Understanding Prepaid Amounts

Customers can prepay for rate-based goods and services. The prepaid amount can be applied to one or more rate-based contract lines. In addition, the amount can be used against all or a portion of the billing activity for the applicable contract lines.

Note: You cannot have prepaid amounts on internal contracts.

This section discusses:

  • Prepaid balance types.

  • Prepaid statuses.

  • Prepaid amounts: billing and utilization.

  • Prepaid accounting.

  • Billing plan assignment.

  • Prepaid streamlining.

  • Prepaid balance processing.

  • Prepaid amounts: tracking.

  • Prepaid amendments.

  • Example of a prepaid.

Before you can set up prepaid amounts for a contract, you must first set up a contract.

These are the prepaid balance types:

Term

Definition

Inclusive

Prepaid amount that is included in the billing and revenue amounts of other goods or services. Inclusive prepaid amounts (also known as inclusive prepaids) are deducted from the amount to allocate on the Billing Allocation and Revenue Allocation pages. You can bill for an inclusive prepaid amount by using a billing plan that combines the billing for the inclusive prepaid amount with the billing for those goods or services with which this prepaid amount is included.

For example, you sell a software license for 500,000.00 USD, and included in that license price is 50,000.00 USD for your consulting group to install the software.

Non-Inclusive

Non-inclusive prepaid amounts are not reflected in the billing and revenue amounts of your amount-based contract products. You can combine a non-inclusive prepaid with a billing plan that also has amount-based contract lines.

For example, you offer customers a more favorable service rate if they prepay for 100,000.00 USD of consulting services.

These are the prepaid status values:

Term

Definition

Pending

When you first create a prepaid amount, Pending appears by default as the status. All fields on a pending prepaid amount are fully editable. No processing occurs against pending prepaids, so they are not subject to system edit checking. You can delete a pending prepaid.

Ready

Manually update the status of a prepaid amount to Ready after you have captured all information that is associated with the prepaid and assigned it to a billing plan. After you update a status to Ready, the system performs edit checks and the prepaid amount is eligible for initial billing and utilization.

If utilization has begun or if initial billing has been processed, the purchased amount of the prepaid can be modified using the amendment mode.

Note: Inclusive prepaids are included in the billing and revenue amount allocations when they have a status of Ready. You cannot mark allocation complete for the contract unless all inclusive prepaids have a Ready status.

Completed

Upon depletion of the prepaid balance, update the status to Completed. When the prepaid balance is complete, you cannot update the status. You must change billing and utilization directly in PeopleSoft Billing.

Cancelled

Prepaids can be cancelled from any status value. You can manually change the status of a prepaid to Cancelled if the following conditions are met:

  • The remaining prepaid balance equals the original prepaid balance.

    This condition implies that no utilization has been finalized in PeopleSoft Billing.

  • The committed prepaid balance equals zero.

    This condition implies that no utilization exists in a pending bill in PeopleSoft Billing.

  • The billing cross-reference history for the initial billing plan nets to zero or has a status of deleted.

    This condition implies that the initial bill was either credited or cancelled in PeopleSoft Billing.

When cancelled, a prepaid cannot be reopened.

This table shows the relationship between billing plan status and prepaid status:

Billing Plan Status

Prepaid Status

Pending

You can change prepaid status to any status except Completed. If you no longer want the prepaid, set it to a status of Cancelled.

Ready

You can change prepaid status to Cancelled only.

In Progress

Prepaid status is Ready and cannot be changed.

Action Required

Prepaid status is Ready and cannot be changed.

Cancelled

You can set prepaid status to Cancelled. However, if utilization has occurred, all amounts must first be backed out.

Completed

You can set prepaid status to Completed. However, the prepaid must first be fully depleted.

Recycled

Prepaid status is Ready and cannot be changed.

Reversal In Progress

Prepaid status is Ready and cannot be changed.

Reversed

Prepaid status is Ready and cannot be changed.

Note: You cannot ready a prepaid without first assigning it to a billing plan.

When establishing a prepaid amount, you must assign it to a billing plan. Either create a new billing plan for the prepaid amount or assign the prepaid amount to an existing billing plan that is associated with fixed-amount contract lines. The billing plan determines the timing and parameters of the initial prepaid billing.

