Manage contractual commitments with purchase agreement in D365 supply chain management

Hello Reader, In this post, I am going to deep dive into purchase agreement management in D365 supply chain and how it is useful in managing contractual agreement between an organization and the vendor. 

So, without further ado, let’s start with it.

What is purchase agreement?

It is a contract between an organization and a vendor that commits an organization to buy certain quantity or amount of product or category over a period. Against this commitment, company will receive better pricing and discounts from vendor.

This purchase agreement will be applied to different purchase orders created over a time for that vendor.

The purchase agreement that you create for a vendor takes the precedence over trade agreement that you create for the same vendor. This is in relation to price and discount only since trade agreement only deals with price and discount. This is one of the major difference between purchase agreement and trade agreement.

Now before creating purchase agreement, let's go through the setup:

Purchase agreement classification: 

It is to classify different purchase agreements created in the system. It is the mandatory configuration required while creating purchase agreement. Purchase agreement classification also has certain setups which are required by specific businesses for maintaining certain information on an agreement. 

More details are given below:

1. To create purchase agreement classification, navigate to Procurement and sourcing > Setup > Purchase agreement classification

2. Click 'New' > Enter name and Description for this classification

3. In general tab, there are several fields available which are relevant to specific businesses. Some of them are visible when public sector configuration key is enabled. Also, some of them needs to be enabled in feature management [Purchase agreement responsible party, Purchase agreement responsible status, Purchase agreement matching policy]

·  Subcontractors – This checkbox is ticked when purchase agreement require to maintain subcontractor details. We can enter details in an agreement such as start date, end date, percent participation etc.

·     Certifications – This checkbox is ticked for adding certification compliance details for the vendor. We can add certification details such as ID, type, effective/ expiration date, certifying organization, liability amount or bond limit on purchase agreement. Purchase agreement certification compliance report is used to identify the details for purchase agreement.

·     Require direct invoicing – This checkbox is ticked when direct invoicing is required. Here we don't need to release the order from purchase agreement. 'Release order' button is disabled in this case.

· Activities: This is ticked to add activities/tasks on purchase agreement. Click on 'Activities' button on purchase agreement  to add, update, or delete activities

·     Agreement classification category – This is a system defined value. presently it is setup to 'Default'

·   Line matching policy – It is the line matching policy for purchase orders released from purchase agreement. It can be company policy, three-way matching, two-way matching, or none. This will be defaulted to purchase agreement from purchase agreement classification. 

·  Primary responsible worker / Secondary responsible worker – It is primary and secondary responsible person for the purchase agreement. A secondary responsible worker cannot be defined without a primary responsible worker. This will be defaulted to purchase agreement from purchase agreement classification

Once purchase agreement classification is defined, next important parameter is purchase agreement commitments. Let's get to know more about various commitments available for purchase agreements:

Purchase agreement commitments 

It is nothing but commitment that is being made by an organization with the vendor and this commitment can be fulfilled through different purchase orders. This commitment is applied to all the items/categories in an agreement.

There are four types of commitments available in the system:

• Product quantity commitment: It is the commitment to purchase specific quantity of a particular product. It is the default commitment while creating an agreement
• Product value commitment: It is the commitment to purchase certain amount of a particular product from a vendor (in the currency agreed with the vendor). 
• Product category value commitment: It is the commitment to purchase certain amount of products from a specific procurement category. 
• Value commitment: It is the commitment to purchase certain amount of products across categories. 

Note: When value commitments selected, the quantity, unit, unit price fields are disabled, and net amount field is enabled in purchase agreement lines for item/category.

    

    Now as we know about classification and commitments, let's create purchase agreement in the system

 1. To create purchase agreement, go to Procurement and sourcing > Purchase agreements > Purchase agreements.

 2. Select vendor to create an agreement. Details for the vendor will be defaulted to purchase agreement such as name, invoice account, currency etc. from the vendor details form. This can override if require. Also we can add the delivery address where vendor is going to deliver material. By default, company address will be defaulted.

