Sales Commission Calculation & Settlement - Handling Through Order Processing PDF

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.
SAP COMMUNITY NETWORK

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Sales Commission Calculation & Settlement Handling through Order Processing
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

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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 reps 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.

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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
th
combination of above percentage and product hierarchy up to 4 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.

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Process Flow
The following diagram shows the commission process

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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)
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.

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Activities (Transactions)
Activity
Description
Transactio
n Code
Role
Create the Commission

Agreement
Create the commission agreement

(as a rebate agreement)
VBO1
Customer Service
dept.
Enter create sales order:

initial screen
When an order is received, the

customer service creates the
order.
VA01
Customer service
dept.
Select order type
Depending on the scenario, the

correct order type has to be
selected via the match code
VA01
Customer service
dept.
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.
VA01
Customer service
dept.
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
VA01
Customer Service
dept.
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
VA01
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
VA01
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 dept.
Create the Shipment
Create the shipment for the

delivery
VT01N
Shipping and
Create the shipment costing
Do the shipment costing for the

shipment done
VI01
Shipping and
Create the invoice
In this activity create the invoice

document
VF01
Billing dept.
Invoice settlement
Here when customer payment is

received, the invoice account
document is cleared against that
payment
FB32
Billing dept.
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 dept.

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Reports
Description
Transaction Code
Role
List of Rebate Agreement
VB(8
Customer service
employee
BI reports for planned commission

payments to sales representative
BI
Customer service
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

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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.

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Settlement Handling through

SAP COMMUNITY NETWORK

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