sales contract management

Sales Contract Management

Detailed View

SAP Enhancement Package 1 for SAP CRM 7.0

SAP Enhancement Package 5 for SAP ERP 6.0

CRM Sales – Order Management

© 2010 SAP AG. All rights reserved. /

Overview of Sales Contract Management

Business Challenges and Benefits

Sales Contract Management with SAP – Processes and Features

CRM Sales Contract Management in Detail

Sales Agreement Processing

Sales Contract Processing

Features and Functions within Sales Agreements and Contracts

Release Order Processing

Sales Contract Analytics

ERP Sales Contract Management – Special Features

Sales Channels and Target Industries

Further Information

Table of Contents


Business Challenges

How can you ensure your customers stay

loyal to you?

Customers have easy access to information and suppliers worldwide.

Products and services are becoming commodities.

Accurate planning and forecasting are key success factors.

How can you guarantee that customers make

repeat purchases?

How can you ensure that you are constantly

aware of customer needs?

How can you provide more accurate sales

forecasts?

Customer Loyalty

Customer Retention

Customer Awareness

Customer Behavior

Sale

s C

ontra

ct M

anag

em

ent

How can you ensure time and productivity

efficiency?

Effectiveness

and Efficiency


Top Pressures Driving a Focus on Contract

Management

Poor visibility of

contractual

relationships

0 10 20 30 40 50

Risk management, visibility and compliance concerns

are paramount

42%

31%

34%

23%

Top 5 Reasons Cited

“Establishing well-designed contracts

that clearly outline the obligations of

each party involved serves to

minimize, if not eliminate, potential

hazards with external suppliers and

customers.”

Source: Aberdeen Group,

Contract Lifecycle Management, Views from

Procurement, Sales, Legal and Finance, Aug 2008

Increased

complexity of

contracts

Regulatory and

reporting

requirements

Pressure to assess

and mitigate risks

Source: Aberdeen Group, Contract Lifecycle Management, Views from Procurement, Sales, Legal and Finance, August 2008

Need to improve

compliance 19%


Sales Contract Management - Challenges

Sales Contract

Management

Increased

contract

volume

Increased

contract

complexity

Compliance

with contract

terms

Collaborative

scenarios


Effective Contract Management Improves

Business Performance

“Managing contracts is nothing new – what is new is their complexity. Fortune

1000 companies have [on average] 20,000 to 40,000 contracts. Companies

spend approximately 50 basis points of their revenues to manage their

contracts, which can be reduced 20-50% using contract management

software.Jamie Friedman, Goldman Sachs

“Contracts can make or break your business. They define and underpin every

commercial relationship. They determine how your business is run and the

level of performance it can achieve.Pricewaterhouse Coopers

“Organisations which don„t manage their contracts effectively will be at a

tremendous competitive disadvantage.Tim Cummins, Director IACCM

“70% of international corporations believe that „contract management remains

a major significant source of operational weakness.IACCM


Sales Contract Management - Benefits

Capture different types of outline agreements, such as sales agreements, value and

quantity contracts.

Guide sales personnel through required follow-up activities

Involve different parties to ensure collaboration and communication

Monitor the sales process from quotation to contract completion

Track the contract releases and follow-up processes

Use integrated reporting for analyzing contract-related sales figures













Further Information

Table of Contents


Contract Management in SAP CRM And ERP

Sales representative wins opportunity

Sales representative creates contract with favorable conditions

Customer releases products against contract

at regular intervals

Customer agrees to continue buying

product

Customer negotiates terms and conditions for buying product

Customer accepts contract

6

5

4

3

2

1

8

7

Near contract completion date, sales representative contacts customer to

renew contract

Sales manager releases contract


Business Scenario (1/2)

Sales representative wins opportunity to sell customer a target value of

products over a certain period of time.

Customer negotiates terms and conditions of contract, including pricing

agreements, validity periods and notice of cancellation.

Sales representative creates a contract with details of the terms and

conditions.3

2

1


Business Scenario (2/2)

Sales manager checks the contract details as well as customer

standing, and approves the contract.

Over the following months, customer releases products against the

contract by ordering the relevant items.

Customer would like to continue buying the product and contract is

renewed.

Towards the end of the contract validity period, or when the target value of

the contract is nearing completion, the sales representative contacts the

customer.

