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In trade promotion planning for smaller direct accounts, brand owners such as consumer goods companies tend to plan at a higher level than where they actually execute the trade promotions, for efficiency reasons. This would typically include both the account and the product dimension.

However, the downstream processes still have to operate at the typical granular level of account and product: Financial liabilities in the form of accruals for rebates must be incurred at account level, and payments for promotional performance must also be made to the individual account, subordinated to the planning level. To support product-level profitability analysis, accruals and payment amounts must be prorated on the products that are subordinated to the product planning level.

By using SAP ERP enhanced rebates processing with external accruals in their SAP CRM trade promotions, brand owners can support these requirements: SAP ERP rebate agreements can accommodate multiple rebate recipients, thus enabling brand owners to build accruals and to settle rebates at product and account level.

In SAP CRM 2007, SAP CRM trade promotion management was enhanced with SAP CRM funds and claims management for budget control. However, the new business objects funds and claims could not accommodate the results of SAP ERP enhanced rebate processing, which meant that brand owners, in their SAP CRM trade promotions, only had the following two options:

• Use SAP ERP (standard or enhanced) rebate processing without using SAP CRM funds and claims management. Order management, accruals calculation, rebate settlement, and balancing would all run in SAP ERP. Budget control was carried out in SAP

NetWeaver BW. This meant that brand owners could not carry out budget control in real-time and could not match an invoice, sent by an account for promotional performance, to a trade promotion.

• Use SAP ERP (standard or enhanced) rebate processing in combination with SAP CRM funds and claims management. Order management would run in SAP ERP, while accruals would be built in SAP CRM funds management, and rebate settlement and balancing would take place in SAP CRM claims management. SAP ERP rebate

agreements would not be used for calculating accruals. This meant that, with planning at an aggregated level, brand owners could not build accruals and settle rebates at product level and account level, but only at the aggregated planning level.

As of SAP enhancement package 1 for SAP CRM 7.0, business function Claims and Funds Management

This allows brand owners to build accruals and to settle rebates at product level and account level, while reserving and tracking the budget set up for promotional rebates inside SAP CRM.

(CRM_CF_1), brand owners can use SAP ERP enhanced rebate processing while building accruals in SAP ERP and running a full integration with budget control using SAP CRM funds and claims management. Accruals are built in SAP ERP rebate agreements based on the sales volume and are subsequently transferred into SAP CRM funds management.

Settlement and balancing take place in SAP CRM claims management but the claim settlement documents are passed on right away to SAP ERP for further processing.

A typical process may now run as follows:

15. A brand owner creates and plans a trade promotion with variable rebates in SAP CRM at a fairly high level of the account hierarchy, covering a large number of individual stores or small franchises. From a product dimension, he or she plans the promotion at product group or product category level. Pricing conditions are typically generated at account hierarchy level and, for example, product group level.

The brand owner assigns a funds plan with budgeted funds to the trade promotion. When he or she approves and releases the trade promotion, the SAP CRM system generates

pricing conditions and rebate conditions, and transfers them to SAP ERP. From the rebate conditions, it generates rebate agreements with reference to the trade promotion and transfers them to SAP ERP as well. In addition, it generates fund usages, either at promotion planning level (one fund usage per trade spend with one fund usage item per product dimension) or, with trade promotions set up for individual products, at an aggregated level. These fund usages consume the funds that are assigned to the funds plan of the trade promotion.

16. The stores or franchises start ordering promotional goods from the brand owner. Goods are shipped and invoiced. From the invoices, SAP ERP builds accruals on the invoiced promotional rebates at product level and account level. SAP ERP also updates the rebate statistics at product level and account level with the accrued amounts, the sales

quantities, and the sales volume. The brand owner then uploads these values back to SAP CRM.

17. The rebate agreements are settled through one of the following:

- Invoice claims: The store or franchise sends in an invoice for promotional performance. The brand owner creates an invoice claim, validates the invoiced amount against the amount accrued in SAP ERP and/or the maximum payable amount determined in SAP ERP rebate processing, and settles the claim.

The brand owner may also choose to pay out the accrued amounts or the amounts of simulated final settlements periodically to the individual stores or franchises.

- Deduction claims: The store or franchise deducts an amount from an invoice received for ordering promotional goods. This is detected automatically in SAP ERP dispute management, where the system creates a dispute case. The brand owner uploads the dispute case to SAP CRM, where it is represented as a claim

submission document. From the claim submission document, he or she creates a deduction claim, checks the deducted amount against the accrued amounts in SAP ERP, and approves the deduction or initiates a chargeback process. This closes the dispute case in SAP ERP.

The brand owner can settle individual invoices sent by the stores or franchises, or a number of invoices collectively, as they come in. With collective claim processing, he or she can add several validated accounts to a claim. Validated accounts are accounts that belong to the account hierarchy node or target group of the trade promotion and for which sales volume exists for the corresponding trade promotion. The payment amount can be capped to the maximum payable amount set in SAP ERP.

The amount accrued in SAP ERP for each account is taken as reference data for the claims settlement. To support product-level profitability accounting, the total settlement amount for each account is then broken down to products, again using the accrued amount as reference data for the split.

In all cases, the brand owner creates claim settlement documents in SAP CRM but they are transferred automatically to SAP ERP right away for further processing. All

subsequent processes, such as account determination, taxation, or printing are executed in the SD billing documents that the system generates in SAP ERP from the SAP CRM claim settlement documents. SAP CRM claim settlement documents are no longer transferred directly into SAP ERP financial accounting and controlling. For this scenario, integration into SD billing in SAP ERP is mandatory (see release note Claim Settlement Integration into SAP ERP Billing (SD-BIL) (New)

18. Balancing reverses all open accruals related to a specific trade promotion and trade spend as soon as no further payments are expected. Reserved funds that were not used are made available for planning again.

).

Effects on System Administration

If you want to run this process, you must also activate the following business functions in SAP ERP:

• ERP, Integration with Claims and Funds Management (ERP_CF_INTEGRATION_1)

• FSCM Functions 3 Effects on Customizing

(FIN_FSCM_CCD_3)

You can find a list of all customizing activities necessary to run this process in the organizational activity ERP Enhanced Rebate Processing in Funds and Claims.