360° Strategic Asset Management > Common > Contract Register

Definition of Lease Contract: A legal document used for the terms under which one party agrees to rent an asset (vehicle/equipment/property) from another party. A lease guarantees the lessee (the renter) use of an asset and guarantees the lessor (the owner) regular payments from the lessee for a specified number of months or years, with certain pre-defined conditions.

A lease contract is a commercial arrangement where:

  • the lessee (customer or borrower) will select an asset (equipment, vehicle, property);
  • the lessor (finance company) will purchase that asset;
  • the lessee will have use of that asset during the lease;
  • the lessee will pay a series of rentals or installments for the use of that asset;
  • the lessor will recover a large part or all of the cost of the asset plus earn interest from the rentals paid by the lessee;
  • the lessee has the option to acquire ownership of the asset (e.g. paying the last rental, or bargain option purchase price);
  • the finance company is the legal owner of the asset during duration of the lease;
  • However the lessee has control over the asset providing them the benefits and risks of (economic) ownership.

Definition of Lease Contract Management

Lease Contract management or contract administration is the management of contracts made with customers. Lease contract will includes negotiating the terms and conditions in the contracts and ensuring compliance with the terms and conditions, as well as documenting and agreeing on any changes or amendments that may arise during its implementation or execution. It can be summarised as the process of systematically and efficiently managing contract creation, execution, and analysis for the purpose of maximizing financial and operational performance and minimizing risk.

360° Strategic Asset Management Lease Contract Management is applying technology to standardise, streamline and automate contract initiation, creation, negotiation, execution through to expiration. This give the organisations the ability to improve standardisation, control and visibility of their entire contracts portfolio. This lead to lower procurement costs, increased revenue, and reduced customer migration, improved compliance, lower risk and an overall gain in employee productivity.

Steps of On-going contract management

On-going contract management involves the administration of a range of activities, which include:

·         Contract maintenance and change control

·         Charges and cost monitoring

·         Receipt and acceptance procedures

·         Payment procedures

·         Budget procedures

·         Resource management and planning

·         Operational and management reporting

·         Asset management

The basic steps of Lease Contract Planning

1.      Configuration setups :

    • Create and setup of Vehicle and Equipment Objects and structures for use in Lease Contract Planning;
    • Create and setup of Event templates specifically for Lease Contract Planning;
  1. Create and setup of a Vehicle/Equipment specifics register
  2. Create and setup of the base interest rate
  3. Create, setup and process of a new contract, quotation and approval of contract
  4. Release contract by changing status to “In Progress”
  5. Maintain contract resources and process of feedback
  6. Run Contract/Financial journal cycle
  7. Invoice Client (External)/Financial Journal

Step 1 - Organisation Base Setup

Organisation structure covers many of the default integration parameters used downstream in 360° Strategic Asset Management. By definition the organisation structure define all the rules how one organisation interfaces with another organisation within 360° Strategic Asset Management, as well as how the stock reservation, billing, financial accounting, etc. will be done for a certain organisation or organisation unit.

It is also important to setup physical locations in which an organisation is located. In principle it is possible for an organisation to be distributed across various physical locations. If AX Integration is on the Locations will be setup in Stock and Warehouse Management Module of standard AX.

Within the organisation structure functionality, the focus is on maintenance, service requests, equipment/operations management, contract management and the organisation allocation is driven by the organisational responsibility. All maintenance, operational and contract events within 360°Strategic Asset Management. are related to a 360°Strategic Asset Management Organisation. These events must be allocated to an organisation and the organisation “supply” a vast amount of the defaults used in the creation of a new event.

Objectives

The following base setup functionalities should be identified and done as pre-requisites for the contract processes as part of the optimal use of Strategic Asset Management product.

  • Create, define and setup status codes and sequences of each;
  • Create and define the360°Strategic Asset Management system parameters setup:
    • Setup of number sequence (Part of Organisation Administration)
    • Setup of general use information (Working Calendar, ERP integration, default service item)
    • Setup infrastructure (Report Server and SMS Service)
    • Setup integration (Integration properties for person, facility and support equipment)
    • Setup of account information (General ledger accounts)
    • Setup of journal names (Journal names in general ledger)
    • Setup of project integration (Valid project groups in Project Management and Accounting)
    • Setup of default accounting organisation (Valid organisation in Objects)
    • UOM Codes
    • Currency
    • Resources (Product Master/Inventory)

Definition of Base Setup

The 360°Strategic Asset Management  general base setup will be used as base configuration throughout the application and assist in determining whether or not the configuration will be necessary for your particular implementation. Ensure that you create a contract/rental organisation in the base setup.

For more on the create detail of base setup process, refer back to Configuration base setup

Step 2 - Vehicle/Equipment Object

Create and Setup of a Vehicle/Equipment Object

For more detail definition and setup of objects, refer back to About Vehicle/Equipment Object Definition

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Click here for the step by step - Create a Vehicle/Equipment Object Structure

Note

The steps for the creation of objects are the same, but objects must be selected to be available on contracts in order to create the specifics on a contract.