6

5

4

7


SAP Offers Multiple Types of Contracts to

Address Diverse Business Requirements

SAP Sales Contract

Sales Agreement

(only CRM)

Quantity Contract(CRM and ERP)

Value Contract(CRM and ERP)

Value and Quantity Contract

(only CRM)

Master Contract

(only ERP)

Scheduling Agreements

(only ERP)


Contract Management With SAP CRM And ERP

CRM Sales

ContractCRM Release

Order

Order

Fulfillment

Contract Management with SAP CRM:

CRM ERP

ERP Sales

ContractERP Release

Order

Order

Fulfillment

Contract Management with SAP ERP:

Invoice

ERP Quantity

ContractERP Release

Order

Order

Fulfillment

ERP Contracts in CRM Web UI:

Invoice

CRM SFA

e.g.

Opportunity

CRM SFA

e.g.

Opportunity

Invoice


Sales

Agreement

Processing

Value / Quantity

Contract

Processing

Release Order

Processing

Follow-up

Activities

Processing

Contract

Analysis

■ Create sales

agreement as a

kind of template /

master contract

■ Negotiate

conditions

■ Define authorized

partners

■ Create customer

contract

■ Maintain

releasable

products

■ Maintain target

quantities and/or

values

■ Negotiate

conditions

■ Define authorized

partners

■ Create release

order

■ Copy data from

the sales

agreement /

contract

■ Monitor order

■ Fulfill order

(delivery,

transportation etc.)

■ Create invoice

■ Monitor contract

■ Create activities

■ Create follow-up

contract

■ Monitor top 5

contracts

■ Monitor contracts

per region

■ Track cancellation

rates

■ CRM interactive

reports

CRM Sales Contract Management –

Business Processes


Sales Contract Management in SAP CRM

Contract Capture and Maintenance

Contract SearchContract Analyses


Contract Management – Features

Agreements on pricing conditions, terms of delivery and payment

Releasable products

Target values and / or target quantities

Authorized partners

Validity dates and date rules

Cancellation dates and rules

Completion rules

Actions for tailored follow-up activities

Level of sales (release value / quantity, release orders etc.)

Contracts are long-term agreements with customers that allow them

to buy products at special conditions, such as lower prices or

favorable terms of delivery.













Further Information

Table of Contents


Sales Agreements

They act as master documents from which quantity or value contracts, or release orders, can

be created for the relevant customers.

Examples of sales agreements are franchise agreements or pricing and terms agreements.

Customer: ABC Group

Valid from: 01/01 to: 07/07

Product price

10% discount

5% discount

7% discount

Contract

Sold-to: Customer A

Valid from: 02/01 to: 06/06

Product: PC100

Price: 10% discount

Sales agreements are contractual documents with products,

terms, and conditions created for a customer or group of

customers.

© SAP 2008 / Page 19


Sales Agreements

Sales agreements should not be mistaken for sales contracts

You use sales agreements to offer better prices and conditions to a

particular customer group for a particular list of products.

Unlike sales contracts, sales agreements do not predefine target

quantities or target values the customer needs to commit to.

Sales agreements can be used to create sales contracts as follow-up

documents.

You can also create sales quotations or sales orders with reference to

a sales agreement.

The system then copies the agreed prices and terms from the sales

agreement into the follow-up document.

Sales agreements can be determined automatically during contract or

order entry.

Integration of sales agreements into the sales scenario:


Sales Agreements – Authorized Partners

Authorized partners to release products from a sales agreement are

determined using business partner types

Business partner types are maintained in Customizing

Business partners can be classified by the business partner type in the

control data of the general role

The business partner type can be used as a classification of customers by

their distribution channels, franchise or the type of business they conduct

In sales agreements, the allowed business partner types are assigned on

header level

Sold-To Party

Auth. Partner Sold-to Party

Partner Type Medium Retailer

Sales Agreement Header

Authorized partners for release orders:


Sales Agreements – Default Sales Agreement

Sales agreements are assigned automatically to all business partners of the chosen

business partner type

For each business partner, the default sales agreement can be selected in the sales data

of the sales area

Default Sales Agreement of the Business Partner













Further Information

Table of Contents


Value Contracts

For example, customer ABC agrees to buy at least $10,000 of products from the

high-tech category and therefore receives a discount for these products.

Item 10: Hightech Products

Target value 10.000 USD

- 10 % discount

Customer: ABC Inc.

Valid: 05/09 – 04/11

A value contract is an agreement that a customer will buy a certain

value of one or several products during a specified period.


Quantity Contracts

For example, customer ABC agrees to buy at least 1000 handheld devices and

therefore receives a discount on all devices.

