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Percentage-of-completion method sales may exceed order amount

Y_Iwasawa
Participant

Dear community,

We want to use percentage-of-completion method in customer projects.
I am trying the recognition key SPFC.
However, in that case, if the actual costs exceed the planned costs, the progress-based sales exceed the sales order amount.
I think this revenue recognition is incorrect.

case)
sales order:1000
planned cost:500
actual cost:600
percentage-of-completion:120%
progress-based sales:1000*1.2=1200

Sales order is fixed and there is no hope for 1200.
I want the limit of percentage-of-completion to be 100%.
Would you please advise me about something?

Regards,
Yoshikazu Iwasawa

Accepted Solutions (1)

Accepted Solutions (1)

ana_goncalves
Product and Topic Expert
Product and Topic Expert
0 Kudos

Hi iwasawa-yoshikazu,

The behavior you're describing is what you should expect from recognition key SPFC. As this calculation method doesn't seem to fit your requirement, have you tried to look into the other recognition keys? The following keys are also available for Fixed Price (see configuration step 'Derivation of Recognition Key for Project-Based Services'):

- SPFCCM (SP: Fix Price Completed Contract Method)

- SPFCQ (SP: Fix Price Cost based POC by QTY)

- SPFCR (SP: Fix Price Revenue based POC)

- SPFCTR (SP: Fix Price Cost based POC Target Rev)

- SPNFC (SP: Fix Price POC No Rev Rec)

For additional information on revenue recognition methods for Fixed Price, please find the event-based revenue recognition cookbook on SAP Learning Hub: https://jam2.sapjam.com/groups/5gwxDPWQPRtOvMO8Xnd32Q/documents/ZmWxs3ehEcZhqZTRovBEjy (valid Learning Hub license required)

Kind regards,

Ana

Y_Iwasawa
Participant
0 Kudos

Thank you for your explanation.

I have checked the cookbook.

But, to calculate progress-based sales by the cost to cost method, I seem to need to use SPFC.

I understood event-based revenue recognition as preliminary, temporary revenue recognition. It is adjusted by period-end revenue recognition.

If so, it is possible that more than 100% POC allowed.

Answers (2)

Answers (2)

former_member825816
Discoverer
0 Kudos

Hi Ana,
Is the latest cookbook is v1.3? or there is any other cookbook for Professional services? thx

former_member825816
Discoverer
0 Kudos

Hi Yoshikazu,

Further to your last note yes the period end rev rec does the adjustment but did you manage to handle the mid period ebrr triggered rev rec to be prevented to not go over 100%? if so, how?