SAP Universal Revenue Management (SAP Universal RevRec) is a cutting-edge solution engineered to elevate and simplify the complexities of revenue recognition. It marks a substantial leap forward that is built on earlier revenue management systems, such as SAP Revenue Accounting and Reporting (RAR) and SAP Automated Revenue Management (ARM).
With a 28 year track record as one of SAP's longest serving partners and the recognized experts in SAP revenue compliance and SAP BRIM/OTC offerings, the Bramasol team has deep experience tailoring SAP solutions to specific client requirements. By leveraging our leadership in deploying more RAR implementations than any other partner, Bramasol is also at the forefront of helping refine and deploy these new Universal RevRec capabilities.
Important benefits of SAP Universal RevRec include:
- Streamlined Processes: SAP Universal RevRec simplifies and streamlines revenue recognition processes, making it easier for companies to manage and report revenue accurately.
- Increased Accuracy: By automating calculations and providing advanced reporting tools, it improves the accuracy and reliability of revenue recognition.
- Enhanced Compliance: Facilitates adherence to accounting standards and regulations, reducing the risk of non-compliance and associated penalties.
- Better Insights: Provides deeper insights into revenue metrics and performance, supporting better decision-making and strategic planning.
SAP Universal RevRec leverages the learnings from RAR implementations along with capabilities of Contract-Based Revenue Recognition (CBRR) and Event-Based Revenue Recognition (EBRR), in combination with SAP Universal Parallel Accounting (UPA) and SAP S/4HANA Cloud Public Edition.
Let's look closer at each of these critical elements that make up SAP Universal RevRec.
Contract-Based Revenue Recognition (CBRR)
Contract-Based Revenue Recognition (CBRR) unifies all contract data in one place, thus ensuring that the contract terms and conditions used for revenue recognition are captured correctly. Agreements are analyzed to detect the performance obligations POBs and decide on the revenue recognition patterns. CBRR is based on optimized features for revenue accounting inbound processing and contract management and enables assigning the sales price to the relevant output of the obligations in the underlying contract. This helps in the correct recognition of revenue, using the relative standalone selling prices (SSP) in the reporting units.
Event-Based Revenue Recognition (EBRR)
With Event-Based RevRec (EBRR), costs and revenues are recognized as they occur. Cost postings are continuously matched to revenues and immediately reported as expenses, while revenues are posted to an income statement account. Recognition and adjustment postings are generated simultaneously with the transactions. The matching principle is supported inherently and therefore no periodic batch jobs are needed for reconciliation. Event-based revenue recognition is fully integrated with the General Ledger and the recognition data is stored in the same location as cost and revenue data. Thanks to this integration, companies are freed from the restrictions imposed by periodic processes. Regardless of which day of the month it is, the cost and revenue information available for analysis is always reconciled and up-to-the-minute.
Universal Parallel Accounting (UPA)
Universal Parallel Accounting (UPA) provides a harmonized architecture for ledgers and currencies, which enables a foundation for not only calculating and posting values per ledger and currency along end-to-end processes, but also provides the baseline for future innovations in finance. With Universal Parallel Accounting, you can benefit from the flexibility of the parallel ledgers not only in General Ledger Accounting but also in various subledgers. You can post different data for each ledger and therefore also display or select data from different ledgers in many Finance apps.
SAP S/4HANA Cloud Public Edition
SAP Cloud Public Edition is the cornerstone of enabling Universal RevRec. It's crucial to understand that this platform transcends merely migrating functionalities to the cloud. It revolutionizes how businesses handle revenue recognition. Leveraging the cloud's power, SAP Cloud Public Edition delivers unmatched scalability, flexibility, and innovation, allowing businesses to swiftly adapt to evolving market conditions and regulatory demands. Furthermore, it integrates well-defined, end-to-end scenarios, particularly for Universal Revenue Recognition. These scenarios are designed to tackle complex revenue processes and ensure seamless integration across various business functions. This comprehensive approach not only streamlines the adoption of revenue recognition standards but also enhances the efficiency and precision of financial reporting.
In essence, SAP Cloud Public Edition serves as the backbone of Universal RevRec, unifying data from diverse sources and ensuring that all contract terms and conditions are accurately captured for precise revenue recognition. By offering a strong, cloud-based foundation, it enables organizations to achieve higher transparency, compliance, and strategic insights into their revenue streams.