Item 10: Handhelds

Target quantity 1000 pc

- $5 discount per pc

Customer: ABC Inc.

Valid: 05/09 – 04/11

A quantity contract is an agreement that a customer will buy a certain

quantity of one or several products during a specified period.













Further Information

Table of Contents


Expected Total Value

In value contracts, the information is taken from the target value.

In quantity contracts, the expected value is taken from pricing, or the user

can enter an expected value manually.

For example:

Target quantity = 1000 pc

Expected total value = $500,000,000

This information is important for reporting purposes, particularly expected sales revenue or sales pipeline

figures.

Both quantity and value contracts contain an expected total value


Releasable Products

You can:

Enter the products directly

Select a product category

Select a partner product range (PPR)

Use a combination of the above

Use configurable products

You can also enter configurable products.

In Customizing, you can define whether the system copies the

configuration when creating a contract release order, or creates

the configuration at runtime.

Products: S12, T14, T18

Product category: 1233455

Computer Accessories

Product: S12

Product category: 1233455

PPR : PPR-00653

At item level, you can define the products that a customer can release

from a a sales agreement or contract.


Authorized Partners

You can:

Create a list of individual authorized sold-to parties

Enter one or more group hierarchies

Use a combination of the above

Sold-to party ABC

Ship-to party ABC

Authorized parties A1

B2

C3

Manual list

Based on

group hierarchy

Sold-to party ABC

A1 B2 C3

Authorized partners are parties, other than the original sold-to party,

that may release products from a contract.


Authorized Partners

Contract

Customer: ABC Inc

Authorized SPs

A1

B2

C3

Release order 1

Sold-to party A1

Item: Value

M328 $7,000

Release order 2

Item: Value

M329 $4,000

Sold-to party B2

Sold-to party XY

Item: Value

M328 $2,000

No link to contract

because the partner

is not authorized.

For example, main sales office ABC signs a contract that is valid for all its

branches across the country. Each branch is also a sold-to party and is

authorized to release products from the contract. When branch B orders

products, the system checks that this sold-to party is authorized to release from

the contract.


Price Agreements

Header level:

The customer receives a general discount for all products released from this

contract:

Discount: - 3%

Item level:

The customer receives a special price for product M201:

Price for M201: $222

You can define price agreements, such as special product prices or

discounts, at either the header or the item level.

Note: Price agreements on header level are only available in sales contracts, not in sales

agreements


Price Agreements – Condition Groups

Contract type

Condition group

Condition group: 3400

Permitted condition types: 0K07

Item category

Condition group

Condition group: 1400

Permitted condition types: 0PR0

0K04

The condition group determines the conditions that can be used for

price agreements in the agreements and contracts.

(not available in sales agreements)


Dates

Dates and durations are essential information in sales agreements and contracts.

The most commonly used dates are:

Valid from - Contract start date

Valid to - Contract end date

Contract validity period or term

To help sales reps during contract creation, you can predefine date rules to

calculate the validity period. For example:

Contract term = months

Contract end date = Start date + term

Contract start: 05/01/10

Validity period: 12 months

Contract end: 04/30/11

You can maintain dates and validity periods on header and item

level of agreements and contracts.

Example:


Cancellation

Cancellation parties: Who has authorization to cancel?

Cancellation dates: How long should notice periods be?

Cancellation reasons: Why was the contract cancelled?

This is particularly interesting for reporting and analyses

This information is combined in a cancellation procedure that can be applied to

different contract and agreement types (on header level).

Cancellation party: Contractee

Cancellation dates

Notification of cancellation: 14 May 2009

Requested cancellation date: 31 May 2009

Actual cancellation date: 31 June 2009

Cancellation reason: Better offer

Example:

In a cancellation procedure, you can define when, why and by whom

an agreement or contract can be cancelled.


Actions

What?

Create “phone call” as follow-up activity

If?

If released value < 90% of target value

When?

One week before contract end date

Action

Schedule

condition

Start

condition

You want the sales rep to call the customer if the contract has not been released

completely.

This ensures that you retain an existing customer and maintain an excellent customer

relationship.

To help you to keep track of the contract, these actions can be automatically triggered

by the system once certain conditions are met.

By using actions, you can schedule and start predefined processes

and activities that need to take place during the contract term.

