Committed quantity usage billing
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This topic is only applicable to termed contracts. A termed contract has both start and end dates.
With committed quantity usage billing, you determine the value metric and price point for a given allotment of your product or services. Then bill your customer as they consume the committed quantity based on the usage for the billing period. You can defer the associated revenue and recognize it any way you want.
If there's overage after the committed quantity is completely consumed or if there are unused quantities when the contract line ends, you get to decide the rules for how to automate those workflows.
Both types of billing depend on usage records to calculate charges. The main difference is that variable quantity usage can be billed at different usage rates and has no lifetime quantity limit, while committed quantity usage is billed at the committed rate up to a specified quantity over the life of the contract line.
Variable quantity billing can include a flat amount that you can bill one-time, in every billing period, or in custom installments. This flat amount can include a given quantity of the item (included units). The included units can be reset for each billing period or only on renewal. When the included units are consumed, the customer is billed at the applicable usage rates if the customer continues to use the item. You can defer the revenue associated with the flat amount.
With committed quantity billing, the billing amount for the billing period = the committed quantity used x the committed rate. When the committed quantity is consumed, you can either let the customer continue to use the item and bill or track overage, or not let the customer continue to use the item. You can defer the revenue associated with the committed flat/fixed amount.
Example
Say that your company provides data storage for businesses. You offer a "save when you commit" model where you charge 0.10 per GB for customers who commit to a volume of 5,000 GB in a given year. You want to bill monthly based on the total usage for the previous billing period, so the customer pays for what they used when they used it. You want to recognize revenue using the Daily rate method.
You start a contract for your customer, Pacific Board World, and add a Quantity-based billing contract line for the data storage item. You set the Quantity type to Committed and choose options for overage and unused quantities at contract completion. When you save the contract line, Intacct automatically generates the revenue schedules based on the flat/fixed amount of 500.00 (5,000 (the committed quantity) x 0.10 (the committed rate) = 500.00).
When you add a usage record, Intacct multiplies the usage quantity by the committed rate and schedules the usage to be billed on the usage date, as in the following example:
When you generate invoices for a billing period, Intacct combines the applicable usage records into the invoice line item.
In the above example as of May 5, the total used quantity is 1,058.00. The total unused quantity is 3,942.00 (5,000 - 1,058). The total billed amount is 72.20 (47.20 + 25.00).
Overage options
Say that your customer has completely consumed the committed quantity but continues to consume additional quantities. How should Intacct account for these quantities?
There are three possible options for overage:
- Bill overage: Intacct allows you to add overage quantities and include the usage records when you generate invoices. When you add a usage record with a quantity that constitutes overage, Intacct treats the quantity as a variable quantity type and invoices it at the applicable billing price list tier rate. This usage does not appear on the billing or revenue schedules.
- Do not allow overage: Intacct prevents you from adding usage records for overage quantities. If you try to add a usage record with a quantity that constitutes overage, Intacct displays an error and will not create the usage record.
- Do nothing: Intacct allows you to add overage usage quantities but doesn't include them when you generate invoices. You can report on this usage.
If you want to bill overage, the contract must reference a billing price list and there must be a billing price list entry for the applicable item.
Unused quantity options
Say that the contract line reaches its end date, but there are remaining unused quantities. How should Intacct account for these quantities?
On the contract line end date + 1 (plus any offset value), the Intacct scheduler initiates an end date action for the contract line. There are three possible end date actions:
- Bill unused quantity: Intacct creates a usage record for the remaining unused quantities and schedules it to bill on the contract line end date. When you invoice this amount, the billing schedule is Completed.
For example, say the committed quantity is 100, the contract line end date is May 31, and the total used quantity is 80. On June 1, Intacct creates a usage record dated May 31 for the remaining quantity of 20.
The contract line Audit Trail shows the following after the action is executed: Action = Workflow, Source = System, and After = Bill unused quantity.
