Real Estate: Service Charge Settlement

Service charge settlement, or charge-back provides functions for settling all services charges for real estate contracts and rental objects that have already been entered in financial and cost controlling. The process is used to distribute apportionable costs to tenants for a particular settlement period, using individual control mechanisms:

1. Categorizing of service charges incurred
2. Time-dependent apportioning of costs based on flexible measurements (fixed values, consumption, percentage share etc) or based on conditions in the contract
3. Time-dependent settlement participation of objects with the ability to exclude individual objects when assigning higher-level objects
4. Clearing of costs that are not apportionable to the tenant (entering a percentage landlord share, or a definition of maximum costs, or settlement of non-apportionable service charges)
5. Apportionment of vacancy costs

This Business Scenario Map shows the interaction between the relevant business partners, and describes the service charge settlement process.

Before settlement can be carried out, a number of parameters need to be maintained and contracts with tenants and service providers are negotiated. Contracts for building services are negotiated with service providers, who provide janitorial, cleaning, gardening, maintenance and repair services. Lease contracts are concluded with tenants occupying space in the buildings. Maintaining all contractual information gives the real estate manager a complete overview of his business partners, real estate portfolio as well as rental and facility management processes. All information is stored centrally, thus reducing administration costs and achieving operational efficiency.

Control mechanisms for the calculation and apportionment of settlement results are defined in a "settlement unit". This determines which costs the tenant participates in, how they are apportioned (measurement), when settlement is carried out and how often it takes place.

During the settlement period the various services and operations are carried out for the buildings. The real estate manager receives the costs for services from the service provider. These costs are entered in the form of invoices in Financials. Seamless integration to Financials enables the invoices to be assigned directly to the relevant settlement units during the posting. Other costs that are not necessarily generated by a service, such as insurance and tax, can also be calculated, apportioned and settled to tenants using the service charge settlement function.

Service charge settlement determines the total cost for the settlement period for each settlement unit. These costs are apportioned according to the control mechanisms, pre-defined in the contracts and rental objects, during settlement. The costs are posted to the tenant accounts as customer receivables. During the settlement period, the tenant may make advance payments towards operating costs. Any advance payments made are taken into consideration when calculating settlement results. When settlement results have been calculated, new advance payments/flat rates based on the actual costs in the settlement result are calculated. Correspondence is generated automatically, informing the tenants of the settlement results and of changes in condition amounts for the following settlement period.

Outstanding payments triggered by the service charge settlement are paid.

Service charge settlement benefits include an automatic cost feedback loop to ensure efficient occupancy, maximizing the use and minimizing the cost of a major organizational cost. Such an integrated and automated process leads to accurate cost allocation and a complete overview of costs and revenues.

SAP Real Estate Management provides fully automated, accurate and transparent cost charge-back processes to ensure efficient service charge settlement processing.