3. Effective date: It is the date on which purchase agreement will become active. This date is agreed with the vendor during agreement negotiation. It will be defaulted to the date on which agreement is created but can override with the agreed date

4. Expiration date: It is the date on which purchase agreement will become inactive. This date is agreed with the vendor during agreement negotiation. This date is blank by default but can override with the agreed date

5. Vendor reference is any specific code or number from vendor system to identify this purchase agreement

 6. Document title and external document reference are the free text field to maintain further details for the purchase agreement 

7. Default commitment: Default it is Product quantity commitment but can override depending on what commitment has been made by the organization with vendor. To keep it simpler, in this example we are selecting product quantity commitment 

8. Project ID: The agreement can also be link to a project. This happens when the requirement is in respect to specific project i.e. All purchases that will happen based on this agreement will be recorded as project transactions. It will be used to get special prices and other services for items from vendor for project specific orders. When it is linked to a project, you can add project id, project category and activity number of the project in purchase agreement "Line details", Project section

9. You can also link your agreement with parent agreement if any 

 

10. Click Ok to create purchase agreement

11. Add other details in the agreement header such as Payment terms, payment method, cash discount, Delivery mode, delivery terms, misc. charges based on the agreed terms with vendor.  

12. Once agreement header is created, add item/category with details such as quantity, unit price, site, warehouse, discount, discount percentage etc. in the agreement lines

13. You can also select Expiration date on the purchase agreement line. This date takes precedence over expiration date selected in the header 

Once agreement is created, there are following setups/details that can be taken care in the purchase agreement line details as it changes the way purchase agreement is link to your purchase order.

 14. Go down to "Line details" tab, General section 

 - Max is enforced: It means total quantity or amount specified on the purchase agreement line against the commitment is the maximum quantity or amount that can be released into purchase orders. If new purchase order is released then only the remaining amount or the quantity will be released. If Max is not enforced, any quantity or amount can be selected when you release the order. This is based on the agreed terms with the vendor

E.g.: If for an item ABC, the quantity specified is 10. The first purchase order is released for quantity 6, then for the second order, only 4 or less quantity can be released as total quantity is 10 is only allowed to release to purchase order from an agreement

- Release limit: It is the maximum and minimum amount that is allowed to release to a purchase order line. This range is setup depending on the agreement with the vendor.

15. Go down to "Line details" tab, Price and discount section 

- Price discount is fixed: Ticked this checkbox when price and discount specified in the agreement is fixed and same must be present on the purchase order line. If for any reason, price or discount is changed on the purchase order line, the link to the purchase agreement will be broken. System will display the warning that seeks the consent before breaking up the link. If link is broken, the system won't be able to track the fulfillment and purchase order will be treated as independent of the purchase agreement. 

Note: It makes price information mandatory in the agreement. Also the price on the purchase agreement cannot change once purchase order is released from the agreement.

16. Go down to "Line details" tab, Fulfillment section 

- Fulfillment: It tracks the progress of commitment that is being made as a part of purchase agreement by both the parties.  It tells you how much quantity or amount is released or remaining. It also tells you how much of the released quantity is received or invoiced.

17. Go down to "Line details" tab, financial dimension section 

- Default financial dimension: Add financial dimensions to the agreement header/ lines, these dimensions will flow to purchase order when released

18. The above steps should be repeated for each line in the agreement.

19. Once agreement is ready, you can see status of an agreement is 'On hold' that means no release can be made from an agreement

20. To activate the agreement, click on confirmation, Alternately, you can manually select an option as effective from on hold from the dropdown in purchase agreement header

Confirm purchase agreement

 

21.  Click on confirmation, select the 'Mark agreement as effective' to yes and click Ok. It will post the purchase agreement confirmation

22. Upon confirmation, you can see purchase agreement is now effective

23. Agreement is effective means it is ready to release to purchase order lines. 

24. You can also check the purchase agreement confirmation journal. System maintains the version as soon as purchase agreement is confirmed. It is advisable to confirm the purchase agreement as and when you make changes to it so that history of all the changes can be maintained. This can also be printed and send to vendor when seeking an approval from the vendor for the changes done

25. Alternatively, before posting the confirmation, you can print pro forma confirmation to get all the agreement's agreed terms verified with the vendor beforehand

26.  Purchase agreement approval workflow can also be used to manage the approval when changes are done to the agreement

One purchase agreement is ready and effective, it can be used in purchase order. there are various ways to do it:

 - Select purchase agreement while creating purchase order. This way link will be established with the purchase agreement. In several other functionalities, you will get an option to search for purchase agreement while creating PO automatically like while creating purchase order from sales order. This is a preferred way where user just need to select purchase agreement while creating an order and select same items in purchase order lines as it is available in the agreement. In this case, the purchase agreement line should be valid on the date of delivery of purchase order line item

 - In master planning, after firming the planned order, the purchase order will be created by using the purchase agreement. This depends on the setups done in the master planning parameters.

