Choosing Maintenance Options

Before using the maintenance contract module, you need to select options that determine how the module functions.

Setting up Maintenance Options

1. Select Microsoft Dynamics GP > Tools > Setup > Service Management > Maintenance Setup > Maintenance Options.
2. Complete the following fields:
   • Revenue Recognition Options
     Select a revenue recognition method. You must select from one of three options to recognize maintenance contract revenue. Select the option carefully. Your selection cannot be changed without assistance from WennSoft Sales. See Overview of Revenue Recognition Methods for more information.
   • Next Cost Transaction Number
     Enter a number in the Next Cost Transaction Number field. The next cost transaction number pertains to maintenance contracts that use the percentage-of-completion or revenue schedule revenue recognition methods. Maintenance contract cost transaction numbers have the prefix "MC." The number is only used within Service Management. Don't confuse it with the Microsoft Dynamics GP document number.
   • Labor Cost Description
     Enter a description in the Labor Cost Description field. This description appears in the Item Description field of the Labor Costs window when using the manual revenue recognition method. The description could simply read: Monthly maintenance charge.
   • In the Options section:
     • Use Labor Loading
       Mark this checkbox to use the labor loading module. Labor loading calculates the percentage of a technician's labor allocated to preventive maintenance contract work. The total hours per contract, across all contracts, and the percentage of available preventive maintenance hours are calculated. This module is useful when deciding if you have the personnel to meet your maintenance contract obligations.
     • Maintain Contract History
       Mark this checkbox to keep a historical record of all maintenance contracts that have been renewed/closed automatically or manually. Historical information can be useful when deciding pricing for renewed contracts. Maintaining history does not impact system performance. If you select not to maintain contract history, when you close a contract, that contract's information is gone.
     • Use Sales Order Processing for Inventory
       Mark this checkbox if you want Service Management's invoicing process to integrate with Sales Order Processing. If the checkbox is not marked, you will enter inventory items used on invoices as inventory adjustments.
     • Create Separate GL Transactions for Costs
       Mark this checkbox if you want to distribute costs to the GL when posting MC or MCC costs. Marking this checkbox enables the Batch ID field in the Maintenance Costs window. If this checkbox is not marked, the Batch ID field will be disabled. See Choosing Service Management Debit Accounts for Cost Transactions.
     • Enable Visit Wizard
       Mark this checkbox if you want to use the Visit Wizard, which allows you to create reoccurring maintenance contract computer-generated (MCC) calls. The MCC calls will not have attached tasks.
     • Use Relative Scheduling
       Mark this checkbox if you want to schedule MCC calls for a relative day of the month. Relative day scheduling is used for tasks with the following frequencies: Monthly, 2 Months, 3 Months, 4 Months, 6 Months, Yearly, 2 Years, and 3 Years. If the checkbox is marked, the first MCC call will be generated using the value in the Maintenance Contract window's Service Call Day field. The system notes the day of week and the week of the month of the first service call and generates subsequent calls based on this information. For example, if a contract was created on the first day of January and the Service Call Day field had a value of 10, a task with a frequency of Monthly would have the first MCC call on January 10. If January 10 was the second Monday of the month, the system would schedule service calls for that task on the second Monday of subsequent months.
     • Default Task Schedule to Starting Service Call Date
       If this checkbox is marked, the maintenance tasks on a contract will be scheduled on the first available service call date, regardless of the task's schedule. This applies to maintenance contracts and quotes.
     • Allow renewing where billing or revenue is not 100% complete
       If this checkbox is marked, you can renew contracts for which the billing or revenue is not 100%. Billing is 100% complete when every billing period in the billing schedule has been posted. Revenue is 100% when all potential revenue from a contract is fully recognized.
   • In the Automatically section:

     • Create Invoices
       Mark this checkbox to automatically create maintenance contract invoices. This feature is available for maintenance contracts that use the percentage-of-completion or revenue schedule revenue recognition methods. If the Automatically Create Invoices checkbox is marked, you can create invoices by choosing Microsoft Dynamics GP > Tools > Routines > Service Management > Maintenance Contracts > Create Invoices. This creates a Receivables Management entry and places the invoice into a batch. If this checkbox is not marked and Automatically Bill was not marked in the Maintenance Contract window, you receive a message "There are no new invoices to be created for this month/year" when you select Microsoft Dynamics GP > Tools > Routines > Service Management > Maintenance Contracts > Create Invoices. You may select not to automatically bill if you bill only as maintenance work is performed. Or you may wish to not automatically bill a contract if the invoice needs individual attention such as a billing adjustment. 

       

       Marking the Automatically Bill selection in the Maintenance Contract window overrides the Automatically Create Invoices selection in the Maintenance Options window

• • Escalate Contracts
    Mark this checkbox to automatically escalate contracts. Contract escalation allows maintenance contracts to be renewed and automatically increased based on user-defined parameters.
  • Distribute Amounts by Cost Category
    Mark this checkbox if you want the system to automatically distribute costs based on contract type when saving a new contract. If you do not have costs set up for the contract type, you will be reminded to distribute costs when saving a new contract. You distribute costs using the expansion button in the Total field of the Revenue/Costs window. If this checkbox is not marked, you will not receive a message and the amounts will not be distributed based on the contract type. The entire amount will be placed in the labor cost category. If you mark the Escalate Contracts checkbox, the Distribute Amounts by Cost Category checkbox will be marked and disabled. Escalating contracts allows you to increase contract amounts based on the cost category.
  • Add Equipment Type Task List When Inserting Equipment
    When you assign equipment to maintenance contracts, you can select to include task lists associated with equipment types.
    

    Inactive task codes and task lists are filtered out from displaying in any lookup and cannot be assigned to any new contract, equipment, or service call. If a task list has any inactive task codes, only the active task codes will be assigned.

