Introduction
Servicetyps belongs to the cost centre accounting and represents a reference value that gives a qualitative and technical description of a product activity. In foreknown the servicetyps give specific descriptions of a service and the related costs per unit, such as hour or day.
Why do I need service types?
Using servicetyps is a major requirement to stay legally competent for service companies in a wide range of fields.
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Offer and Order creation A offer/order has to be understandable for the customer regarding the offered services. Service types assist this by categorizing the offered services in the necessary disciplines and making it possible to allocate time and cost per discipline.
Example: To provide a shop system the disciplines Business Analyst, Designer, Integrator and Developer are needed. Every discipline represents a servicetyp, has a different hourly rate and also the needed times differentiate.
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Time tracking: If an order is implemented every tracked time has to be allocated to a servicetyp to determine the cost of the time correctly. This means the servicetyps are also important for time tracking. Usually specific service types can only be done by specific employees.
Example: Employee A is working as a Junior Developer on the shop integration. This means his time can only be settled as "Junior Developer", which has to be taken into account when the time gets transferred.
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Reporting: Since the offer and order contain a defined amount of efforts per servicetype, reporting should show the efforts already made for each type of service. Thus the progress/consumption gets visible in the structure of the offer/order.
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Invoice calculation: When doing the invoice calculation for the done services it's necessary to mark them with the in the order defined service types to comprehensibly show the costs. Due to this the tracked times get consolidated on service types and distributed for Invoices.
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Employee/Resource planing: As not every employee can do every discipline/servicetype they should be allocated to the employee, that can be planned for it. If you compare the total services for all service types of the current and planed orders with the capacity of all employees the service types will help to identify capacity shortage.
What to take into consideration when you build a service type?
It becomes clear that when designing service types, the entire process must be taken into account, from the preparation of the offer, to time recording, reporting and billing.
Various aspects play a role here:
1. Which services do you want to offer with your company?
As mentioned above, the service types provided by a service company are often directly related to the disciplines that are required for the implementation of an offered service.
Example: An IT service provider that offers the development of web-based applications will schedule software architects, designer, developers, product managers, software tester, documentation editors and project managers.
Thus, some clear service types can already be derived from the disciplines.
2. Which services can you actually offer with your employees and possibly subcontractors?
On the one hand, a company that wants to offer certain services should ensure that the employees have the necessary skills or that subcontractors can fill the gaps.
But it is also possible to expand the range of services based on the competencies of the employees.
Example: An employee has extraordinary mathematical skills that can expand the range of services offered by the company. of the company, e.g. to be able to offer more extensive web analytics services. This associated, a new service type "Web Analyst" may then be required.
In addition, the level of competence of employees for certain disciplines also plays an important role.
Example: A young employee who has only a few months of experience in software development is usually not charged at the same hourly rate as an experienced software developer. This difference should also be reflected in the service type by differentiating a "junior developer" and "senior developer".
3. How do you want to price the services you offer?
As already mentioned, the service types are also a prerequisite for the creation of offers, orders and invoices. Therefore, these are also the basis for the service offer and its pricing, since different requirements depending on the type of service, different requirements are placed on the service provider, depending on the type of service, and therefore justifies individual hourly or daily rates.
Particularly when creating the offer, it is important to use the service types to create an offer that is comprehensible to the customer for the various services and the associated costs. It is important to make it clear to the customer which disciplines and costs are associated with each type of service.
Example: If one offers the service type "Product Owner" to a customer in the context of an agile project, it should be made clear what the tasks or the required disciplines are that an employee must perform to fulfill this service type in order to be able to justify a corresponding price.
4. What requirements do your customers have for the billing of services?
For the processing of an order, an order or budget is usually also managed at the customer's, against which the invoices are posted. The service types from the order are often used to divide the total budget into different sub-budgets.
Example: An order contains 20 days of conception (service type: Business Analyst) and 100 days of development (service type: Developer) and 5 days of project management (service type: Project Manager). At the customer's site, for example, 3 budget items are set up in an SAP system for this order, reflecting the 3 service types. Thus, it is necessary that the invoices are consolidated by service type and show activity statements of all activities by these service types so that the customer can correctly allocate them to their budgets.
What is a recommended course of action?
As the previous remarks show, there are a lot of criteria to consider in order to define comprehensible service types. Therefore, from our point of view, several steps are necessary to arrive at a final list of service types.
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Definition of service offering: Before defining service types, you should be clear about what services you want to offer as a company.
Example: Services of an IT service provider could be:
- Implementation of website projects from conception to relaunch.
- Realization of web-based applications
- Evaluation of CMS systems
- Consulting "communication strategies"
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Derive Required Disciplines: The service offering can then be used to derive the required disciplines needed to provide a service.
Example: Front-end and back-end development is required for web-based application development. In the backend development PHP and JAVA developers are needed. In frontend development JS developers and HTML/CSS experts are needed.
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Identify service types: The service types should now be formed from the sum of the disciplines. Here, however, should not be subdivided too finely.
Example: The different disciplines mentioned in one of the previous example can usually be represented by one service type "Developer", since you may only want to charge one hourly rate for development activities.
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Considering Level of Competency: For each identified service type, consider whether there are different levels of competency among the performing employees that require different hourly or daily rates.
Example: Project management is performed by two employees. One employee is a "Senior Project Manager", i.e. has several years of experience in project management and is supported by an inexperienced employee who is offered as a "Project Management Assistant".
A service type should be defined by a unique, understandable name and a comprehensible description. A standard hourly or daily rate should be defined for each service type. In exceptional cases, this can be overwritten by individual hourly or daily rates for individual customers / orders.
How does it work in foreknown?
Service types are managed in foreknown as part of the "Invoice" module. There you can store any number of service types. Each service type is described by a name, a description, a unique abbreviation and a billing rate (as hourly or daily rate). The billing rate represents a general value, which can be overwritten per customer and order.
Activity types are used in the creation of offers and orders to break down an offer/order item into the individual activity components and associated expenses.
When transferring working times booked by employees, the activity types also play an important role in determining the agreed payroll rate for each working time booked.
Docu-Link: Further details can be found in the online documentation under "Features / Billing / Service types".