- Request for quotation: agreement can also be created from RFQ. When RFQ bid is accepted, the purchase agreement is created if RFQ type is 'Purchase agreement'

 - Release purchase agreement: in this case, purchase order is released from purchase agreement. Details are given below:

Release purchase agreement

27. Once purchase agreement is created, you can release it to the purchase order. It is nothing but placing an order to buy certain quantity or amount of items from vendor. 

 28. Click on Release order

29.  As we have selected product quantity commitments, enter purchase quantity for releasing it into purchase order

30. Other details such as item number, name, unit, site, warehouse will be defaulted from the purchase agreement

31. Verify the delivery address and click on 'Create' button

Note: If the agreement has quantity commitments, you can prepare the lines for the release order in the lower section of release form. If the agreement has value commitments, you must enter such order lines after you have created the release order i.e. no lines will be visible in the release order form when commitment is other than quantity commitments and such lines will be entered when order is created

32. Once agreement is release, click on Release order lines to check the details of purchase order lines.  

33. You can see the purchase order is created against the agreement

34. Click on purchase order hyperlink to view the details of the purchase order. You can see purchase agreement details will flow to purchase order such as item, unit price, quantity, site warehouse etc.

35. You can now process the purchase order as like any other purchase order. You can add other items to your purchase orders if require.

36. Once purchase order is processed completely, you can check the details in the purchase agreement 

37. Go to Line details --> Fulfilment tab --> You can see released, received or invoice quantity from the agreement  (In this agreement, we have selected product quantity commitments, hence fulfillment will be tracked for the quantity of an item selected in agreement line)

38. If release order is invoiced, you can also see the invoice lines from the purchase agreement

Once agreements are processed, the fulfillment details of different agreements can be tracked through below report.

Purchase agreement fulfillment report

This report is used to track the fulfilment of purchase agreements. You can run this report per agreement. per commitment types, per item number, earliest effective date, latest expiration date, per vendor account etc.

To run the report, go to Procurement and sourcing > Purchase agreement > purchase agreement fulfillment report.

Close purchase agreement

1. You can restrict the purchase agreement from being used by marking it as closed. You can make it effective anytime if required

2. Select the status as 'Closed' in the agreement header

  3. Once closed, you can see options are disabled hence agreement can't be processed further 

Delete purchase agreement

Once quantity or amount is released to purchase order, agreement cannot be deleted. Prior to release, it can be deleted.

Intercompany purchase agreement

Just like intercompany sales and purchase orders, you can also create purchase agreement in one legal entity and its associated sales agreement will automatically be created in other legal entity and vice versa. Precondition is there should be a intercompany trading relationship exist between vendor and customer in different legal entities. I will dedicate separate post for this functionality

So that's it for this topic. I hope it turns out to be useful for all the readers.

In the upcoming topics, I will discuss in detail on more functionalities around purchase/ sales agreements. So Stay tuned & Keep sharing !!!

Abhijeet Hele |  Dynamics 365 Enthusiast | My Profile | 

The information provided on this site represents my own opinion/view and does not represent the opinion/view of my employer or Microsoft.

[Part-1] Royalty claim management in Microsoft Dynamics 365 Finance and Operations: - Setup

Hello Readers, this post is about royalty management in Dynamics 365 F&O. Below are few set of questions that pops up in mind when we say 'Royalty':

- What is royalty?

- Why one should pay the royalty?

- On what products and services, one should pay the royalty?

- Which parties are involved in royalty agreements?

- How D365 F&O manages the royalty life cycle effectively?

These and other set of questions that I am going to address in this post.

Royalty is a monetary reward (Payment or Fee) given by one party (Licensee) to another party (Licensor). Those two parties are 'Licensor' and 'Licensee'. Licensor is an entity (Person/ Organization) who owns the asset or Intellectual property such as Patented product. Licensee is an entity who is seeking the rights to use those assets or intellectual property to earn the revenue and pay the royalty (share) on every sell that happens as per the agreement.