  • Add Equipment Components When Inserting Equipment
    When you assign equipment to maintenance contracts, you can select to include component records.
  • Mark Leave Open on Contracts
    Mark this checkbox if you want the system to automatically mark the Leave Contract Open checkbox on the Maintenance Contract and Master Contract windows. When you mark this option and save the Maintenance Options window, you will be asked if you want to roll this option down to open contracts. Select Yes to roll down or select No to mark this for new contracts going forward.

• • In the Maintenance Invoicing section

    • Calculate Taxes On
      Select to calculate taxes on the Contract Amount or the Cost Category Amount. If you want to use differing tax schedules per cost category or want to exclude certain cost categories from tax, select to calculate by cost category amount. The Distribute Amounts by Cost Category checkbox must be marked to enable the Calculate Taxes On option. 

      

      To exclude taxes on contracts, we recommend that you set up a tax detail that has a 0.00% tax rate. Otherwise, you will have no details and the values of the billing amount and taxable amount of $0.00 do not show in the Microsoft Dynamics GP Tax Distribution.

    • Use Next Number From
      Select to use the next maintenance invoice document number from the Service/Repairs field or from the Scheduled Payments document type. You can distinguish transactions created through the Maintenance Contract module from transactions created through the Core module. Core module transactions use the next number from the Service/Repairs field in the Receivables Setup Options window (Microsoft Dynamics GP > Tools > Setup > Sales > Receivables > Options). You can select to use the next document number from the Scheduled Payments document type to distinguish Maintenance Contract module transactions from Core module transactions. 

      

      We recommend using the next number document number from the Scheduled Payments document type to ensure service invoice transactions and maintenance invoice transaction numbers never conflict. If you select to use fewer than 17 characters for the next cost transaction number, select a length that will satisfy your business needs for at least two years. Service Management starts from one when the highest number is reached. For example, if your transaction number is only three characters, when number 999 is reached, the system starts over from 001. If transaction 001 hasn't been posted, it will be overwritten with the new information.

Overview of Revenue Recognition Methods

One of the most important setup decisions you will make is how to recognize revenue.

Percentage-of-completion

The percentage-of-completion revenue recognition method is commonly used by companies that do not accumulate maintenance costs evenly over the life of a contract (e.g., seasonal maintenance).

The percentage-of-completion method tracks maintenance contract revenue using a cost-to-date/forecast cost ratio. This ratio represents a contract's percentage of revenue or loss for an entire year. For each maintenance contract, estimated and forecast costs can be projected, in addition to tracking the actual costs.

Revenue schedule

The revenue schedule method allocates maintenance contract revenue for each period by dividing the contract amount by the number of months in the contract. For example, when one month of work for a 12-month contract is complete, you can recognize 1/12 of the contract's revenue. The amount of revenue to be recognized each month is maintained in a revenue schedule for each contract.

The Revenue schedule is the most commonly used revenue recognition method. It reflects costs as they are incurred. It also assumes that the work outlined in the contract is complete. Revenue is recognized equally over the life of the contract.
Each month, you will run a batch process that recognizes revenue based on the amount allocated for that month. A Microsoft Dynamics GP General Ledger entry is created by the batch process.

Manual

The manual method is a combination of the revenue schedule method and a standard time-and-materials (service) invoice. That is, you can bill a fixed amount, determined by the maintenance contract, and bill for additional costs. Contrary to the manual method, the revenue schedule method only allows for a fixed amount to be billed; you are unable to bill additional costs incurred on the MCC service call.

For example, you may sell a contract to provide the labor to perform a monthly systems check for $100 per month over 12 months. Materials and other charges are to be billed on a time-and-material basis.

The manual method allocates maintenance contract labor revenue for each period by dividing the contract amount by the number of months in the contract. For example, when one month of labor for a 12-month contract is complete, you can automatically bill 1/12 of the contract amount. When the work is complete, you add costs to the invoice from the Service Invoice window, not the Maintenance Costs window. From the Service Invoice window, you create and print the invoice. Service accounts, which are set up in the Invoice Accounts window, will be used when posting the invoice.

The invoice for the work performed includes the monthly labor amount as an invoice detail record in the labor cost category. The price matrix does not affect the labor billing amount. After you add costs, you can post the invoice as you would a standard service invoice. When posting, a Microsoft Dynamics GP Receivables transaction is created. Revenue recognition occurs only at the time of billing.

With the manual method of revenue recognition, you must manually create invoices and recognize revenue.

The following example shows the difference in revenue recognition methods.

The Revenue/Cost window allows you to track the forecast cost while keeping the estimated cost intact. The example above is for a multi-year contract. You will notice that six months into the contract the forecast cost changed perhaps to reflect the manager's forecast cost at the end of the current year. (Please note that Labor's estimated cost remains the same while the forecast cost reflects the projected cost.) Having this information allows you to measure the estimator's performance, have accurate up-to-date cost information, and still forecast your gross profits to give a more precise financial statement.

A) Revenue recognized under the percentage-of-completion method:

• $495.00 / $1,450.00 x $2,400.00 = $819.30\[contract actual costs total to date\] / \[total forecasted costs\] x \[contract amount\] = \[revenue earned total to date\]

B) Revenue recognized under the revenue schedule method:

• $1,200.00 = $1,200.00
• (Contract amount recognized based on billing schedule) = (revenue recognized)

C) Revenue recognized under the manual method:

• Maintenance invoices are not created, but a fixed billing schedule is created for each contract. A service invoice will be created for each maintenance contract service call. The fixed billing amount (from the billing schedule) will be entered as a transaction in the Labor cost category on the service invoice. In addition, service accounts will be used for posting, not maintenance accounts.