The blog will give you a crisp and clear understanding of the Milestone billing.
Milestone billing means distributing the total amount to be billed over multiple billing dates in the billing plan. This approach is particularly beneficial for industries such as engineering, construction & professional services where projects are linked to project completion phases.
Business Example:
Engineering firm such as Windmill Manufacturing company uses milestone billing as follow,
- Contract Phase – 30%
- Design Phase – 40%
- Assembly Phase – 20%
- Final Invoice Delivery Phase -10 %
At each milestone Billing date Invoice triggers to the Client.
Below are the Configuration steps for Milestone Billing in SAP S/4HANA:
1. We need to Define Billing Plan Type in SPRO/ Transaction Code: OVBO.
2. Define Date Description in SPRO/ Transaction code: OVB0: As per Business requirement create Date description such as- Contract phase, Design phase, Assembly phase, Final Invoice phase.
3. Define and Assign Date Categories: Billing rule- (Depends on Business requirement of percentage Basis or Value base etc.)
4. Assign Date category for Billing Plan.
5. Maintain Date proposals for billing plan type: Maintaining the Billing Date, Billing Rule, Date Description and Billing Type Information will be repeated automatically in upcoming milestone orders created in the system (As per client requirement).
6. Assign Billing plan Types to Sales Document Types in SPRO/ Transaction Code: VOFA.
7. Assign Billing Plan type to Item Categories.
8. In some Business Cases Milestone comes from PS Module:
- Create Milestone Billing in Project Systems (PS) Module Use Transaction Code: CJ20N (Project Builder)
- Define milestone under project activities and specify milestone dates.
- Link each milestone to a billing plan date.
- Once the Milestone is confirmed by the Project system team, the billing block is removed and billing can be done accordingly.
9. Create Sales order: Go to Billing plan tab in Item level & adjust the billing dates and amounts according to milestone and project progress.
10. Now system is ready to create Invoices based on Milestone.
Note: To Add or Remove Billing Plan Tab in Sales order – Header level Screen > Go to Transaction code VOV8 Select sales document type in Billing Tab > Billing Plan type maintain as Business requirements.
Advantages of Milestone billing to clients:
Milestone billing gives clients the option to change project focuses while reducing the financial risk by connecting payments to finished milestones. It helps businesses keep high quality, Standard and builds a trust in client. Linking payments to the project phase clears the result encourages trust and openness, Clients can monitor the progress and make sure payments match the billing value delivered. This approach also improves project management by setting clear targets and timelines, which helps stay on schedule and budget while matching cash flow Alignment with project advancement.
Upgrade in S/4HANA compared to ECC:
1. User Interface: Fiori application provides modern & easy to use interface, easy to track and manage.
2. Milestone Achievement rates are progressed due to embedded analytical dashboards and by allowing real- time Tracking.
3. Integration with SAP Project Systems (PS) updates billing milestones by project status, making it more accurate and cutting down on manual tasks.
4. The integration of real-time connectivity with the Universal Journal facilitates instantaneous modifications to milestone billing financial documentation, thereby obviating the necessity for routine verifications.
5. The system provides quicker processing of big billing data and allows for real-time checks for billing results.
Conclusion: Milestone billing is a useful way to send invoices that brings several advantages to companies. These advantages include better cash flow control, improved project handling, and stronger relationships with clients. By linking payments to certain project milestones, companies can maintain financial steadiness, lower financial risk, and encourage quality work. Using milestone billing helps companies succeed and gain both profit and customer satisfaction.
