What is a Product Contract?
Product contracts are defined on Product Contract Parameters (BR10.9). On this form, you identify the basic contract requirements, such as the revenue method and customer. After a contract is defined, more specific product information is defined on Product Contract (BR51.1), and/or the product contract parameters are used to create a maintenance schedule on Maintenance Schedule (BR52.1).
A product contract defines all the data needed to calculate billing and revenue amounts for a product sale. It includes information such as list price, net price, discounts, free maintenance amounts, and deferred revenue amounts. Some of this information applies to all products in a contract and is defined at the contract level, while other information is specific to a product and is defined on the product detail lines.
Including Free Maintenance on a Product Contract
Very often, free maintenance is included as part of a product contract. The Free Maintenance tab of Product Contract (BR51.1) can be used to enter the required information for free maintenance. Free maintenance must be processed as deferred revenue, since revenue can only be recognized during the period in which the service is provided. Therefore, the amount of free maintenance included in the contract is spread evenly over the number of free maintenance periods in the contract, and a maintenance schedule is automatically created to recognize the revenue accordingly.