In a recent Blog post you learned about “Resource-Related Intercompany Billing” as a way to resolve cross company cost postings on Service Orders. That scenario addresses a use case where a technician from another Company Code posts time (and potentially expenses) on a Service Order. This may happen for example if the first company (left side) is not able to provide enough capacity, or does not have the necessary skill for certain tasks within the Service, but the overall coordination and ownership remains in Company 1.
Of course the cost re-allocation process is limited to a very specific use case and does not provide the “executing” Company with the means to properly plan and report on the Service provided. It simply sends the “warm bodies” to perform the work and offload their cost on Company 1’s Service Order.
To address a more general requirement we introduced the “Intercompany Execution” process in 2023. In this scenario, we enable the full delegation of a Service to another company code. i.e. if a customer facing entity (for example a Sales Subsidiary) is not able to fulfill a certain Service, it can be sent on to another company code and will result in a completely autonomous Service Order for the planning and execution of the requested Service.
This can be either be a “simple” Service Order:
Or, an “Advanced Execution” Order, using a Maintenance Order for the actual execution of the work.
This (second) order is then fully in the ownership of the execution entity to plan and execute on it. Items can be changed, added, again sent on to another company code etc.
The way we achieve this in the system is depicted in the diagram below.
As you can see, a Fix Price Item is created on the customer facing side. This item is a special Item Category that will create a corresponding Intercompany Service Order in an Execution Company specified via a “Executing Sales Org” field. This Intercompany Order can then be used for planning and execution of the Service, i.e. any changes can occur as long as the Intercompany reference is retained on all the related items. Once the Service is performed and subsequently billed, the resulting Invoice will be identified as “intercompany” and pass the account assignment of the original Fix Price Item to Accounts Payable on the “Commercial” side. This way all the cost flow back to the customer facing Order Item!
Lets go through step by step.
First, you need to define the relationship between sending and receiving Sales Organizations for each originating Item Category. The relationships defined here will then restrict the choice of recipients allowed when “sending” a Service Item.
In the Service Order itself you will find two new pre-defined Item Categories to start an intercompany process
- SRVI with a fixed-price (service order-related billing) and
- SVAI which allows you to use an ad-hoc billing plan.
When creating such an item, a new assignment block will available to maintain and view the intercompany details. Initially, before we can even release the item, a receiving sales Organization needs to be selected (from the ones defined in the IMG activity above).
Once the Intercompany Order is created, details will be available here as well.
On the header of the Intercompany Order the Customer is the Intercompany Customer for the ordering Company code.
The Item is copied with the original material and item category determination is performed in the Intercompany Order again. If there is configuration information existing on the item it will also be copied to the Intercompany Order and can be continued to be detailed out here. Please note that the material can be changed and additional items added to the order, as long as they carry the reference to the original item.
If more than one item from the original Service Order is to be sent to the same receiving sales org, they will be added to the same Intercompany Order, to prevent the creation of a flurry of individual orders on the executing side.
If a receiving Organization needs to once again distribute all or some of the Order to yet another Company, this is fully supported. Again only the reference to the original item is needed.
Revenue recognition is completely independent in the original and Intercompany Orders.
On the Customer-facing order (which is as we have learned currently a Fix Price order only!) only Completed Contract is currently supported as revenue recognition method.
On the Executing Order all billing types and supported revenue recognition methods are possible:
Finally, once the executing Company triggers the billing, the Company Code customer on the Intercompany Order is recognized by the system and the costs will be account assigned back to the original item on the Customer-facing Order. (i.e. the revenue of the executing company is equivalent to the cost on the original item)
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