Example:


Action Profile

You can create a set of actions that are valid for:

A specific contract type

A particular item category

And that are triggered depending on certain conditions:

Scheduled for when a condition is met

Started at a particular date

Transaction type Item category

Action profile

Define actions

Assign to transaction type

Schedule conditions

Start conditions


Completion Rules

The following options are available:

1. Target value or quantity can be exceeded.

2. Target value or quantity cannot be exceeded.

3. Target value or quantity can only be exceeded once.

4. Split release item when target quantity exceeded.

You can use completion rules to define what should happen once

the customer has released the total target value or quantity from the

contract.

In case 1, 3, and 4, the system automatically sets the status of the contract item to

completed.













Further Information

Table of Contents


Releasing Products From Contracts

You create a sales

order either as a

Follow-up document

New sales order (with

contract

determination

activated)

System checks

Products

Validity period

Partners

Where there is a

match, the sales

order is linked to the

sales contract.

System updates

Released values

Released quantities

in relevant contract

Once the contract has been created and approved (status of items

changed to released), the customers can order (release) products.


Release Order as a Follow – Up Document

Customer: ABC, Inc.

Contract:

Create follow-updocument

Customer: ABC, Inc.

Standard order:

Select or enter the products you want to release.

If you know the contract number, you can create a release order as

a follow up document to the contract.

HT-1000 1000 pc

HT-1000 15 pc


Sales Order With Reference to a Contract

Choose a contract

If so, you assign the sales order to one of the contracts proposed by the

system.

You create a new sales order and the system checks whether valid

contracts for the customer and the products exist.

Customer: ABC, Inc.

Standard order:

HT-1010 15 pc


Contract Determination in Sales Orders

You have the following options:

No contract determination:

The system does not search for contracts when you create a sales order.

Contract determination; assign immediately if unique:

The system searches for valid contracts. If exactly one relevant contract exists, the

system immediately assigns it to the business transaction. Otherwise the user gets a

popup with all valid contracts from which he can choose the right one.

Contract determination; always with selection option:

The system searches for valid contracts. The user always gets a popup for selection.

Contract determination is always done on item level!

In Customizing you can define whether and how contract determination

should take place


Updating The Contract

Once you have saved the release order, the system updates the

released quantity and value and records it in the contract.

Header:

Item:


Release Order List

The release history assignment block on header and item level

displays all release orders for the contract or a particular item.













Further Information

Table of Contents


Search And List

Advanced search

Central search

Save search results as favorite contract lists

Add contracts to favorites

You can search agreements and contracts according to different

criteria using different searches.


Search Result Lists

Within the search result lists, you can

Personalize the displayed fields

Filter and sort the results

Display a chart / diagram

Export the results to Excel


Interactive Reporting For Sales Contracts

With SAP EhP1 for SAP CRM 7.0, you can do interactive reporting for

sales contracts. You can create, edit, and display reports in SAP CRM.


Contract Management Analytics

Open sales contracts

Rejected sales contracts

Completed sales contracts

Best-selling products in contracts

Sales contract pipeline

Open sales and contract volume

You can use SAP Business Information Warehouse to analyze

contract information, such as:













Further Information

Table of Contents


Special Features in ERP Contract Management

Master contracts (sales agreements are not available)

Two types of value contracts

Scheduling agreements

Different completion rules


SAP ERP Master Contracts

The master contract is a document under which you can group contracts as

lower level contracts.

It contains the general terms which apply for all the lower level contracts over a

specified period

The master contract contains header data only

Contract grouping: allows you to link several contracts to a master contract to

ensure consistency of data

Customer: Customer A

Sales Area: 3020/30/00

10% discount

Value Contract

Sold-to: Customer A


Product: PC100

Price: 10% discount

Master Contract GK

Quantity Contract

Sold-to: Customer A


Product: AX500

Price: 10% discount

Service Contract

Sold-to: Customer A


Product: Repair service

Price: 10% discount

Referencing Procedure


SAP ERP Value Contracts

Types of value contracts:

Contract type WK 1:

You can specify a product hierarchy or an assortment module for value

contracts

Contract type WK 2:

You can create contracts for one material (usually configurable) with this

type of value contract

A value contract can be billed directly by using a billing plan

An assortment module is a list of products that can be released from a

value contract


SAP ERP Scheduling Agreements

You fulfill a scheduling agreement by creating the deliveries in the schedule as they

become due.

You process deliveries for a scheduling agreement in exactly the same way as you

process a normal delivery.

After you have carried out the delivery, the system updates the Delivered quantity field in

the scheduling agreement item with the delivery quantity.

© SAP 2008 / Page 54

A customer scheduling agreement is an outline agreement with

the customer containing delivery quantities and dates. These are

then entered as schedule lines in a delivery schedule.