Royalty assets are nothing but an intellectual property solely own or patented by the licensor. Licensee has to sign an agreement with Licensor that is called royalty agreement which mentions all the terms and conditions for using the intellectual property/ Assets. The payment that is being made to licensor by the licensee is called 'Royalty'. 

The entire royalty life cycle, right from getting into the agreement by both the parties after the terms and conditions are agreed upon to processing the royalty claim for facilitating the payment to licensor is manage effectively in D365 F&O.

Advantages of royalty management 

• It will reduce the manual and administrative error occurs while managing royalty life cycle
• By accruing for future payables, cash flow forecasts can be Improve
• Different terms and conditions of royalty contract can be accommodate effectively in royalty agreement

So, let's get started with the setup in the system:

Enable configuration key

First thing is to enable the configuration key for royalty (if not enabled already) from the license configuration setup in order to use royalty management functionality in D365 F&O.

• Go to system administration > Setup > License configuration

• Ticked the Royalty checkbox under Trade > Trade agreements section (if not ticked already)

Account payable parameters

1. Go to Accounts payable > Setup > Accounts payable parameters

2. Click on Broker and royalty tab > Royalties section

3. Starting day of week: It is used when cumulating the royalty by week. If 'Sunday' is selected, the it will consider a week from Sunday to following Saturday for cumulating the royalty by week. 

4. Accrual journal name: It is the daily journal which will be posted when royalty claim is approved

5. Accrual account: It is the main account (Liability account) which will be credited when accrual journal is posted

6. Expense account: It is the main account which will be debited when accrual journal is posted

7. Procurement category: It is the default procurement category for royalty. 

8. Once values are entered for the above fields in Broker and royalty tab, go to Number sequence tab in accounts payable parameters

9. Select the number sequences for royalty contract, royalty code, royalty claim ID, royalty claim vendor invoice id as these are required while generating royalty claim, royalty claim vendor invoice etc. 

10. Once setup is done, system is ready to create royalty agreement for setting up the terms and conditions which are agreed upon.

Create Royalty agreement/Contract

Set up the royalty agreement between licensor and licensee which will be approved and applied to sales order for royalty payment calculation.

1. Go to Accounts payable > Broker and royalties > Royalty agreements

Upper pane

2. To create new agreement, click 'New' 

Note: Royalty contract id will be generated automatically from the number sequence selected in Accounts payable parameters

3. Vendor account: Select vendor account. The royalty will be paid to this vendor (Licensor), once claim is settled

4. Description: Enter the description to identify each agreement uniquely such as 'Trademark royalty'

5. Unit: Select unit of measure such as ea., pcs etc. depending on what products will be sold as a part of royalty agreement

6. Unit type: Once unit is entered, select unit type that can be Inventory unit or Catch weight unit (for perishable items) that is represented by the product. Select the value from the dropdown

7. Unit of measure royalty options: This can be Convert or Exact match i.e. whether unit for the item in sales order should exactly match with unit given in royalty agreement or should the conversion be allowed. Select the value from the dropdown

8. Calculation date type: It is the date which is to be considered from sales order line(s) while calculating the royalty such as, created date, requested ship date or requested receipt date. Select the value from the dropdown.

9. Start date and end date: Enter the date during which royalty agreement will be valid.

10. Cumulate sales by: how do you want royalty to be calculated i.e. per invoice, per week, per month, per year or by other specific date. It specifies the period for royalty calculation (Week, month, year). If invoice is selected, the royalty will be calculated automatically every time eligible sales order line is invoiced. (In this case royalty claim directly gets the status as 'Calculated').  Select the value from the dropdown.

11. Price (taken from): Which amount from the sales order line should be considered for calculating the royalty such as net amount or gross amount. Select the value from the dropdown

12. Accrual accounts and expense account: Values for these fields will be copied automatically from the accounts payable parameters and can be overridden in the agreement. These are used while posting the accrual journal when royalty claim is approved

13. Currency: Select the currency for royalty agreement. Royalty payment terms will be in this currency which will be used in royalty calculation

14. Calculate by: How do you want to calculate the royalty i.e. by quantity or by amount. Either the quantity or the amount (Net or gross) will be considered from sales orders to determine the tiers for applying the royalty amount (For example: if quantity is selected, the overall quantity from the sales orders in the given period will be considered to decide which royalty amount will be applied from the agreement for royalty calculation)

