Rental X-hire

Background

X-hire agreements are used in the rental and service business and consist of three parties: a customer, the rental company, and its supplier.

The customer rents equipment from the rental company. If this equipment is out of stock, the rental company can in turn rent the equipment from its supplier and have it delivered directly to the customer or to the rental company. The rental company acts as an intermediary, is charged by its supplier, and in turn charges its customer.

The requirement is for a coherent solution from entering a customer rental agreement through to managing the cyclic invoices sent from the supplier according to the purchase order agreement. When the equipment is sent directly to the customer, the first knowledge of the delivery might be the supplier invoice. In that case, supplier invoices are sent to the rental company and must be matched against goods receipt and invoices each time an invoice is received. This should be done even if no actual goods are received when invoicing is performed.

Limitations

• The invoice must be created from 'Supplier Invoice. Record' (APS100), and not from 'Supplier Invoice Batch. Open' (APS450) to perform goods receipt from invoice matching.
• In 'Supplier Invoice. Recode' (APS110), goods receiving can only be done from a non-aggregated view.
• In (APS110), goods receiving is only done against the selected line in 'Supplier Invoice. Match GR Line' (APS360).
• When the purchase order is an X-hire purchase order, the first PO line (item line) will not be posted in the accounts. There will be no invoice on this line, and it will not be displayed in the (APS360) line.
• The accounting will not take place and the line will not be displayed in the (APS360) line if the purchase order category is 80 (Loan), the origin (GETY in MPLINE) is 35 or 36, and the sub-number of the purchase order line is not 700 or higher.

Overview

In an overall X-hire process, a customer rents equipment from a rental company, or for example, a service company charges the customer for x-hired tools. Similar to a regular rental process, a rental agreement is created between the customer and the rental company. In service, the agreement is managed through the maintenance agreement.

If the requested equipment is out of stock, the rental company turns to another rental company that will act as a supplier of the equipment. This is known as the X-hire process. The equipment is rented according to a purchase order agreement between the rental company and its supplier. This purchase order agreement is set up as an X-hire agreement, which means that the price is a rental price per period rather than a purchase price.

The supplier delivers the equipment directly to the customer, or to the rental yard or service workshop. During the rental period, the supplier will send invoices to the rental company for each rental period. The rental company in turn charges its customer for the equipment.

To manage the cyclic supplier invoice sent, a subline number is available to the purchase order. This is connected to the actual line of the rental equipment. The item on this subline represents the supplier invoices being sent from the supplier and the quantity on the subline represents the number of rental periods.

The X-hire process involves the rental, procurement, and the finance modules. To meet the requirements of the X-hire functionality, changes have been made to these three areas.

X-hire cyclic invoice item

The field 'X-hire cyclic invoice item' (XINI) is used to represent the cyclic supplier invoices and must be matched against an invoice when received. The 'X-hire cyclic invoice item' is set up in the program 'Settings - Rental Agreements' (STS699) and must be a non-inventory accounted item.

Once a purchase order is created as a result of an X-hire process, it is created with a line for the rented equipment. A subline is connected to this line, with the X-hire cyclic invoice item acting as a data carrier to represent the supplier invoices. The subline displays the rental price per period and the number of rental periods. The subline number is 700 when 'Origin' equals 35 or 36. If 'Origin' equals 20 or 26, the number is controlled by parameter 796 in 'Purchase Order Type. Open' (PPS095).

The X-hire cyclic invoice item is a fictive, non-inventory item which applies the accounting method 'simplified purchasing'. This means that it will be posted to the accounts once the Accounts Payable invoice is posted.

Rental agreement lines

When you specify an X-hire rental agreement line (line type 7 or 8) in the program 'Rental Agreement. Open Lines' (STS201), panel I is shown displaying information about the purchase order agreement. The fields used in the X-hire process show the details about the current PO agreement.

• The PO agreement number is the number of the agreement set up with the supplier in the program 'Purchase Agreement. Open' (PPS100). This agreement is set up as an X-hire purchase agreement rather than a traditional purchase agreement.
• The rental price is retrieved from the PO agreement line and is the price the rental company is charged by the supplier per rental period. In the example used in this document, the price is set to 2100 CAD/ WEK.
• The rental price unit of measure is retrieved from the PO agreement and represents the rental period.
• The number of periods is the number of rental periods the equipment is rented from the supplier. The value specified on the rental agreement is shown as the quantity on the subline of the PO since this is what will be invoiced by the supplier. The unit of measure is to clarify the definition of the period. In this example, the period is a quantity of 5 WEK (weeks).

Work order material lines

When you specify a material line in 'Work Order. Open Line' (MOS101) that will be sourced through an X-hire purchase order, panel B displays the planned purchase order or purchase order number when the PO is order initiated. If the PO is order initiated the X-hire invoice item is added to the WO when the planned PO is released. This WO material line contains:

• The rental price. This is retrieved from the PO agreement line and is the price the rental company is charged by the supplier per rental period. In the example used in this document, the price is set to 2100 CAD/ WEK.
• The rental price unit of measure. This is retrieved from the PO agreement and represents the rental period.
• The number of periods. This is the number of rental periods the equipment is rented from the supplier. The value specified on the purchase agreement is displayed as the quantity on the subline of the PO since this is what will be invoiced by the supplier. The unit of measure is to clarify the definition of the period. In the example used in this document, the period is 5 WEK (weeks).