Note: You can relate prepaid utilization criteria only to rate-based contract lines. You link rate-based contract lines to a different billing plan from that of the prepaid. The billing plan that is linked to the prepaid is used for the initial billing of the prepaid amount. The billing plan that is linked to the rate-based line is used for the perpetual billing activity that occurs with the utilization of the prepaid.

Determine the parameters against which the prepaid balance can be utilized. You can choose to use the prepaid balance against any of these activities:

  • All billing activity for all (or some) rate-based contract lines that are contained in the contract.

  • All billing activity for one rate-based contract line that is contained in the contract.

  • All billing activity for a particular project or activity that is associated with a rate-based contract line that is contained in the contract.

  • A portion of the billing activity (based on project string, that is, resource type or resource category) for any of the preceding.

    When PeopleSoft Contracts sends rate-based billing activity to PeopleSoft Billing, PeopleSoft Contracts creates additional utilization rows and sends those to PeopleSoft Billing to net out billable amounts. As these rows are sent to PeopleSoft Billing, the prepaid committed amount is increased. After billing is finalized by the PeopleSoft Billing to PC/CA Interface process (BIPCC000), the prepaid committed amount is removed and the prepaid remaining amount is decremented appropriately. In addition, the utilization rows are sent back to PeopleSoft Project Costing for analysis and to adjust the balance sheet accounting. The utilization process continues until the prepaid balance is fully decremented (remaining amount equals zero).

Note: A value-based billing plan enables users to define and bill independent amounts other than the actual rate-based transactions that are processed for revenue recognition. Value-based billing plans can be assigned only to rate-based contract lines. Prepaids are applied to rate-based contract lines based on the utilization controls. One of the utilization control options is to use the prepaid against all contract lines. However, even if you select this option, prepaids are not applied to any rate-based contract line that is associated with a value-based billing plan. (Value-based amounts are fixed in nature.)

Prepaids have two components: the initial prepaid billing and the utilization of the prepaid balance. Both components have accounting requirements associated with them.

When setting up the prepayment, you must define the contract liability accounting distribution to which the initial prepayment amount is to be booked. This accounting distribution is passed to PeopleSoft Billing. After finalization, PeopleSoft Billing creates an accounting entry to debit billed accounts receivable (AR) and credit contract liability.

Note: The accounting that is specified in the prepaid table does not depend upon your selection of the contract liability option on the contract line.

Note: Contract liability can be modified after the prepaid status is set to Ready. However, modifications to the contract liability distribution fields are not tracked with Amendments. Any modifications made to these fields are only applicable to processing performed after the modification is saved.

The system generates accounting entries for utilization in two parts:

  1. The first accounting entry occurs in PeopleSoft Billing.

    The accounting distribution on utilization rows that are sent to PeopleSoft Billing is the same contract asset distribution that is found on the corresponding billing row. When the bill is finalized, PeopleSoft Billing creates two accounting entries: one for the billable amount and another for the utilization. The utilization entry debits contract asset and credits billed AR. This entry nets out the billing entry that debits billed AR and credits contract asset. In PeopleSoft Billing and PeopleSoft General Ledger, this nets out if the utilization covers the entire billable amount.

  2. The second accounting entry occurs in PeopleSoft Contracts.

    After the bill is finalized, the utilization row is inserted into PROJ_RESOURCE. The rate-based revenue Accounting Rules Engine process (PSA_ACCTGGL) picks up the utilization row and the corresponding billing row (this can occur at separate times) and creates two accounting entries. The utilization entry debits contract liability (as established in the Prepaid table) and credits contract asset. The regular entry debits contract asset and credits revenue.

    Note: Because all entries are derived from the source transaction row or prepaid table, you cannot set up accounting distributions for regular utilization (UTL) and utilization adjustments (UAJ) rows on the Accounting Rules page.

You can assign prepaids to billing plans using one of two methods:

  • Billing plan template

    Use billing plan templates to streamline the billing plan creation process. You can set up billing plan template defaults at the PeopleSoft Contracts business unit level. The values that you enter at the business unit level appear by default on the prepaid. Select a billing plan template or accept the default billing plan template on the Initial Billing tab of the Prepaids page.

