SAP Financial Supply Chain Management, ERP

Revenue Recognition for Project Sales(Time and Material) in SAP Business ByDesign

In this blog post I have explained how the Revenue is Recognized for the Revenue type ‘Project Sales(Time and Material)’ when the accrual method is “Recognize at the point of delivery”.

Project sales include the sale of project-based services and Material but it does not includes the sale of standardized material and services.


Navigate to Business Configuration > Choose the First Implementation > Click on Edit Project Scope > Under third Step Scoping Make sure that Sell Project-Based Products and Services is in Scope


Under Fourth step Questions > Enable the question “Do you want to use Solution-Supported Revenue Recognition for sales orders?”.

Figure2:Enable the question

Navigate to Business Configuration > Select the First Implementation > Click on Open Activity list > Search for Accrual Method Determination Activity > Assign the accrual method for the Revenue type Project sales(time and Material) .

Figure3:Accrual method Determination

Process flow

Navigate to Sales order Workcenter > Create a new sales order by entering all the mandatory details . Under items tab add the Project Based Material and Services and click on Save.

Figure4:Create Sales Order

Create a Project from the sales order and ‘Create Project’ field will be enabled only if we add the Project-Based Material and Services in the sales order.

Figure5:Create Project

Enter all the mandatory details and click on ok

Figure6:Enter mandatory details

Project is Created and it is linked to the Sales Order

Figure7:Project is linked to the sales order

Release the Sales Order

Figure8:Release the sales order

Navigate to Project Management workcenter > Open the Created Project > Add the team member and Edit Period Plans for the Service under Work tab.

Figure9:Added team member

Enabled ‘From Stock’ indicator as I’m going to consume it from own stock for the Material under Materials tab.

Figure10:Enabled From Stock indicator

Released the project task

Figure11: Release the Project Task

Created project stock order for the Material under Products tab.

Figure12:Create Project Stock Order

Choose the Ship From Location and click on finish

Figure13:Choose ship from location

Navigate to Outbound Logistics control Workcenter > Search for Created Project Stock Order > Release the Project Stock Order demand

Figure14:Release the Project Stock order Demand

Navigate to Outbound Logistics Workcenter > Delivery Proposal > Search for Project Stock Order > Allocated Material to the Project by clicking on Allocate button.

Figure15: Allocate material to the project

Choose the Source Logistics area and click on Save

Figure16:Choose the Source Logistics area

Navigate to the Project Management Workcenter > Open the created Project >Click on Consume in order to Consume the material to the project

Figure17: Consume the material to the Project

By logging into the Employee user, Edit and release the timesheet for the employee

Figure18:Edit and release the timesheet for the employee

Actual quantity for the material and Service is updated in the Project.

Figure19:Actual quantity for the Material and Service

We can see the Journal entry posted for Internal Service Confirmation and Goods Issue for consumption where Cost of sales of Material and Services are posted to the Deferred Costs account. This account is a balance sheet account, which means that the costs are not yet recognized.

Figure20:Goods issue for consumption
Figure21:Internal Service Confirmation

Navigate to Cost and Revenue Work Center > Search for Sales Order > Execute Revenue Recognition for sales order before doing Customer Invoice and click on ok

Figure22:Execute Revenue Recognition

Enter all the Mandatory Details and click on Ok

Figure23:Enter the Mandatory details

Here we can see the Journal entry, the run posts recognized revenue from the deferred net value account to the sales revenue account and deferred cost of sales account to the corresponding expense accounts.

Figure24:Journal entry for Revenue Recognition

Navigate to Project Management Work Center > Search for Created Project > Create a project invoice request

Figure25:Create Project Invoice request

Propose invoice items using sales order items Under third step, then it will propose the line items which are associated in the sales order.

Figure26:View of Project Invoice Request

Check the project invoice request for consistency, Finish and release it

Figure27:Release Project Invoice Request

Once we release the Project Invoice request, the Customer Invoice Request is automatically created under Invoice Request view of Customer Invoicing workcenter and then Release the Customer Invoice.

Figure28:Release Customer Invoice

Journal entry for customer invoice after revenue recognition ( Service) is posted.

Figure29:Journal entry for customer invoice

Journal entry for customer invoice after revenue recognition (material) is posted.

Figure30:Journal entry for customer invoice

Navigate to Cost and Revenue Workcenter > Sales Document items > Search for Sales Order > Execute the Revenue Recognition after Customer Invoice and click on ok

Figure31:Execute Revenue Recognition

Journal entry for Revenue Recognition after Customer Invoice where “Deferred Revenue” and “Unbilled Receivables” will be cleared when Revenue Recognition is performed subsequently

Figure32:Journal entry for Revenue Recognition