Customer: Customer A

Delivery

20.10. 100 pcScheduling Agreement

Schedule Lines:

20.10. 100 pc

20.11. 200 pc

20.12. 150 pc

Delivery

20.11. 200 pc

Delivery

20.12. 150 pc


ERP Quantity Contracts in CRM Web UI

You can create, change and display ERP quantity contracts in the CRM

WebClient UI

Only quantity contracts are available, not value contracts or master contracts

You can also create the ERP release orders in the CRM Web UI

There exists a contract determination in the Sales Order


Integration of Contracts Between

SAP ERP And SAP CRM

You can run an initial download to replicate all existing SAP ERP contracts to

SAP CRM.

New or changed contracts are then downloaded automatically from SAP ERP

to SAP CRM. They can be displayed in SAP CRM across all channels (you

cannot change them in SAP CRM).

You can then release products against them from the SAP CRM system.

Contracts are continually updated with the correct released quantities or values

in both systems.

You cannot download SAP CRM contracts to SAP ERP.

You can create and change SAP ERP quantity contracts directly in the CRM

Web UI.

Contracts have a long shelf life, so for customers who wish to use

SAP CRM as the leading system for contract management, it is

possible to download ERP contracts to the SAP CRM system.













Further Information

Table of Contents


Contract Management in Different

Sales Channels

You can work with sales contracts also in:

Internet sales

Collaborative contract negotiation enables you and your customer

to discuss the terms and conditions of the contract across the

Internet.

Mobile sales

You can view SAP CRM contracts from laptops and create sales

orders in Mobile Sales.

When the information is downloaded from Mobile Sales to the SAP

CRM system, the sales order is then linked to the relevant contract.


Products

M-328

M-326

M-325

Chooses

products from Web

catalog

Pricing

agreement

10% discount if

more than 1,000 M-

28 ordered by 12/04

Sales rep

reviews and

modifies

terms and

conditions

Contract

Customer: ABC

Products: M-325 to

M-328

Valid to: 12/04

Target qty: 1,000 pcs

Creates contract

inquiry with

required

conditions

Returns contract

quotation

to customerCustomer

accepts contract

Negotiation process can be

repeated as required until

both parties are satisfied.

Customer

releases

products

from Web

shop

Collaborative Contract Negotiation


Target Industries of Contract Management

Sales Contract Management is appropriate for all industries and

customers.

Contracts are also available in CRM Service and in the leasing and IPM

scenarios.

Oil and Gas

Automotive

Utilities


SAP Contract Management Value Proposition

Accelerate time-to-value of contracts

Reduce creation cycle times

Enable set-up of diverse contract types

Reduce corporate risk

Accurately estimate revenue from contracts

Gain visibility to contract compliance

Realize full value of contracts

Realize hard-won sales deals

Identify new business opportunities













Further Information

Table of Contents


Further Information – CRM

CRM Field Information

https://portal.wdf.sap.corp/go/crm-field

SAP CRM - Ramp-Up Knowledge Transfer (RKT)

http://service.sap.com/rkt-crm

SAP CRM – Demo Portal

http://crmportal.wdf.sap.corp:1080

SAP CRM – WiKi

https://wiki.wdf.sap.corp/display/SAPCRMHub/Home

SAP CRM - Help Portal

http://help.sap.com/crm

CRM @ BPX - Community Network

https://www.sdn.sap.com/irj/bpx/crm

SAP Public Web

http://www.sap.com/crm







http://crmportal.wdf.sap.corp:1080/

https://wiki.wdf.sap.corp/display/SAPCRMHub/Home



https://www.sdn.sap.com/irj/bpx/crm





Further Information – ERP

ERP Field Information

https://portal.wdf.sap.corp/go/fss-erp

SAP ERP - Ramp-Up Knowledge Transfer (RKT)

http://service.sap.com/rkt-erp

SAP ERP – WiKi

https://wiki.wdf.sap.corp/display/ERPCOM/Home

SAP ERP - Help Portal

http://help.sap.com/erp

ERP @ BPX - Community Network

https://www.sdn.sap.com/irj/bpx/erp

SAP Public Web

http://www.sap.com/erp

SAP Service Marketplace for ERP EhPs

http://service.sap.com/erp-ehp







https://wiki.wdf.sap.corp/display/ERPCOM/Home

http://help.sap.com/erp

https://www.sdn.sap.com/irj/bpx/erp










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