Microsoft Dynamics AX

Broker contract

management This document walks you through demo

scenarios that provide a broad overview of

the typical process for handling broker fees.

Demo script

Olga Turovceva Mulvad

May 2016

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Broker contract management 1

Contents

Target audience 2

Demo scenarios 2

Background 2

Demo overview 3

Demo data and instructions 4

Demo instructions 4

Demo pre-steps 4

Demo step by step 5

Demo 1 – Review a broker contract 5

Demo 2 – Sell products that qualify for a broker commission and generate a claim 6

Demo 3 – Process the claim and pass it as payable to A/P 9

Demo 4 – Partially process the claim 12

Broker contract management 2

Broker contract management

Broker contract management was introduced as a new feature in Microsoft Dynamics AX 2012 R3. It helps companies

better manage their brokerage agreements by automating tasks that are involved in administering, tracking, and

paying the fees that are due to the brokers.

The demonstration scenarios in this document provide a broad overview of the typical process for handling broker

fees:

● Registering details of the negotiated broker contract

● Running the negotiated contracts through ongoing sales and generating broker claims

● Approving the generated claims, so that they can be passed on to Accounts payable (A/P) for payment

● Handling situations for partial claim approval and differential accounting

Target audience

The demos in this document are intended for business decision makers in enterprise companies, in capacities such as

sales manager, accounting manager, and A/P manager, who have the following responsibilities:

● Negotiating contracts with brokers

● Managing staff that processes broker claims and makes fee payments

People in these roles are looking for ways to achieve these goals:

● Flexibly accommodate different definitions of broker contracts and their conditions.

● Reduce the administrative burden and errors that are associated with tracking and processing broker claims.

● Improve cash flow forecasts by accruing for future payables.

Demo scenarios

Background

The following set of demo scenarios takes place at Contoso, which is a manufacturer and distributor of consumer

electronics. Although Contoso has a wide network of established retailers, it has recently introduced several new

products within the audio and video equipment line, and wants to target a new segment of more specialized

retailers. Therefore, Contoso has decided to enlist the services of Fabrikam Supplier, an experienced brokerage

company that has access to those retailers.

For the sales and promotion responsibilities that it has taken on, the broker receives a commission on each product

unit that is sold. Although this broker incentive program helps Contoso achieve its sales volume and penetration into

new market segments, the fees that must be paid to the broker represent an administrative burden.

Because multiple broker contracts are running simultaneously, Contoso sales and financial managers are eager to

exercise better control over their broker contracts and the impact that they have on cash flow.

Broker contract management 3

The following demos illustrate how broker contract management supports Contoso sales and financial managers in

their goals.

Demo overview

Demo 1 – Review a broker contract

This demo walks you through a broker contract. A broker contract is a record of an agreement with a broker that

specifies the negotiated terms and conditions under which the brokerage company qualifies for a monetary reward

in return for achieving preset sales targets. The demo also explains how an agreement between Contoso and its

customers is set up to specify who will incur the broker fee.

Demo 2 – Sell products that qualify for a broker commission and generate a claim

When a sales processor creates a sales order for an item that Contoso has a broker contract for, if the order line’s

details qualify for the broker commission, the system identifies the future broker fee payment. This demo explains

how a sales processor can review those commissions. It also illustrates the automatic process that, when an order is

invoiced, posts fee amounts to the general ledger (G/L) as accruals and generates broker claims for every order line

that is invoiced.

Demo 3 – Process the claim and pass it as payable to A/P

The broker claims that are generated represent the future payments to the broker. The contract owner reviews these

claims and approves them. In this demo, after the sales manager has approved a specific claim, the system creates

and posts a journal that reverts the interim amounts, and also creates and posts a vendor invoice. As a result, the

credit is added to the balance for the broker (who is set up as a vendor), and the A/P team can include the resulting

open transaction in the regular settlement process.

Demo 4 – Partially process the claim

In some situations, such as disputed broker services or product returns, Contoso might decide to void entire or

partial broker claim amounts. This demo explains how a user can handle the partial claim and automatically account

for outstanding differences directly from the claim.

Broker contract management 4

Demo data and instructions

Demo instructions

The demo scenarios are run in the USMF legal entity. The demo data in this legal entity includes setup parameters

that have been preset to support the steps in these demos.

Data for demos 2 through 4 build on each other and depend on the completion of the previous demos. You can skip

demo 4, “Partially process the claim.” However, if you include it, you should also complete a few pre-steps, as

described in the next section.

Demo pre-steps

If you decide to complete all the demos in this document, before you start them, you must create and post a sales

order that will generate a broker claim. Follow these steps.

1 Complete steps 1 and 4 in demo 1, “Review a broker contract.”

2 Complete steps 1 through 4 and 9 through 10 in demo 2, “Sell products that qualify for a broker commission and

generate a claim.”

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Demo step by step

Demo 1 – Review a broker contract

We will start by becoming familiar with how Contoso’s sales manager has captured details of the company’s new

agreement with vendor US-104, Fabrikam Supplier. This vendor will act as a broker between Contoso and its

customers when selected products in TV sets range are sold.

1 Click Accounts payable > Broker and royalties > Broker contracts.

The Broker contracts page currently lists two agreements for two different brokers. We will examine the terms of

the second agreement, BC_US_0002, by looking at both the header and the contract detail lines. According to this

contract, the broker, Fabrikam Supplier, which is set up as a Contoso vendor (account US-104), qualifies for a

commission from Contoso for every sale that meets these conditions:

● Item T0020, TelevisionD30042", is sold.