    If you use a billing plan template to create the initial billing plan for the prepaid, the system creates the billing plan when the prepaid status is changed to Ready. In addition, if the option to automatically ready the billing plan was selected on the billing plan template, the system sets the billing plan status to Ready.

  • Assign Billing Plan page

    If you do not select a billing plan template when creating your prepaid, you must use the Assign Billing Plan page to assign a billing plan manually for the prepaid sequence. Use the Billing Planslink in the Go To field on the Prepaid component to reach the Assign Billing Plan page.

PeopleSoft Contracts enables you to unlink an initial billing plan after it has been created or assigned. You can unlink the billing plan and relink the prepaid to another plan, or create a new billing plan. You perform these tasks on the Assign Billing Plan page in the Prepaids to be Assigned/Unassigned group box.

PeopleSoft Contracts streamlines the prepaid process by enabling the system to set the initial billing plan to a Ready status automatically if you selected the Ready option on the billing plan template. In addition, PeopleSoft Contracts streamlines the prepaid process by supplying default values from the business unit level onto the prepaid component. Follow these rules for readying the billing plan automatically:

  • If you use a billing plan template to create the initial billing plan, a check box on the billing plan template indicates whether the system should mark the initial billing plan Ready automatically when the prepaid status changes to Ready. You must select this option on the billing plan template for automation to occur.

  • If any contract lines, in addition to prepaids, are assigned to the billing plan, the system cannot change the billing plan status to Ready until the contract has an Active status.

  • If contract lines, in addition to prepaids, are assigned to the billing plan, and the contract has an Active status, when you change the prepaid status to Ready, the system changes the billing plan to Ready.

  • If multiple prepaid sequences are assigned to the billing plan, the system does not change the billing plan status to Ready until all of the prepaid sequences that are associated with the billing plan have Ready statuses.

Processing prepaids involves the following Application Engine processes throughout the system:

  • Contracts Billing Interface process.

  • Utilization Engine process, which is called automatically from the Contracts Billing Interface process.

  • Billing to Projects process.

  • Prepaid Update process, which is called automatically from the Billing to PC/CA Interface process.

  • Contracts to GL process (rate-based revenue process).

Initial Prepaid Billing Process (Contracts Billing Interface Process)

This process handles the initial prepaid very similar to a fixed-amount contract line. The timing and percentage to be billed depends on the status and events of the billing plan that is assigned to the prepaid. The amount itself, as well as the contract liability accounting information, comes from the CA_PREPAID_TBL. The billing information is then sent to INTFC_BI, where it awaits the Billing Interface (BIIF0001).

See Running the Contracts Billing Interface Process.

Prepaid Utilization Process

After the Contracts Billing Interface process selects and processes project billing activity, but prior to sending the activity to billing, the Prepaid Utilization process is called. This process considers all active prepaid balances and the utilization criteria that is defined. Then, of the active prepaids, the process selects only the prepaid balances that have had at least one event on the initial billing plan where the invoice has been finalized. The billing activity is then matched up against this data. If a match is found and an available balance exists, a new utilization row is created. If more than one match is found, the prepaid balance with the lowest-use sequence number is selected. As utilization rows are created, the committed amount in the CA_PREPAID_TBL is updated to reflect the prepaid amount that is committed to be utilized. When the process finishes, the Contracts Billing Interface process inserts the utilization rows, along with the billing rows, into the INTFC_BI table.

Note: The Prepaid Utilization process also considers prepaid tax implications. If the initial prepaid includes ship to and ship from countries that are different from that of the billing activity, utilization rows are not created. For complex tax situations, in which the utilization may span many ship to and ship from combinations and you choose to tax upon the initial prepaid, split the prepaid into separate prepaid amounts and define utilization for each amount to specific contract lines.

Note: If you selected the Tax on Utilization option for prepaid tax timing, utilization occurs prior to the initial billing plan being sent to PeopleSoft Billing and finalized. The utilization occurs after the bill plan has been created, and it does not have to have been processed.

The initial billing plan must still have been created before you set the prepaid status to Ready. In addition, before you allow the prepaid status to become complete, the initial billing plan must be processed and finalized.

Billing to Projects Process

After a bill is finalized, you run the Billing to PC/CA Interface process to update PeopleSoft Project Costing with actual billing information. This may include billing adjustments, credits, rebills, or utilization. Utilization data is ultimately written back to PROJ_RESOURCE as analysis types UTL and UAJ.

