Which settings are mandatory for working with periodic billing using rental contracts?

To effectively manage periodic billing in the context of rental contracts within SAP, the assignment of a billing plan type to the item category of the rental contract item is essential. This setting ensures that the system understands how to process and generate invoices based on the predefined billing schedule for the rental items.

When a billing plan type is assigned, it defines critical details such as the frequency of billing (e.g., monthly, quarterly) and the specific conditions under which billing will occur. This allows the system to automate the billing process according to the established terms of the rental contract, reducing manual intervention and potential errors.

Without this assignment, the system would lack an understanding of how the pricing should be applied over time, leading to difficulties in managing cash flow and customer relations as billing would not align with the expected rental payment schedule. Thus, this requirement is crucial for seamless periodic billing operations in rental scenarios.