquez, and Tom Walsh. Used with permission of SAP PRESS. All rights reserved.
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