- Cancel unused quantity: Intacct multiplies the unused quantity by the rate and credits Unbilled AR and debits Unbilled Deferred Revenue for the resulting amount. It terminates the remainder of the revenue schedule using the contract line end date as the cancellation date. This contract line will not be renewed as the contract line's state is Canceled.
The contract line Audit Trail shows the following after the action is executed: Action = Workflow, Source = System, and After = Cancel unused quantity.
- Do nothing: Intacct takes no action. You can continue to add usage to the contract line past the contract line end date and bill against the committed quantity.
The scheduler only executes the end date action one time. If you subsequently delete the system-created unused quantity usage record, uncancel the contract line, or change the usage quantities in any way after the end action runs, you need to manually account for any unused quantity as applicable.
Before adding a committed quantity contract line
Before adding a committed quantity contract line, you may need to update your billing price list for the desired item.
Note the following expected behavior for billing price lists and committed quantity contract lines:
- You can use a billing price list entry to default the committed rate for a selected item.
- If you want to bill for overage, a billing price list with a valid price list entry for the applicable item must be specified on the contract. You won't be able to save the contract line without specifying a billing price list on the contract and saving the contract.
- Included units must be 0.00 on the billing price list entry.
Add a committed quantity contract line
| Subscription |
Contracts |
|---|---|
| Regional availability |
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| User type |
Business |
| Permissions |
Contract: List, View, Add, Edit |
| Dependencies |
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| Configuration |
The Enable usage billing checkbox must be checked on the Configure Contracts page. |
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Do one of the following:
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Add a contract line from the Contracts page:
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Go to Contracts > All > Contracts.
- Find the contract to which you want to add a contract line.
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Select More actions > Edit at the end of the row.
- Select Add located above the top-left corner of the Contract lines grid.
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Add a contract line from the Contract lines page:
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Go to Contracts > All and select Add (circle) next to Contract lines.
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Use the Contract dropdown to select the desired contract.
Intacct populates the page with default information from the selected contract.
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- Use the Item dropdown list to select the desired product or service.
- If applicable, use the calendar tool to select the desired Start and End dates or GL posting date.
- Use the Billing method dropdown list to select Quantity based.
- Select Committed as the Quantity type.
- Use the On contract line end date dropdown list to select the desired workflow for handling unused quantities.
- Use the If usage exceeds the committed quantity dropdown list to select the desired workflow for overage.
- In the Calculator, enter the Committed qty and Rate values.
The Flat/fixed amount field reflects the contract line value.
- Use the Revenue template dropdown lists to select the revenue templates and use the calendar tool to select the desired Start and End dates for each template.
If you select a Quantity-based revenue template, the Total revenue quantity will be the Committed quantity.
- Use the dropdown lists to select any Dimension values.
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Select Post.
- Do one of the following:
Open an existing contract in Edit mode. Select Add located above the top-left corner of the Contract lines grid.
The Contract Line popup window appears.
Go to Contracts > All > Contracts and select Add (circle) next to Lines.
In the Contract Line page, use the Contract dropdown list to select the desired contract.
- Intacct populates the page with default information from the selected contract.
- Use the Item dropdown list to select the desired product or service.
- If applicable, use the calendar tool to select the desired Start and End dates or GL posting date.
- Use the Billing method dropdown list to select Quantity based.
- Select Committed as the Quantity type.
- Use the On contract line end date dropdown list to select the desired workflow for handling unused quantities.
- Use the If usage exceeds the committed quantity dropdown list to select the desired workflow for overage.
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In the Calculator, enter the Committed qty and Rate values.
The Flat/fixed amount field reflects the contract line value.
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Use the Revenue template dropdown lists to select the revenue templates and use the calendar tool to select the desired Start and End dates for each template.
If you select a Quantity-based revenue template, the Total revenue quantity will be the Committed quantity.
- Use the dropdown lists to select any Dimension values.
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Select Post.
Learn more about contract line fields.
Next steps