Step 3 - Setup Event Template for Lease Contract

Event templates play a critical role in the Organisation and scheduling of materials, equipment and resources.

This function is used to define a generic Event Template in terms of identification, duration, costs, status, frequency, resources, etc.

Events or standard contract lines must be defined for all tasks that are performed repetitively, for example a service that occurs on a monthly basis on the contract or all lines that are standard on a contract cycle.

Defined Event Templates are used as a library of tasks, which facilitate uniform tasks for budgeting and task history analysis. It also ensures to do life cycle planning.

Objectives

The Objectives are:

  • To define and setup recurring event definitions for various function types and objects which will be used within an organisation
  • To define and setup event types
  • To understand why and how to define the create of event templates for an organisation

Definition Event Templates

An event template determines the basic composition for tasks to be used on an object or service type and contains information about required resources, activities and organisations that can perform the task. Once established, the template can be called and recalled from the library of event templates) instead of the registration of every single task as and when required.

These defined tasks are used as standard templates to facilitate uniform tasks execution and task history analysis.

Setup of Event Definition

Event definition is used to define the setup of default event templates regarding any instance or occurrence of tasks. Contract events can be a specified condition/action and the commencement of default proceedings. A contract event can in principle be all the standard tasks that occur on the contract during the cycle period of the contract.

Every event can consist of a number of activities (procedure step). An event activity is an action to be performed by a person or the contract. The following is an example of event activities for vehicle lease contracts:

  • Delivery of vehicle (Billing normally in advance and once off)
  • Monthly leasing of vehicle (Billing as agreed in contract)
  • Administration of the lease contract

When defining the event definition for lease contract planning, the contract type can be defined as one of following types or selected "Not Applicable":

·         Lease - Full maintenance contract agreement

Definition - A full maintenance lease is a monthly rental inclusive of usage and full maintenance. Rentals are determined by the choice of vehicle, period of usage and kilometer requirements. Full maintenance lease transfers all risk of resale values and maintenance cost form the customer to the leasing company. The monthly rental may includes all maintenance, license and registration costs. In terms of the maintenance component, the FML agreement allows for all maintenance, repairs and replacement tyres, the only exclusions being top-up oil, accident damage and repairs as a result of negligence and/or abuse of the vehicle.

·         Lease - Managed maintenance agreement

Definition - The objective of this type is managing all players who participate in the generation of maintenance expenditure, vs the servicing dealer, alternative suppliers, manufacturer, customer and the driver. The focus of Managed Maintenance is on real cost reduction and the benefits of reduced administration, driver support, quality of repair and the provision of a complete maintenance history that will enhance the vehicle’s resale value. Any discounts received from suppliers are passed onto the customer.

·         Lease - Operating

Definition - The objective of this type is managing all the alternative financing options to FML, their benefits and inclusions also mimic those offered by FML, the only difference is that there is no maintenance portion included in the monthly rental and therefore all maintenance and repair remains the responsibility of the customer. The benefits remain the same but the risk on the maintenance is transferred to customer.

The setup indicators, forced and fixed indicators are not applicable to contract event templates.

Setup of Event Object

After object assets are identified and the hierarchy or structure of each have been defined, it is essential that pre-determined events are then defined in order to maintain, optimise and fully utilise their equipment.

Industries will also need the capability not only to create and fulfill predetermined events but will also need the ability to create additional events pertaining to their physical assets which are of an Adhoc nature. (Adhoc is a Latin phrase which means "for this purpose", unscheduled.)

No matter the event, key information is required to ensure the events can happen successfully and in the most efficient manner as possible.

Event Object Tasks should be defined for all tasks that are performed repetitively. The latter can include service tasks (for example: insurance, monthly installments, monthly usage, delivery, collection) which occurs frequently.

For the explanation of the setup of event objects that are link to an event definition we will use the leasing of a vehicle to a customer:

In the event definition task for a leasing contract is the setup, for example the creation of the leasing of a vehicle event. This event has a number of actions against it that will define the standard service item lines.

With the creation of event objects more than one object (vehicle, etc.) can be linked to an event template (definition).

For more detail definition and setup of Events, refer back to About Event Definition

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Click here for the step by step - Create an Event template for lease contracts

Step 4 - Setup Specific Assets for Contracts

The specific asset register is crucial in defining how a specific asset instance of this object will be managed throughout its life cycle. There are different category views of the specific asset registers and can be summarised into the following categories for Fleet management:

Equipment Register: Tangible properties (asset) which include things such as various equipment types, mobile equipment, etc. which is used in the operations of a business. Examples of equipment include ground moving equipment, support equipment, etc. Maintaining the Equipment register enables the organization to manage its inventory across a specific business line. This implies that control is gained over the inventory items between measuring points in a particular path, expressed in quantitative and/or financial terms.

Transport Register: Include things such as vehicles, air craft and water craft, etc. which is used for operations of a business. Maintaining the transport register enables the business to manage its transport assets across the entire operation. This implies that control is gained over the inventory items between measuring points in a particular path, expressed in quantitative and/or financial terms.