15. Validation: To validate the agreement, click on Validation button in the upper pane of the agreement. Validated checkbox will be ticked automatically when royalty agreement is validated 

16. Approval required: It should be ticked manually if approval is required while processing the royalty claim

17. Optionally, list of items can also be assigned at the header level and for that go to selection tab

18. Once values are entered in upper pane, fill in the details for lower pane to make this agreement ready to use.

Lower pane

To enter the details, click on 'Add line'. Here we are creating an example where 7 USD per unit of royalty will be paid for items 1000 and 4402 if quantity is sold between 1 to 1000 and 9 USD per unit of royalty will be paid if quantity is sold between 1001 to 5000. Beyond 5001 quantity, 10 USD per unit of royalty will be paid.

19. Royalty code and description: Royalty code will be generated automatically from the number sequence and description will be copied from the header automatically which can be override if require

19. Vendor account, calculation date type, currency, unit, start date and end date will be copied automatically from the header level (Upper pane). These details can be override if require for each royalty agreement line

20.  Amount type: The amount type can be Amount per unit, Fixed amount or Percentage. Once royalty amount is entered in the royalty agreement, that amount will be applied to sales order as per the amount type. For example, If Amount per unit is selected in the Amount type field and royalty amount value is 7 USD for some specific quantity then it means 7 USD per unit of royalty will be calculated when applied to the sales order

20. Now go to selection tab, click on add line/ Add lines to enter the item(s) for which royalty will be paid

21. Enter unit, site and warehouse for the selected item(s)

22. Once item(s) are entered, go to Royalty amounts tab for setting up the royalty amount values for specific quantities or amounts (depending on what value is selected in calculate by field)

23. Enter From value and To value. It can be quantity or amount depending on calculate by field value

24. Enter the value for calculating the royalty. In our case we have selected Amount type as 'Amount per unit', and value selected here is 7 USD for 1 to 1000 quantity, it means for quantity up to 1000, royalty will be 7 per unit and so on.

25. Once values are entered, it is time to validate the royalty agreement to verify if all the mandatory fields are properly entered and no business rules are violated

26. Click on validation button. You can see worker id associated with your user account will come in validated by field. Click ok

27. Once validation is done, you can see validated checkbox is ticked automatically. Also see the worker name in the validated by field (worker associated with your user account)

Note: Upon validation, this agreement will be disabled and no further changes are allowed.

Hope!! Everyone gets clear understanding of how setup is being done for enabling royalty claim for orders in D365 F&O

Please post if any queries and do let me know if any suggestions for improvement.

See you soon with new post

Happy D365ing !!!

-------------------------------------------------------------------------------------------------------------------

Abhijeet Hele |  Dynamics 365 Enthusiast | My Profile | 

The information provided on this site represents my own opinion/view and does not represent the opinion/view of my employer or Microsoft.

Broker Commission / Broker Contract Management/ Brokerage in D365 F&O

Hello readers, In this post I am going to explain the broker contract management or broker commission / fee management in D365 F&O.

In broker contract management, company enters into the contract with broker for receiving broker's service for selling of item(s). For example: company enter into the contract with broker for selling of particular brand of shoes.

In this case, broker will sell the item(s) on behalf of company and earn the commission against each sell. Commission can be based on number of item sold or the amount of item sold. The commission will be calculated as a percentage of sell or fixed amount or amount per pcs (Per unit)

This is a good marketing strategy for boosting the sell of item(s) and having this functionality available in the system, certainly make the task easier for the company as managing the brokerage payment or broker fees will be easier through broker contract management which will reduce the burden

Setups:

You need to perform following setups in the system to manage the broker contract.

Accounts payable parameters:

1. Go to Accounts Payable > Setup > Accounts payable parameters

2. Click on Broker and royalty tab > Brokerage section 

3. Differential journal name: Select the journal name (Journal type 'Daily') from the dropdown . This journal is used to post the cancelled brokerage amount

4. Expense journal name: Select the journal name (Journal type 'Daily') from the dropdown . This journal is posted when broker claim is approved. This journal reverses the posting which is done in the form of charges when sales order is invoiced

5. Manual posting: Manual posting checkbox needs to be checked if you want expense journal to post automatically when brokerage claim is approved

6. Procurement category: select procurement category to which commission will be applied

Once this setup is done. Go to the Number sequence tab in Accounts payable parameter:

7. Select number sequence code in Broker claim invoice. It is the invoice id of the vendor invoice generated when approving the broker claim

Setup differential reason

1. Go to Accounts payable > Broker and royalties > Differential reasons

2. Select differential reason for broker commission such as order return and select the main account for posting this difference in differential journal.