New rental price

In the purchase agreement setup with the supplier, the rental price is shown instead of the purchase price. This is specific for the X-hire process.

New purchase order subline number

When you specify an X-hire rental agreement, a purchase order on 'Purchase Order. Open Lines' (PPS201/B) is created for the rented equipment. X-hire rental lines created at the same time are placed on the same purchase order. If an X-hire rental line is added to an existing agreement with other X-hire lines, this new line is placed on the existing purchase order when the defined and specific details match. Otherwise, the new X-hire line creates a new purchase order.

The purchase order is created with two lines:

1. One line for the rented equipment

2. A second subline (subline number 700 if the source is rental agreements, otherwise controlled by parameter 796 in (PPS095)) representing the supplier invoices to be received.

This example shows a purchase order created in an X-hire process:

The main line for the rented equipment shows a quantity of one piece (PCS). This equipment is delivered to the customer from the supplier (if the line type is 8 in the rental agreement or to the rental yard (if the line type is 7 in the rental agreement). This line is never matched to an invoice, but the goods must be received to determine which lot number (individual item) was received by goods receipt or by the customer.

The subline, which represents the supplier invoices, shows a quantity of three weeks (WEK). The item number used on the subline is the one set up in (STS699). The quantity (3) represents the number of rental periods, and the unit of measure (WEK) is the measurement of the rental period. The quantity is specified on (STS201/I) when you specify the rental agreement and the unit of measure (U/M) is retrieved from the purchase order agreement. The U/M can also be changed on (STS201/I).

When the source is a work order the quantity is specified on 'Purchase Agreement. Open Lines' (PPS101/E) using the 'Rental duration' field.

The main line contains a quantity of 1 PCS. No purchase price is set for the rental equipment because the rental price is defined on the subline. So instead there is a purchase price text. When goods receipt is performed here, there are no accounting transactions.

On the F panel, the 'Origin' field indicates the process from which the purchase order line is created. The example is created from an X-hire with direct delivery to the customer and displays value 36. Other possible values are:

• 20, if sourced through MRP on a work order.
• 26, if sourced as order initiated on a work order.
• 35, if order initiated from rental agreements line type 7.
• 36, if order initiated from rental agreements line type 8.

The item on the subline is retrieved from the setup in (STS699). The quantity on the line is the number of periods specified upon registration of the rental agreement in (STS201) or for work orders retrieved from (PPS101).

In this example, the equipment is rented for 3 periods (WEK) at a price of 2100 per period. This gives a line total of 6300.

When you create a rental agreement line or a work order material line for a serialized item, one rental or material line is created for each item. This results in one purchase order main line for each item to be X-hired. For each main line, a corresponding subline is created.

In the example above, a rental agreement has been created with two separate rental lines. This is because the item 'CAT315C' is a serialized item, and you cannot have the equipment on the same rental line. On the purchase order, there will be two main lines each with its separate subline.

The first subline shows that the item CAT315C is to be X-hired for 3 weeks. The second subline shows that the item CAT315C is to be X-hired for 4 weeks.

When you create a rental agreement line or a work order material line for a non-serialized item, only one subline is created. This is also the case for serialized items, but the quantity on the rental line for non-serialized items will be 'no. of rented periods' multiplied by 'quantity' (only applicable when source is a rental agreement line, not supported when source is work order).

For example, if 10 pieces of an item are rented for 5 weeks, the result is a subline with the quantity of 50 weeks.

Before you start

• An X-hire cyclic invoice item must be defined and selected in (STS699). This item will be written to the PO subline to represent the supplier invoices. The X-hire cyclic invoice item used to represent the supplier invoices should be a non-inventory accounted item. This is defined on the E panel of the 'Item. Open' (MMS001) program.
• Inv acc method in (MMS003/E) and Purchase agreement type must be set.
• A purchase order agreement type that is set in (PPS110/E) with the X-hire agreement setting selected is needed. On an X-hire purchase agreement type, the 'Loan agrmt' setting must also be selected. This type of agreement has the same functionality as a loan agreement type, but certain X-hire specific fields are displayed in the workflow.
• A purchase order agreement must be defined for the current supplier. The agreement type selected must have the 'X-hire agmt' setting selected on (PPS110/E).
• A purchase order type with category 80, and parameter 795 set to 1 in (PPS095), has to be used for X-hire when acquired for a WO.
• The rental item must be included in the purchase agreement. In this example, item CAT315C in PPS101 is set up to be X-hired.

  Since this is an X-hire purchase order agreement, the price for the equipment is a rental price per period instead of a purchase price. The rental price is set up per unit of measure but can be different from the one set up for a regular purchase agreement for this item. The unit of measure is the definition of the rental period. In this example, it is configured to represent a weekly period by naming it 'WEK'. The rental price and unit of measure are defaulted on the I panel in (STS201) when you enter the rental agreement.

