In this topic, you will learn how to better understand contract amendments.
Steps:
This diagram represents the amendment process flow. It displays the process that occurs when an amendment is initiated and the option to adjust events retroactively is selected.
Step 1The diagram shows one possible scenario for amendment processing. In this scenario, the user has chosen to adjust events retroactively. If this option had not been selected, the system would not automatically create amended events.
Step 2When a contract is in a pending status, it is considered to be a work in progress; therefore, any changes that occur before the contract is activated can be made within the
contract.
Step 3Billing and revenue plans can be created before or after a contract is activated.
Step 4When the system processes an amendment that affects a contract line that is associated with a revenue or billing plan, it does not allow the plan to continue processing until the plan is reviewed and any necessary changes are made.
Step 5This diagram shows the general process flow that is associated with contract processing. It is assumed that you have created a contract, added contract lines, allocated contract amounts across contract lines, and activated the contract. It is also assumed that the contract contains amount-based contract lines that have
been billed and that revenue has been recognized, based on milestone events.
Step 6Price change occurs for contract line assumes that the contract is active, a problem arises with the customer, and we agree to a concession. In this scenario, we agree to reduce the price of one of the contract lines. The contract line that will be reduced is tied to the milestone billing and revenue plans.
Step 7If the contract is not active, the price change is incorporated into the amount allocation process for the contract as a part of contract negotiations. Billing and revenue plans are built according to the final contract line price amount. Amendment processing is not required.
If the contract is active, amendment processing is required to adjust the contract.
Step 8When a contract is active and a price change occurs for a contract line, you need to complete the Amended Amount Allocation page. Amended amount allocations can occur for an entire contract amount or one contract line. You need to indicate the total amended amount and then allocate that amount, as needed, to all applicable contract lines.
This scenario adjusts billing and revenue retroactively (selects the Adjust Billing and Revenue Retroactively option). If this option is not selected, the system would not automatically create amended events.
Step 9If events have been processed for billing or revenue when an amendment is processed, the system automatically creates an amended event in the amount of the processed event. The billing and revenue plans are placed in an action-required status and are not processed until you review and update the plans. While reviewing the billing and revenue plans, you may need to reallocate the events so that your total event allocation is 100 percent.
Step 10Using amendment processing, you can make changes such as activating pending contract lines, cancelling active contract lines, adding additional products and services, or changing the amount for amount-based contract lines.
For all kinds of changes to a contract, you need to perform some basic steps. This diagram illustrates the steps to perform a contract amendment.
Step 11Before you create amendments, you need to specify amendment types and amendment reason codes. This provides you with a quick explanation of why the contract is being modified and what type of amendment is being made.
Step 12The amendment type is a high-level classification that you assign to an amendment. This diagram illustrates examples of amendment types.
Use the Amendment Type page to define amendment types for your business needs. You enter an effective date and status for your amendment types on this page. This data is informational and does not impact the amendment processing.
Step 13Amendment reason codes enable you to link an explanation to an amendment type. When processing the amendment, you specify the reason for which the amendment was initiated. The reason codes are informational and do not impact the amendment processing.
This diagram illustrates examples of amendment reasons.
Step 14An amendment status controls the time when you can enter data for an amendment, when the application can process an amendment, and when an amendment is made effective. An amendment can hold four statuses. This diagram illustrates the amendment statuses.
When working with amendments, the amended information is stored in a separate table until it is processed to a Complete status.
Step 15Complete is the default status assigned to an amendment when an amendment is created for a contract.
Step 16You need to manually change the status of an amendment to Ready. A ready amendment is processed by the system. All edit checks are also performed at this stage.
Step 17The amendment status is set to Complete after the amendment application engine is executed and the amendment is processed. At this stage, the amendment is active and is accessible to the users.
Step 18You need to manually change the amendment status to Cancelled. You cannot change the status of an amendment after it is cancelled.
Step 19Congratulations, you have successfully gained an understanding of contract amendments. A contract amendment is a change made to an active contract where you modify the original terms and conditions of the contract. The contract is amended using the Amendment Processing feature. Amendments can have these statuses: Pending, Ready, Complete, or Cancelled.