Objectives

The Objectives are:

  • To define and setup specifics for all managed equipment, facilities, vehicles, etc. (Assets)
  • To classify specifics into groups
  • To link the physical asset to an specific type, organisation and events
  • To understand why and how to manage the activities and details pertaining to the registered physical assets
  • Maintain specific structures

Definition of Specific

Management requires information at strategic level to plan object utilisation. Every object is registered and their statuses are monitored. The specific, rental and operational statuses of an object must be known to make informed decisions with respect to its rental and/or operational utilisation while taking cognizance of the current status and historical performance. Various functionalities on 360°Strategic Asset Management allow the owner to gain access to the necessary information.

Use this process to create and maintain a list of specifics for an object. Specifics can be specific detail to a part, item, person, etc. This function will open a form displaying the selected object and its lower level structure in a tree view format. This function is also used to update the specific structure in accordance with the generic structure. It should only be necessary to use this function if the generic configuration structure template of the object type has been changed.

Create and Setup Specific for Contracts

For more detail definition and setup of Specifics, refer back to About Specifics

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Click here for the step by step - Create Specific Assets

Step 5 - Contract Planning

The following process is the workflow for creating a new contract with an external organisation or an internal organisation/department. Use this form to create and maintain Contracts. Contract Planning is used to create, maintain, and enquire about contracts.

There are many different possible flows and processes in the major process of Contract Planning. The following diagram reviews the processes of Contract Management and the detailed Contract Planning Process Flow:

diagram

Create and Maintain Contract:

For more detail definition on contracts, refer back to About Contract Planning

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For more information on the step by step process, refer back to Contract create and maintain Process

Step 6 - Feedback Process

The main purpose of this function is to provide feedback on contracts in progress. Feedback can be done on all resources (contract specific lines) linked to the contract. This includes:

  • Hours used per individual person (for example: Contractor, Tradesman/Technician)
  • Hours used per individual Special Tools/Equipment
  • Monthly revenue per item/resource as quoted
  • Monthly usage per item/resource

Contract Feedback:

For more detail information to do Contract Feedback, refer back to Contract Feedback Process

Contract Postings:

Contract Posting is the process to create the financial transactions for a sales order or project management, if project integration is used. Contract postings can be run for a batch of contracts or a single contract.

For more detail information to do Contract Postings, refer back to Contract Postings Process

Step 7 - Process Invoice (Billing) and Generate Invoice

If the work is completed the status of the execution specific line can be changed to “Complete”. If all the feedback is done and completed on this execution order, the execution order’s status can be changed to “Financial Complete”. The system will automatically run the financial transactions to create the journals for the invoicing process. The posted journals will be in Projects (if project integration is ON) or in Sales Orders. Select “Enquiries” under “Financial transactions” and the user will find the posted journals. The accounting department can now make the decision to generate the “Invoice” for the customer.

Generate Invoices from Sales Orders:

If the contract posting is completed for the billing period, the Invoice/s has to be generated from the sales orders. The posted journals will be in Sales Orders. The accounting department can now make the decision to generate the “Invoice” for the customer. The following is the process for generating an invoice in Sales Ledger.

For more detail information to do Generate Invoices from Sales Orders, refer back to Generate Invoices from Sales Orders

Generate Invoices from Projects:

If the contract posting is completed for the billing period, the Invoice/s has to be generated from the projects. The posted journals will be in Projects Management Module. The accounting department can now make the decision to generate the “Invoice” for the customer. The following is the process for generating an invoice in defined project for the selected customer.

For more detail information to do Generate Invoices from Projects, refer back to Generate Invoices from Projects

Step 8 - Finalise the Contract

The Feedback and Invoice processes will be repeated for the duration of the contract. The following status changes will happen in order to finalise the contract:

  • Complete Status - Once the contract reaches the end date of the contract the contract customer status can be updated to be completed.
  • Financial Complete Status - Accounting department has run the final billing process and then once completed the status can be updated to financial complete.
  • Finished – The contract status can be updated to finish when there is NO OPEN Sales Orders, Purchase Orders or Projects (If project integration is ON). The system will check if there are any open sales orders, purchase orders or projects, the CUSTOMER CONTRACT STATUS will not be allowed to be UPDATED.

Step 9 - Extended Billing

Extended billing indicator on Contracts:

When the contract reaches the END DATE, and the Customer wants to extend the contract for a longer period and more billing has to run on the contract, the Extended Billing indicator has to be ticked on contract.

Extended billing indicator on Object Structure

The Extended Billing Indicator can also be switched on Organisation/Company level in the Object Structure Form and this will allow that ALL contracts that are created for this organisation/company can have extended billing. When any new contracts are created and the indicator is ticked at this level, it will filter through to the contract level on header and specific lines.

See also

The following is the link to the standard generic setup of the different functions:

Setup of Object

About Specific Register

About Contract Planning

About Feedback