Use Cases
Universal RevRec brings together the complete end-to-end process for sales, services and projects as fully integrated scenarios, while also addressing their specific requirements. For areas such as sell from stock, services, projects, and subscriptions, Universal RevRec delivers comprehensive functionality in SAP Cloud Public Edition. Since these scenarios are usually more cost and profitability driven, tight integration is a key factor for operational and compliance success.
- Sell From Stock -A typical scenario in the "sell from stock" use case involves varying material prices based on different accounting principles, often stemming from the application of distinct depreciation rules across various stock categories. In EBRR, the revenue recognition rules are organized into revenue recognition keys, which define data sources, methods for recognizing revenue and costs, and the posting rules for revenue/cost and accrued/deferred revenue on the balance sheet.
- Services - For service documents, such as service contracts and service orders with customers, EBRR captures relevant data at the outset.. Upon the release of a service contract, revenue is calculated and posted according to the billing plan tied to the contract items. This revenue is then evenly distributed on a monthly basis over the billing plan's duration and recognized during the period-end run. Service billing activities automatically trigger revenue adjustments and reallocate billed revenue to deferred revenue accounts. Additionally, costs related to service contracts are captured via the associated service orders, with flexibility for manual adjustments and accruals of both revenue and costs.
- Projects - For EBRR with project system, clients typically use either a cost-based or revenue-based percentage-of-completion (PoC) method. In a cost-based POC the progress is measured according to the actual cost versus planned cost. Different material prices or activity rates may lead to different actual costs in the relevant ledgers. To identify fulfillment progress for a given project, EBRR applies the PoC of the leading ledger. For a revenue-based PoC, the PoC is calculated based on the actual revenue versus the planned revenue. This PoC is then applied to the planned cost. Since the planned cost is only captured in the leading ledger, EBRR-enabled Universal RevRec considers different costs in other ledgers to calculate a relative actual cost (RAC) ratio based on the actual cost in the respective ledger, versus actual cost in the leading ledger.
- Subscriptions - Another use-case scenario that is gaining momentum involves subscription-based offerings, such as are on the rise with the advent of the Digital Solutions Economy. Universal RevRec streamlines compliance for bundled offerings, such as production equipment sales that include a subscription for consumables or usage-based billing. The subscription is mapped into a provider contract in CBRR and the billing forecast into a billing plan for the scheduled billings from Subscription Billing. The Bramasol team has recently elevated this concept by developing a SAP Partner Packaged Solution. This innovative offering is designed to deliver a turnkey, rapid-deployment, end-to-end methodology for implementing subscriptions and bundled offerings, ensuring seamless revenue compliance within SAP S/4HANA Cloud.
Summary
In effect, by combining EBRR, CBRR, UPA and Public Cloud capabilities, Universal RevRec unifies all the contract data in one place, thus ensuring that the contract terms and conditions used towards the revenue recognition are captured correctly. Key operational benefits include:
- Unified Platform: - SAP Universal RevRec integrates seamlessly with SAP S/4HANA and other SAP applications, providing a unified platform for revenue recognition across different business processes and systems. It offers an end-to-end solution that covers the entire revenue management lifecycle, from contract inception to revenue reporting.
- Enhanced Flexibility - Supports complex and dynamic revenue recognition scenarios, including multi-element arrangements, variable consideration, and performance obligations. and allows for customizable revenue recognition rules and logic, catering to specific business needs and industry requirements.
- Improved Compliance - Ensures compliance with ASC 606, IFRS 15, and other relevant accounting standards through a robust set of predefined rules and configurable options. Provides real-time updates and adjustments to revenue recognition, facilitating ongoing compliance with changing regulations.
- Advanced Reporting and Analytics: - Delivers advanced reporting and analytics capabilities, offering detailed insights into revenue streams, performance metrics, and compliance status, plus features integrated dashboards and visualization tools for real-time monitoring and analysis.
- Automation and Efficiency - Automates complex revenue recognition processes, reducing manual intervention and improving overall efficiency. Minimizes errors and discrepancies through automated calculations and standardized procedures.
- Scalability and Adaptability - Designed to scale with growing business needs and adapt to evolving revenue recognition requirements. Continuously updated to incorporate new features, enhancements, and regulatory changes.
In summary, SAP Universal Revenue Management represents a significant advancement in revenue recognition solutions, offering enhanced flexibility, improved compliance, and greater efficiency. It builds on the capabilities of previous solutions like SAP RAR and ARM, providing a more comprehensive and integrated approach to managing revenue recognition.
For more information:
- Register for September 26th webinar on SAP Universal RevRec
- Download this detailed eBook SAP Universal RevRec - The Next Leap in Compliance Evolution