Understanding Not-to-Exceed Rules

You can specify not-to-exceed rules for a contract to ensure that you do not generate an invoice in excess of a billing amount to which you and your customer have agreed. You can also specify not-to-exceed rules to ensure that you do not recognize revenue in excess of a certain amount.

When you set up not-to-exceed rules, you must specify:

• The amount that you do not want to exceed, or the maximum amount.

• The process to which the limit applies (revenue recognition, invoicing, or both).

For example, you might set up a not-to-exceed rule that applies only to the total amount for which you bill the customer, but not to the revenue amount that you recognize for the contract. Or you might want a specific billing line to be exempt from the not-to-exceed rule that you set up for a change order.

The system uses not-to-exceed rules during the revenue recognition and invoice processes to determine whether the revenue and invoice amounts are within contractual limits. If the revenue or the billing amounts are not within the limits that you specify for the not-to-exceed rule, the system recognizes revenue up to the limit and creates offset records for the excess. For invoicing, the invoice is created but does not include transactions that cause the limit to be exceeded. For the revenue recognition or invoicing processes, you can manually override the not-to-exceed values for the records that exceed the specified limit.

Note: If you define a not-to-exceed rule and limit at the contract or change order level, the system considers only T and M billing lines when evaluating whether the not-to-exceed limit has been exceeded during the revenue generation process.

You can define not-to-exceed rules at the contract master, change order, or contract billing line level.