A Contract serves as an agreement between the customer and the service provider.
A Contract is defined per customer and valid for a single branch. However, a Contract can be extended by connecting additional customers and by expanding validity to multiple branches.
Contracts can be grouped using a contract type, where a contract type can be for example, WARRANTY and SERVICE.
Connecting additional customers to a Contract can serve the following purposes:
A Contract can have several statuses; Planned, Active, Negotiated and Closed; as explained below:
Planned – A new Contract will always receive the Planned status. A Planned Contract cannot be used with Requests.
Active – An Active Contract is ready to be connected to a Request or to be invoiced.
Negotiated – The status of Contract is set to Negotiated when you need to adjust an active Contract.
Closed – A Contract is closed when it is no longer in use.
It is also possible to Freeze a Contract. This is not a status, rather it is an option to temporarily freeze a Contract due to reasons such as the customer failing to make a payment. It is not possible to connect a Contract Line from a frozen Contract to a Request. However, a frozen Contract can be invoiced.
Invoice parameters are needed for invoicing a Contract. The following are the required invoicing parameters defined in the Contract header level.
Specifies the time period for which the periodic price to be invoiced is valid. For example, if a Contact Line contains a periodic price of $1200, and the customer will be invoiced every quarter, i.e. March, June, September and December, the following table shows how different price units and price unit lengths, affect the price to be invoiced:
| Price Unit Length | Price Unit |
Price to be Invoiced ($) |
Explanation |
|||
| March | June | September | December | |||
| 1 | Month | 3600 | 3600 | 3600 | 3600 | Since the periodic price of $1200 is only valid for a month and invoicing is done once in 3 months the price to be invoiced is accumulated to $3600. |
| 3 | Month | 1200 | 1200 | 1200 | 1200 | Since both the valid period and the invoicing period are the same, i.e. 3 months, the total price to be invoiced remains the same at $1200. |
| 1 | Year | 300 | 300 | 300 | 300 | In this example, the periodic price of $1200 is valid for 12 months and therefore it should be divided among the invoicing period. |
Period allocation is a common requirement where a customer is invoiced a fee for the Contract, which will be applied for future periods. The Contract allows you to distribute amounts that should be invoiced over time. When an Invoice Plan Detail Line is created, either for preview or when creating an invoice directly, a period allocation rule is automatically attached to the Invoice Plan Detail Line. The period allocation method used by default is Proportional, but you can change it to, Even or Mixed. Your can also define an allocation method the system should use by default, by specifying the relevant method in the object property, PERIOD_DISTR_METHOD.
Determines if you want to invoice at the beginning of the period (Prior) or at the end of it (Post).
Specifies how often a Contract should be invoiced. In the case of the example above, invoicing is done every quarter (3 months).
Determines how often and at what percentage a revaluation should be performed on the Contract, if applicable. The percentage can be positive or negative, for example, a price of $100, revaluated at 5%, the price will be revised to $105. If revaluated at -5%, the price will be revised to $95.
While providing a service, it is not uncommon for customers and service providers to change the basic prices they had agreed upon at the time of creating a Contract. In such cases, instead of revising the Contract, a Customer Agreement with the correct price can be connected to the Contract, to be used explicitly. Here, the prices defined in the customer agreement overrides the prices defined in the Contract.
When defining the Contract Lines, you can define; the validity period, the type of Services the customer is entitled to, the details related to Coverage Items, the invoicing parameters required in the Contract Line level, and the Service Level Agreement (SLA) details.
Invoice Plan
Enabling the Invoice Plan option, make it possible to invoice Contract Lines periodically. When periodic invoicing is used a Sales Part should be specified to fetch the periodic invoicing price.
Periodic Prices
For Contract Lines using an Invoice Plan, one or more Periodic Price Lines exists, that will display the price that will be invoiced per Contract Line for a given period. These Periodic Price Lines can have Accepted, and Revaluating, statuses as explained below:
The following steps can be performed related to Periodic Price Lines:
Price Rule
The Requests associated with a Contract Line, regardless of the Invoice Plan setting, can use a Price Rule to specify, how the prices are calculated. For example, when periodic invoicing is used for a Contract Line, a Price Rule defined as, Total Price Free of Charge, means that the service Requests associated with this Contract Line is handled without any charge.