Prepaid Update Process

During the Billing to PC/CA Interface Process, the Prepaid Update Process is called. This process reduces the committed amount and remaining amount in the CA_PREPAID_TBL, based on the utilization being sent back to PeopleSoft Project Costing.

Contracts to GL Process (Rate-Based Revenue Process)

In addition to creating accounting entries for PROJ_RESOURCE revenue rows, the rate-based revenue process (Accounting Rules Engine) creates accounting entries for utilization rows (UTL, UAJ).

See Running the Contracts Billing Interface Process.

When adding a prepaid amount to a contract, the system tracks three amounts that are associated with that prepaid balance: purchased amount, remaining amount, and committed amount. The following steps define how these amounts are used:

  1. A prepaid balance of 100,000 USD is established.

    Purchased Amount

    Remaining Amount

    Committed Amount

    100,000.00 USD

    100,000.00 USD

    0

  2. A utilization of 25,000 USD is sent to PeopleSoft Billing through the Contracts Billing Interface process.

    Purchase Amount

    Remaining Amount

    Committed Amount

    100,000.00 USD

    100,000.00 USD

    25,000.00 USD

  3. A utilization of 25,000 USD is finalized in PeopleSoft Billing.

    Purchase Amount

    Remaining Amount

    Committed Amount

    100,000.00 USD

    75,000.00 USD

    0

Changes are allowed on the Prepaids page when the prepaid status is Ready. A user can reduce the prepaid amount up to the unused prepaid amount. No limit exists if the user increases the prepaid amount.

Once the prepaid Purchased Amount is modified and the amendment is processed, the initial billing has to be processed for the modified difference amount. The user should review the bill plan if the status of the bill plan is set to Action Required.

If the modified prepaid is inclusive, then it must be included in the billing and revenue amounts of a contract by allocating the difference on the Amendment Billing and Revenue Allocation pages. Before changing the amendment status to Ready, the modified inclusive prepaid should be allocated on the Amendment Allocation pages for Billing and Revenue and the allocation should be set to Complete.

The Contract Liability Distribution ChartFields remain open until the prepaid is closed. Any changes made to the contract liability distribution fields are applicable to processing performed after the change is saved.

See Understanding Contract Amendments.

This example shows the accounting implications of a 100,000.00 USD prepaid and the utilization against it. Column headings are abbreviated. Full spellings are billed accounts receivable (Billed AR), contract liability , and Contract Asset.

Steps

Billed AR

Contract Liability

Contract Asset

Revenue

Initial prepayment is billed. PeopleSoft Billing creates the entries in the columns to the right:

100,000.00

(100,000.00)

 - 

 - 

20,000.00 USD of billable transactions sent to PeopleSoft Billing. PeopleSoft Billing creates the entries in the columns to the right:

20,000

-

(20,000.00)

  -

20,000.00 USD of billable transactions are utilized. PeopleSoft Billing creates the entries in the columns to the right:

(20,000.00)

 - 

20,000.00

-

The Contract-to-GL process sends billable transactions to PeopleSoft General Ledger. PeopleSoft Contracts creates the entries in the columns to the right:

-

-

20,000.00

(20,000.00)

The Contract-to-GL process sends utilization rows to PeopleSoft General Ledger. PeopleSoft Contracts creates the entries in the columns to the right:

-

20,000.00

(20,000.00)

-

81,000.00 USD of billable transactions are sent to PeopleSoft Billing. PeopleSoft Billing creates the entries in the columns to the right:

81,000.00

-

(81,000.00)

-

80,000.00 USD of billable transactions are utilized. (1,000.00 USD cannot be utilized because prepaid balance is fully decremented.) PeopleSoft Billing creates the entries in the columns to the right:

(80,000.00)

-

80,000.00

-

The Contract-to-GL process sends billable transactions to PeopleSoft General Ledger. PeopleSoft Contracts creates the entries in the columns to the right:

-

-

81,000.00

(81,000.00)

The Contract-to-GL process sends utilization rows to PeopleSoft General Ledger. PeopleSoft Contracts creates the entries in the columns to the right:

-

80,000.00

(80,000.00)

-

Totals

101,000.00 awaiting cash collection

0

0

(101,000.00)