Supplier invoice settings

'Settings - Accounts Payable' (APS905) contains these settings related to the X-hire functionality:

• 380 - Goods receive from invoice matching

  This indicates whether you want to perform goods receipt immediately when you perform invoice matching from ‘Supplier Invoice. Record’ (APS100) and use an option in (APS110).

  This is only valid for purchase orders with Origin 24 (CO direct delivery), 35 (Rental agreement), or 36 (Rental agreement direct delivery).

  These are the valid alternatives:

  1. Do not display supplier invoice. Receive goods.

  2. Always display supplier invoice. Receive goods.

  3. Only display supplier invoice. Receive goods if this is not a third-party invoice.

  If the supplier number on the invoice is different from the supplier number of the purchase order, assume that this is a third-party invoice.

  
• 390 - Action if delivery not completed for all PO lines (Gr Inv match)

  If you perform goods receipt from invoice matching and there are still purchase order lines that have not been received, the setting indicates what will happen to those purchase order lines.

  1. Only goods receipt lines are selected

  2. User is asked whether to select the PO line for lines with missing goods receipts

  3. PO lines with missing goods receipts are always selected.

  If alternative 2 or 3 is selected, the following apply: If there are no goods receipt transactions for the PO line, an invoice line of type 2 is created, indicating that the line has been matched to a PO line. The invoice quantity is then set as equal to the order quantity.

Supplier invoice process

The program 'Supplier Invoice. Receive Goods' (APS352) is opened from invoice matching if there are purchase order lines that have not been received where the purchase order Origin values are:

• 24 = CO direct delivery
• 35 = Rental agreement
• 36 = Rental agreement direct delivery

Setting 370 (Goods receive from invoice matching) in (APS905) also allows goods receipt from invoice matching.

The program indicates how much has been ordered, invoiced, and what remains to be received. You can report what has been received by adding the received quantity and selecting the action 'Confirm update'. You can also access 'Purchase Order. Receive Goods' (PPS300) by using option 11='Receive goods'.

On the (PPS300/E) panel, you can edit a purchase order line, view all the details, add a lot number, for example, and perform goods receipt. You can also access 'Purchase Order. Reconcile Recd/Not Invd' (APS370) by using the action 'Rcvd not invoiced'.

Workflow - Enter supplier invoice

You receive an invoice from your supplier in the amount of 2100 within a period of 1 week. In (APS905), you stated that you want to perform goods receipt from invoice matching.

Specify an invoice in 'Supplier Invoice. Record' (APS100). When you press Enter in (APS100/F), you will automatically access 'Supplier Invoice. Goods Receive'. This applies if there are purchase order lines that have not been received where the purchase order Origin values are:

• 24 = CO direct delivery
• 35 = Rental agreement
• 36 = Rental agreement direct delivery

Setting 370 (Goods receive from invoice matching) in (APS905) also allows goods receipt from invoice matching.

In this case, no goods receipt has been done so far. You must receive the first line to determine the lot number of the equipment that the customer received. To add a lot number, you must edit the line.

Specify the received quantity and lot number, then press Enter. You will go back to (APS352) and receive the part that was invoiced, which was 1 week. Add 'Received quantity' one and click F14='Confirm update'. Two weeks remain to be received. Close the program to access the invoice matching.

For setting 390='Action if delivery not completed for all purchase order lines', these are the possible scenarios:

• Setting 1: Only the goods received line will be shown in (APS360).
• Setting 2: You will be asked to select between purchase order lines and the goods received part in (PS360).
• Setting 3: Only the goods received part will be shown in (APS360).

Since you only want the goods received part to be shown in (APS360), you will see the goods received line of 1 week. The item line with the lot number is not displayed because this will not be invoiced. The X-hire invoice will be recorded in the accounts using accounting event PP20 (Supplier invoice) and accounting type 903 (fictive inventory). If the invoice charges must be recorded separately, accounting exceptions can be created for the costing element.

Workflow - Add more purchase orders

If you receive an invoice with several purchase orders, you can add purchase orders in (APS360) by selecting F19 ='Select receipt'.

When you select purchase orders and click F14='Crt inv line', the (APS352) panel will be displayed if the conditions are met in (APS905) and goods receiving can be performed.

Workflow - Perform goods receiving from (APS110)

If an invoice was specified in (APS100) and connected to a purchase order that is not received, you can receive the line from (APS110). Related option F22='Goods receive' opens (APS352) if the purchase order origin is one of these:

• 24 - CO direct delivery
• 35 - Rental agreement
• 36 - Rental agreement direct delivery

After goods receipt is performed, line type 4 (the line has been matched against a goods receipt line, goods arrived after invoice) is created in (APS360).

If the invoice was not connected to the purchase order in (APS100) but was specified in (APS110), line type 1 (the line is matched to a goods receiving line, goods arrived before invoice) is created instead.