3. Select reason code, description and main account

Setup charge code to calculate brokerage during sales invoice

These are the charges which are applied to sales order for broker fee calculations.

1. Go to Accounts receivable > Charge setup > Charge code

2. Select Charge code, Description, debit & credit ledger account and posting types as 'broker fee'.

3. Ticked prorate checkbox so that charge will applied on prorate basis

4. Select item sales tax group if you want tax to be applied on charges.

Once all the setups are done, it is the time to setup broker contract in the system.

Setting up the broker contracts

Broker contract is like an agreement with vendor/broker that specifies the fee or commission, a broker will receive against the sale of item(s) when claim is settled.

1. Go to Accounts payable > Broker and royalties > Broker contract

2. You can see there are two sections: upper pane and lower pane. 

• Broker contract: Upper pane maintains the broker contract status, broker account (Vendor account), validity period etc. 
• Contract details: Lower pane maintains the items details, charge code, brokerage value in terms of percentage, fixed value or per unit, currency etc.

3. Here we will create a new brokerage and for that click on 'New'

In the upper section, enter broker contract information:

4. Status: You can see status of the broker contract is 'Planning'. It is the first state where all the planning and agreement happen with vendor/broker

5. Broker contract ID: Enter broker contract id and description which will uniquely identified the broker contract

6. Broker vendor account: Select vendor account from the dropdown. This vendor is nothing but a broker who is responsible for selling the item(s) for earning the commission

7. From date and To date: Select validity of the broker contract. It is the duration during which broker contract will be valid and brokerage will be calculated against the sell of item for the broker. Select 'From date' and 'To date'

8. Charge code: Select the charge code which was created during the setup. It will be applied to sales order for generating the brokerage amount

9. Category: Select category. It is nothing but the way brokerage will be calculated. 

• Pcs: This can be based on quantity i.e. broker fee will be generate based on the quantity of item(s) sold.
• Percentage: If this is a percentage, the brokerage will be calculated as a percentage of total amount of item sold in the sales order line
• Fixed value: It is a fixed amount, broker will receive against the sale of item in the sales order

10. Charge value: Once category is selected, enter the value in charges value field. It is the value which will be used for calculating the brokerage

11. Charge currency code: Select charge currency code as well for applying the charges in that currency

Once values are entered in the upper pane, go to the lower pane to select contract details which are applicable to this contract such as specify the product code type, Item relation and customer or customer groups to which this contract is applicable etc.

In the lower section, enter broker contract details information:

12. Once details are added in the upper pane, go to lower pane and click on Add line to add item(s) and other details for setting up the contract

13. Product code type: Select product code type as 'Table' (For single item), 'Group' (Group of items) or 'All' depending on to which item(s) you want this contract to be applied i.e. for single item, or for specific group of items or for all items sold by the company

14. Item relation: Once value is selected in product code type, select item relation value accordingly i.e. If table is selected in  product code type then select a item number in the item relation field. It means broker contract is applicable to this single item. If Group is selected in  product code type then select item group in the item relation field. it means broker contract is applicable to this particular group of item. If 'All' is selected in product code type then item relation field is disabled as it means brokerage is applicable to all items in that legal entity

15. Party code type: Select party code type as 'Table' (For single customer), 'Group' (Group of customers) or 'All' (All customers) depending on to which customer(s) you want this contract to be applied

16. Account selection: Once value is selected in party code type, select account selection value accordingly i.e. If table is selected in party code type then select a customer in the account selection field. It means brokerage contract is applicable to sales order created for this single customer. If Group is selected in party code type then select customer group in the account selection field. It means brokerage contract is applicable to sales order created for this particular group of customers. If 'All' is selected in  party code type then account relation field is disabled as it means contract is applicable to all the customers in that legal entity

17. Break type: In the Break type field, select either quantity or amount which act as a basis for calculating the brokerage amount

18. Break: In Break field, we can specify the break value for the quantity or amount as selected in the Break Type field. Value entered here will act as a minimum quantity or amount for calculating the brokerage as per the break type selected

19. Values for other fields such as category, charges value, charges currency code will be flow automatically from the header which can be overridden as needed.

