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Function documentationAdvance and Minimum Guarantee

 

About Advances

An advance is an amount agreed in the contract, which the purchaser usually pays at the start of the contract validity period and against which subsequent royalties due are offset. You can agree to an installment (also called milestone) billing plan

Billing of an advance generates a “credit” in the Billing Engine application (BEA).

Billing of a recoupable item against this advance generates a clearing item, which absorbs some of this credit as a “by product”. If the credit memo is greater or equal to 0, no additional clearing items are generated.

Caution Caution

IPM only supports recoupment of advances as partial credit memos and only as a recoupment against billed values.

End of the caution.

The following types of advances exist:

  • Guaranteed:

    Any remaining amounts remain with the licensor at the end of the runtime.

  • Repayable:

    Any remaining amounts are repaid to the licensee at the end of the runtime.

In both cases, a final invoice item is created by the system in the contract. However it is not displayed on the UI and only visible in the billing due list when it is due. See also:

About Minimum Guarantees

A minimum guarantee describes a target value that is to be reached cumulatively by a certain defined point in time using recoupable items. Recoupable items increase the actual guarantee value that is valid for the minimum guarantee when they are settled. This actual value is compared with the target value during settlement of the minimum guarantee. If it is less than the target value, a subsequent payment is required.

Prerequisites

Different Customizing settings are required in conjunction with advances and minimum guarantees for the contract and billing to ensure that transfer to the BEA IPMO (for outgoing royalties) or the BEA IPMI (for incoming royalties) and recoupment during billing function correctly.

Customizing settings for recoupment of advances and minimum guarantees are found under the same Customizing path (specified below).

Note Note

Advances and minimum guarantees are not relevant to the difference calculation.

End of the note.

  1. To ensure that you can agree advances and minimum guarantees in the contract, define all item categories to be used for advances and minimum guarantees as being relevant to billing (billing following contract release). This means that advances and minimum guarantees are transferred to the Billing Engine application following contract release.

    Note Note

    Milestone billing request items can also be used for advances and are subject to the same clearing logic as other advances.

    End of the note.

    Activity

    Menu Path

    Define Billing Relevance of Advances/Minimum Guarantees

    Start of the navigation path Customer Relationship Management Next navigation step Transactions Next navigation step Basic Settings Next navigation step Define Item Categories End of the navigation path

  2. To use an item category as an advance or minimum guarantee in the contract, check the Clearing Relevance field for this item category in the IPM-specific Customizing settings as follows:

    Activity

    Menu Path

    Define Settings for IPM Item Categories

    Start of the navigation path Customer Relationship Management Next navigation step Industry-Specific Solutions Next navigation step Media Next navigation step Intellectual Property Management Next navigation step Transactions Next navigation step Settings for IPM Transactions Next navigation step Define Settings for IPM Item Categories End of the navigation path

  3. Define the data values required for clearing:

    Activity

    Menu Path

    Define Data Values

    Start of the navigation path Customer Relationship Management Next navigation step Industry-Specific Solutions Next navigation step Media Next navigation step Intellectual Property Management Next navigation step Basic Functions Next navigation step Pricing Next navigation step Define Data Values End of the navigation path

  4. Define clearing control for the relevant BEA item categories.

    Activity

    Menu Path

    Clearing Control

    Start of the navigation path Customer Relationship Management Next navigation step Industry-Specific Solutions Next navigation step Media Next navigation step Intellectual Property Management Next navigation step Billing and Settlement Next navigation step Clearing Control End of the navigation path

  5. Select the IPMO or IPMI application and maintain one or more entries as required (or copy the Customizing settings provided).

  6. You can also define requirements that are evaluated in clearing control if necessary. By making read and update rules dependent on requirements, you can represent more complex scenarios similarly to recoupment of advances.

    Activity

    Menu Path

    Define Requirements for Clearing Control

    Start of the navigation path Customer Relationship Management Next navigation step Industry-Specific Solutions Next navigation step Media Next navigation step Intellectual Property Management Next navigation step Billing and Settlement Next navigation step Define Requirements for Clearing Control End of the navigation path

Settings for recouping a royalties item against the credit balance of the licensee are found in the Customizing settings provided or the IMG documentation on clearing control.

Several advances and minimum guarantees can be combined as a group in the Advance/Minimum Guarantee group = AMG group), by creating one of these items as the main item and the other items as sub-items. This grouping is used when royalties are recouped against advances or settled for minimum guarantees: A royalties item only ever explicitly references the main item for this AMG explicitly and therefore the entire group implicitly. This reference is set by the user manually and means: “This royalties item (and all of its billing request items) can be recouped against all advances in the group and contributes to the actual guarantee value of all minimum guarantees in the group”).

To create this grouping:

  • Access the license acquisition or license sales contract, move to the Advance Group assignment block and select New.

  • In the advance group screen, move to the Advance Items section and specify the properties of the first advance or guarantee.

  • Next, move to the Advance Rate section and specify the rates.

  • To add a new advance or guarantee, move back to the Advance Items section and select New. Specify the properties and rates of the advance or guarantee.

  • Repeat the above step to add additional advances or guarantees as required.

Cross Contract Advances

The cross contract advance function allows you to assign advance references across contracts and to specify more than one advance reference in a contract. This function is only available for license acquisition contracts. For more information see, Cross Contract Advance.