A price rule basically defines how the costs will be charged from the customer. Price rules can have multiple rule lines defined for different sales groups and cost types as well as a default, compulsory price rule line covering all other prices, that are not handled by any other specific price rule line.
The most simplified Price Rules can be one of the following types:
Benefit Plan
Requests associated with a Contract Line can utilise a Benefit Plan to specify how prices are calculated. A benefit plan consists of a price rule, a number of applicable requests and the date parameters for the applicability of the benefit plan. Requests created that satisfy the parameters of the benefit plan will have their prices calculated using the price rule defined in the benefit plan, thus overriding the price rule defined on the request contract.
The SLA defines the time limits that are applicable to the Contract Line, based on the agreements with the customer. The SLA’s can be defined in each Contract Line level. SLA covers three different times:
For Request Scopes associated with a Contract Line, the Request SLA Template on the Contract Line will be used to automatically generate a Request Scope SLA Order, which will calculate the SLA Latest Start and SLA Latest Finish dates on the Work Stages.
A Recurring Service Program can also be created from
a Request Contract and the Recurring Scopes of the program are
eligible to use the Request Contract Lines where relevant.
For Recurring Scopes associated with a Contract
Line, the Request SLA Template and Pricing Rule on the Contract Line will be
applied on Request scopes on the generated Recurring Service Requests.
The
Request Contract should be in Active state to generate Requests from
contract connected Recurring Service Programs.
Recurring Service Program can be created using
Request Contracts in Planned, Active, Negotiated statuses, except in Closed
status. When a recurring service program is connected to a request contract,
the program validity is set by Valid From and Expiry Date of
the request contract, but editable on the program.
A Contract can be invoiced in several ways:
Through a Request – A Contract Line can be connected to a Request Scope directly, when you create a new Request Scope. You can use the invoicing in the Request to invoice for the Contract.
For the entire Contract – When invoicing a Contract as a whole, the system checks if the invoice period falls within the valid time period of the Periodic Price Lines of the Contract Lines. If yes, then the relevant Periodic Price of the Contract Line will be invoiced. For example:
| Invoice Period | Contract Line No | Periodic Price Valid Period | Eligible for Invoicing? (Y/N) |
| >01-01-2020 to 01-31-2020 | 1 | >01-01-2020 to 01-31-2020 | Y |
| >01-01-2020 to 01-31-2020 | 1 | >02-01-2020 to 02-28-2020 | N |
| >01-01-2020 to 01-31-2020 | 2 | >01-01-2020 to 02-28-2020 | Y |
A Contract Line – Instead of invoicing an entire Contract, you can opt to invoice a Contract Line. In such cases, you should first need to generate a preview of the invoice lines and then should select the Contract Lines to invoice, in the Invoice Plan Details.
If a delivery address is defined on the Parties tab of the object covered, that delivery address would be selected for the customer orders created for periodic invoicing. If no delivery address is defined, the default delivery address of the contract customer would be automatically selected.
Credit invoice lines can be created to negate existing invoices. Planned credit invoice lines can be created on an Invoice Period or directly on an Invoice Plan Detail Line.
The resulting Invoice Plan Detail Lines will contain a minus value of the previously debited invoice.
If performed on an Invoice Period, debit invoices for all Contract Lines belonging to the selected period as well as more recent invoices for the same Contract Line, will be credited, and new periodic price lines with Revaluating status will be created for each Contract Line of the Contract.
If performed on the Invoice Plan Detail Line, the selected invoice plan line as well as for more recent invoices for the same Contract Line, will be credited, and a new Periodic Price Line with Revaluating status will be created for the Contract Line.
One-Time Invoices can be used to:
Creating a One Time Invoice will create a new Invoice Plan Detail Line. This Line can be used to create the Invoice.