The generation of an A/R invoice out of the Contracts differs from the standard generation of an A/R invoice in Eralis Job as the Contract invoice is not based on work that has been carried out on a Job. Instead, the invoice is based on predefined Contract phases or billing milestones.

Any invoice raised from a Contract does not impact the income statement but rather, the revenue portion of the invoice is posted directly through to the Contract Control account in the balance sheet. This account is essentially a deferred income account reflecting the value of invoices generated that are not entitled to be reflected as income in the income statement.

The A/R invoice generated from the Contract module is a service type invoice and not an item-based invoice. This means that the lines of the invoice reflect a General Ledger account directly, rather than an Item Code from the SAP Business One Inventory module.

A key principle of the Contracts module is that the invoice process and the work done on a Job are separate processes. This means that the invoice can be generated on a Contract even if no work has been done on the Job.

Phases of a Contract can be linked directly to either a single or multiple Subjobs. This is intended to provide more accurate reporting for Subjob profitability.

Fundamentals of Contract Invoicing

When generating an invoice, the user can choose the phase they want to invoice for, along with the value to be invoiced.

The system allows the user to invoice multiple phases in one process, along with providing an option around how the user wants the invoice to be generated. The user can have an invoice for each phase so that, in instances where multiple phases are being invoiced, multiple invoices will be generated, or the system can consolidate the phases into a single invoice with multiple lines for each phase.

Within the Contract phase, the user can set a retention value for amounts relating to a phase that should be held off from invoicing until a later event is achieved. The system allows the consolidated invoicing of phase amounts and retention amounts in a single invoice.

Users are able to specify a variation amount against each phase to report on initially agreed Contract values and any subsequent variations to those values.

Retentions and Variations

Retentions are available on a phase-by-phase level to identify a value that needs to be held back with invoicing until a certain event has been achieved. The event may be a time-based event (for example, six months after the completion of the project the company is entitled to bill the retention) or it may be some other contractual event.

On each phase, the user is able to identify the percentage or values of the retention that needs to be withheld.

The system will then move the retention values to the Retention grid on the Contract screen and limit the value of the phase line that can be invoiced, to the phase value less the retention value.

When the event relating to the retention is achieved, the company can invoice out the retention value. If this coincides with the invoicing of a phase, the company can generate a consolidated invoice displaying the value of the phase being invoiced and the retention being claimed.

A variation can also be applied to each phase line. This allows the company to track the initial value of the Contract, plus any agreed variations after the initial Contract was set. From an invoicing standpoint, the maximum value that can be invoiced on a phase line is equal to the initial value of the contract plus the variation amount specified, less the retention applied to the phase line (the retention is invoiced out from a retention phase line and not the original phase line).

When generating the invoice print layout, the company can display the initial contract value, agreed variation, less retention to illustrate the current claim.

Journal Entries

The journal entries that result from Contract invoicing differ from journals that would be created from a standard A/R invoice. This difference is due to the fact that no revenue is posted to the income statement from the Contract invoice. Instead, the revenue portion is posted to the balance sheet into a Deferred Income account.

The Contract Control account is specified in the Eralis Job System Initialization screen, under the Contracts/Settlement tab. This account needs to be created as a balance sheet account and is usually located in the liabilities section of the balance sheet.

While this account is titled the Contract Control account, it can just as easily be referred to as the deferred Income account. This account should not be used for any processing outside of Contract processing from Eralis Job.

A/R Credit Memo

Once an A/R invoice has been generated from a Contract, no changes can be made to the invoice. The journal entry associated to the A/R credit memo is the exact reverse of the Contract invoice. The Contract Control account will be debited and the related Business Partner or A/R Control account will be credited. 

To alter the invoice value, an A/R credit memo must be raised, which will decrease the value of the Total Invoiced Amount on the phase line. The A/R credit memo must be created using the Copy To function from the A/R invoice. If the credit memo is not generated this way, the necessary links will not be available to update the Contract phase lines.

Foreign Currency

Foreign currency invoices can be generated from the Contracts module. To do so, the following conditions must be met:

1. Enable the Foreign Exchange feature in the Eralis Job System Initialization.
2. Set the Business Partner used on the Job to either a currency that it not the system currency or All Currencies.

New fields will be available on the header and rows of the Contract that allow the user to choose to work in the local currency or a combined mode where they can see both the foreign and local equivalent values.