This best practice outlines two ways in which you can credit charges that were billed against a service contract and ensure that the credit goes against the profitability of the contract.
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Overview | Best Practice Steps | Other Helpful Info | Related Alerts
Overview
Overview
It is important that anytime revenue was billed against a contract that you're needing to credit that you credit against the contract. If you don't, then the profitability of the contract will be skewed. An example of when you may need to do this is if you overbilled usage or billed a misc. charge on a contract invoice in the past and it is too messy to void and rebill back to that period.
This best practice outlines two ways in which you can credit charges that were billed against a service contract and ensure that the credit goes against the profitability of the contract. You cannot create a misc. charge credit memo against a contract, but you can create a sales credit memo or bill misc. charges on the contract against the contract. Below illustrates how.
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Best Practice Steps
Best Practice Steps - start to finish
Method 1 - Create a sales credit memo to clear invoice charges billed to contract
1. Create a new sales invoice in your e-automate for the customer to be credited
2. Add your designated item to be used to credit the charges to the sales invoice
3. Open the line item you've added and adjust the quantity to be negative 1, add the price, add the contract and equipment and adjust tax as needed.
4. Click OK to create the sales credit memo
5. The credit memo is now created and has credited from the designated contract GL account and from that specified contract. From here, apply the credit memo to the open charges to clear them.
Method 2 - Create a sales credit memo to clear invoice charges billed to contract
1. Open the contract that the credit is to be issued on
2. Go to the miscellaneous tab of the contract and click to Add a charge
3. Select the charge code associated with the correct GL and complete the quantity as a negative 1, the rate, what invoice the charge will bill with and the billing frequency. The charge code is shown below as an example of how this is set up.
4. Save the misc charge and save the contract
5. The next time the contract bills with this charge, you can clear the credit one the newly bill invoice with the charges billed that need to be cleared by creating a payment in your e-automate for $0.00 and applying them to each other. Or you can create a misc charge invoice and a misc charge credit memo to a clearing account and apply to the newly billed invoice credit and the invoice.
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Other Helpful Info
Other Helpful Info
1. How to Create Item to be Used on Sales Credits/Invoices:
In e-automate go to Inventory > Items > Create new Item
Complete the fields for the Item as seen in the example below. Also see example of sales code which will have GL information that matches the GL the contract charge bills against.
Click OK to save the item
2. Note on Clearing Payments
If you have the opposite situation from the above where there is an unapplied payment that needs to be cleared to contract revenue, then follow these steps but do not make the quantity negative. Instead, leave the quantity a positive number so that an invoice is created that the payment can be applied to.
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Related Alerts
Related Alerts
None.
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