INDUSTRIES

Industrial Machinery & Equipment

Industrial manufacturers are moving beyond one-time equipment sales. Machines, tools, and production systems are increasingly offered with long-term service agreements, spare parts, software, and financing – or as fleet management and equipment-as-a-service models with monthly fees or usage-based pricing.

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From Selling Machines to Selling Outcomes

These business models create recurring revenue and closer customer relationships. They also create accounting complexity across revenue recognition and leasing.

Typical Challenges

• Bundled contracts: Equipment, installation, commissioning, service, and spare parts in one agreement require allocation across performance obligations.

• Equipment-as-a-service and fleet models: Monthly fees covering equipment, service, and replacement may contain lease and non-lease components.

• Lessor accounting: Leasing equipment to customers requires classification as operating or finance lease and, for finance leases, interest and principal schedules.

• Long-term projects: Customized machines and production lines may require revenue recognition over time and milestone billing.

• Contract changes: Fleet extensions, equipment swaps, early terminations, and term changes.

• Global operations: Multiple entities, currencies, and accounting principles.

Typical Scenarios

• Sale of a machine with installation and a multi-year service contract

• Fleet management with a monthly fee for tools, service, and replacement

• Operating or finance lease of equipment with bundled maintenance

• Customized production systems with milestone billing and over-time revenue

• Usage-based pricing for connected equipment (e.g., per operating hour)

• Extension or replacement of fleet equipment during the contract term

Typical SAP Products and Modules

• SAP Revenue Accounting and Reporting (RAR): allocation for bundled contracts; lessor accounting for equipment and fleet leases

• SAP SD: sales orders, billing plans, deliveries, and billing

• SAP Service Management: service contracts, maintenance, and field service

• SAP BRIM: usage-based and recurring billing for equipment-as-a-service models

• SAP S/4HANA Finance: general ledger, asset accounting, and parallel accounting

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