Understanding Products and Product Groups
Core contractual obligations are the products and services that an organization provides to its customers. In PeopleSoft Contracts, you define a standard set of products; associate them with a set of attributes that include pricing structure, tax parameters, and accounting information; and then use the products in your contracts.
Here are the steps for defining products and product groups:
Define a product group and identify it as a Contract product group type.
Define contract attributes for the product group.
Define the product.
Define the list price (optional).
Define the revenue price using price lists and price rules in the Enterprise Pricer (optional).
Associate a product to a product group and type.
Define product rate defaults (optional).
Note: You can define a product without a product group. In that case, follow steps 3, 4, 5 and 6 only.
This section describes:
Product groups.
Price types.
Product kits.
Ad hoc products.
Renewable products.
Product Groups
A product group is a high-level grouping of products. Product groups enable you to categorize products based on a business model. When you define an individual product or a product kit, you can optionally associate a product with a product group. If the product group is tagged as a Contracts Product Group, you can define additional attributes (Contract Product Group Options) such as the contract liability and contract asset distribution code on the Contract Product Group Options component. If you associate a product with a product group that you linked to an contract asset account, when that product is added to a contract line, that contract line inherits the product group's contract asset account information. When you select that product onto a contract line, the distribution code table is populated with the contract asset account information defined at the product group level. When you select products that are not associated with a product group onto a contract line, the distribution code table is populated with the contract asset account information that you defined for the PeopleSoft Contracts business unit on the contract header.
Price Types
Products in contracts are rate-based, amount-based, or recurring. Rate-based products have a price type of Rate, amount-based products have a price type of Amount or Percent, and recurring products have a price type of Recurring. The price type that you select for a product determines the details that you define for that product and the billing and revenue recognition methods with which you can associate the product.
This table shows the valid revenue recognition and billing methods for each price type:
Note: You select the revenue recognition method when defining a product. However, you do not select the billing method at that time.
|
Price Type |
Revenue Recognition Method |
Billing Method |
|---|---|---|
|
Amount or Percent |
Milestone, Percent Complete, Apportionment, Billing Manages Revenue |
Milestone, Percent Complete, Immediate |
|
Rate |
As-incurred |
As-incurred, Value-based |
|
Recurring |
Billing Manages Revenue |
Recurring |
Defining Rate-Based Products
You can optionally set up product rate defaults, where you can associate multiple PeopleSoft Project Costing rate sets or rate plans with a single PeopleSoft Contracts product ID. This enables you to set up unique rates in different PeopleSoft Project Costing business units and refer to them with a single PeopleSoft Contracts product ID.
Define your rate defaults on the Product Rate Defaults page by identifying a PeopleSoft Project Costing business unit with either a rate set ID or a rate plan ID. Once you make this association, the system uses this rate set or rate plan as the default for the product.
Defining Amount-Based Products
You can set up an amount-based pricing type as either a fixed amount or a percentage of the total contract value.
Defining Recurring Products
For recurring products, you must set up a contract with a Recurring billing method and a revenue recognition method of Billing Manages Revenue.
Product Kits
A product kit is a collection of products. Products or services are often sold as part of a product kit. When you select a product kit for a contract, an individual contract line is created for each product within the product kit. Product kits can contain both rate-based and amount-based products.
Ad Hoc Products
An ad hoc product is a product that you define during the contract entry process. Any ad hoc products that you define for a contract are available for use only on the contract from which they were created. Otherwise, an ad hoc product is essentially the same as a regular product. Ad hoc products share the same key structure as regular products. Consequently, an ad hoc product cannot share the same product ID with an existing product ID, or with an existing ad hoc product that is on another contract.
An ad hoc product that you define during contract entry can be converted into a regular product. When you convert an ad hoc product into a regular product, the system indicates that the product is no longer an ad hoc product, and the product is now available for selection onto other contracts. The system creates the product definition data for the new product based on the existing data for the ad hoc product on the contract line.
Renewable Products
You can designate a fixed-amount product or service as renewable when defining a product by selecting the Renewable check box on the Product Definition - Contract Options page. In addition, you must select a default Renewal Action option to designate whether the renewable product is a manual or an automatic renewal. The renewable action appears by default with the product and is stored on the renewable contract line. This renewal action drives the behavior of the renewal plan associated with the contract line. With automatic renewals, the system processes the renewal when the specified criteria are met. The renewal action can be overridden when selecting the renewable product onto a contract line. Optionally, you can select a default renewal plan template for the renewable product.