20. Once details are entered in the lower pane, status of the broker contract should be changed from planning to approved. Once status is approved, no further changes to contract terms are allowed.

Note: Contract terms cannot be applied to sales order unless the status of the broker contract is changed to approved.

21. There are other statuses as well which can be used as needed for the broker contract:

• Canceled: when contract with the broker is cancelled, the status should be changed to canceled
• Closed: when contract with the broker is over, the status should be changed to closed.

22. Once status is changed to approved, the contract is ready to be applied to sales order for calculating the commission/ fee for the broker.

Create Sales order 

1. Now create sales order by taking same customer and item(s) which was the part of broker contract

2. To view the commission calculated as per the broker contract, click on sales order line > Broker commission

3. You can see commission will be calculated for item 1000 as below:

In this 5 quantity is selected in the sales order line. and in the broker contract 10 percent brokerage is promised for minimum of 5 quantity.

         Net amount = 9500 for the sales order line 

         10 % of net amount = 9500 * (10/100) = 950

Note: Here minimum 5 quantity is required in order to generate the commission for broker as that is the break quantity for this item in broker contract.

4. Similar is the case with other brokerage calculations as well:

 For item 4401: (Fixed amount 5 USD is applied)

For item 4402:

5. This is the as on commission based on the current values (quantity, net amount) on each sales order line. Value of the commission can be changed in case values from the sales order line are changed. This can be possible unless sales order is not invoiced

6. Once sales order is invoiced, we can see commission is available for claim for the broker. Until this time, commission is only calculated based on the current sales order line values. Once sales order is invoiced, the calculated commission is posted in the ledgers defined in the broker charges and is also available in the broker claim form for realizing it for the broker.

7. You can view the posted commission in the ledger account defined in the broker charges during setup and from the trail balance as well. This amount will then be reversed when broker claim amount is actually settled.

Broker claim

1. Go to Accounts payable > Broker and royalties > Broker claim

2. We can see broker payment is available for the sales order in the open status in broker claim form. We can see the total amount of brokerage generated against the sales order along with other details such as broker (vendor) id against which this brokerage is generate, total qualified amount for brokerage, total invoice amount and charge code etc.as seen above.

3. This form displays all the brokerage generated in the system along with its status (Open, Closed and All)

4. Once Broker claim is review, it needs be to approved and for that you need to enter the amount under 'Approving' field in broker lines 

5. Click on 'Approve'. Once approved, you can see the amount under approved field in the broker claim header and lines. Broker claim header displays the consolidated value of approved amount from broker claim lines

6. Also once you click on approve, system automatically creates the vendor claim invoice and post the expense journal in the general journal section.

Note: Manual posting checkbox is not ticked in the accounts payable parameter during setup hence you can see expense journal is posted automatically. If review is needed before posting then tick the manual posting checkbox.

7. Go to the expense journal, you can see the commission which was posted against the sales order in the form of charges will be reversed i.e. what was credit earlier is debited now and what was debited earlier is credited now in the expense journal. (You can also see these postings (debit/credit) in the trail balance or in those ledgers as well)

8. Apart from posting in the expense journal, it also generates the vendor liability in the form of vendor claim invoice. Go to the vendor invoice/ transactions to view the details

9. This broker commission which is now available as vendor liability will be settled either through payment (payment journal) or by other means as per the standard D365 F&O practices.

Close broker claim

1. Go to Accounts payable > Broker and loyalties > Broker claim

2. Marked the broker claim for closure

3. Click on Close

Note: you can also mark individual broker claim lines and close them instead of closing the entire broker claim.

4. Once closed, you cannot edit the broker claim further, Also you cannot open it again.

 

In this way broker contract is setup in the system and broker payment/ fee is managed.

Hope!! Everyone gets clear understanding of Broker Contract Management in D365 F&O

Please post if any queries and do let me know if any suggestions for improvement.

See you soon with new post :-)

Happy Daxing !!!

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Abhijeet Hele |  Dynamics AX Enthusiast | My Profile | 

The information provided on this site represents my own opinion/view and does not represent the opinion/view of my employer or Microsoft.