● The item is sold to any customer.

● A minimum quantity of 10 units is sold.

The payment is USD 10 for every product unit that is sold.

The contract includes a negotiated condition about who will incur the broker fee (the customer that buys the

product or Contoso itself). This condition is set up on the associated Charges codes page.

2 In the Charges code field, click the BR01 link to open the Charges codes page.

The setup of the Broker Fees charge indicates that the selling company (that is, Contoso) will incur the broker fee

as a sales expense, rather than the customer.

● In the Debit section, the Type field is set to Ledger account.

● In the Account field, interim account 606800 (Accrued Royalty and Brokerage Expense) is selected to receive

the intermediary expenses on the income statement.

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Note: If a contract stipulates that the customer will incur the fee for the broker services, the associated charge

must be set up so that the Type field in the Debit section is set to Customer/Vendor. In this case, Contoso first

receives the fee payment from the customer and then pays its liability to the broker.

The fields in the Credit section of the charge setup specify the accrued liability accounting rule for the broker fee.

● The Type field is set to Ledger account.

● The Account field is set to 200200 (Royalty and Brokerage Accrual), which is an interim liability account that

will host the charge (fee) amount from the time when the charge is posted to the time when the broker claim

is approved and moved to the real payable as a result of invoice posting.

3 Close the Charges codes page.

On the Broker contracts page, notice that the agreement status is Planning.

4 In the Status field, select Approved.

The contract is now ready to be applied to sales orders that meet its conditions.

5 Close the Broker contracts page.

Demo 2 – Sell products that qualify for a broker commission and

generate a claim

The contract that authorizes broker US-104, Fabrikam Supplier, to receive a payment of USD 10 when it sells item

T0020, TelevisionD30042", on behalf of Contoso in any quantity above 10 units, is in place. A customer now makes its

first purchase, and a Contoso sales clerk creates a sales order.

1 Click Sales and marketing > Sales orders > All sales orders.

2 On the All sales orders list page, on the Action Pane, click New.

3 In the Customer account field, select US-009, and then click OK.

Broker contract management 7

4 On the Sales order page, enter an order line for item number T0020 and a quantity of 20.

5 Select the order line, and then click Sales order line > View > Broker commissions.

On the Broker commissions page, the sales clerk can see that a fee from the valid broker contract (BC_US_00002)

for a total amount of USD 200 is applied to the line. The USD 200 is calculated by multiplying the 20 units (the

line quantity) by USD 10 (the fee amount per product unit that applies when the line quantity exceeds 10).

6 Close the Broker commissions page.

Because broker fee accruals are handled as a charge, the same broker commission can also be accessed from the

sales order through the standard charge page.

Broker contract management 8

7 Select the order line, and then click Sales order line > Financials > Manage charges.

On the Maintain charges page, the sales clerk can review the non-editable charge that represents the broker fee

of USD 200.

8 Close the Maintain charges page.

9 On the Sales order page, on the Action Pane, on the Invoice tab, in the Generate group, click Invoice.

10 On the Posting invoice page, click OK.

Note: On the Parameters tab, make sure that the Quantity field is set to All before posting.

The sales invoice has now been posted. In addition to the regular sales invoice transactions, the following

postings have occurred:

● The broker claim has been generated for the invoice line.

● The accrued charge that represents the broker fee has been posted to the interim liability and expense

accounts, as appropriate.

The sales clerk can now review the accrued fee posting.

11 On the Sales order page, on the Action Pane, on the Invoice tab, in the Journal group, click Invoice.

12 Select the journal line, and then click Voucher.

Broker contract management 9

On the Voucher transactions page, the first two lines represent the charge amount that is debited to interim

expense account 606800 and credited to interim liability account 200200.

13 Close the Voucher transactions page.

The next steps in the broker fee handling process are to review, approve, and process the claim into the payables.

Demo 3 – Process the claim and pass it as payable to A/P

The broker agreement owner is responsible for periodically reviewing and processing the claims that are generated.

After claims are approved, either fully or partially, the vendor invoice is created and posted, if posting is supported

by the A/P policy, so that the vendor credit is passed to the regular payable processing.

1 Click Accounts payable > Broker and royalties > Broker claims.

The Broker claims page lists two claims. The second of these claims was generated when the sales order was

posted in the previous demo.

The Qualified field specifies the fee amount of USD 200 that, when it’s approved, will be paid to vendor US-104

for its brokerage services.

Note that the fields in the lower section of the page specify details about the originating sales invoice, such as the

invoice number, invoice line net amount, and associated customer transactions.

The sales manager will now process the first outstanding claim by approving it for the full amount.

Broker contract management 10

2 On the line for the first claim, make sure that the Approving field contains 200.

3 In the Mark column, select the check box for the line.

4 On the Action Pane, click Approve.

Message bars inform the sales manager that the following events have occurred:

● An Expense journal posting has reversed the previous interim amount on both the accrual liability account and

the accrual expense account.

● A broker claim (vendor) invoice for the approved broker fee amount has been created.

Note: A broker claim invoice can be posted either automatically as part of the claim approval process or

manually. The policy that controls the posting behavior is specified by the Manual posting field on the

Broker and royalty tab of the Accounts payable parameters page.

● As a result of broker claim invoice posting, the expense account has been debited, and the vendor payable

account has been credited.

Note: The expense account number is specified for the procurement category when purchase expenditure for

expense posting is set up for purchase orders. The procurement category itself is defined on the Broker and

royalty tab of the Accounts payable parameters page.

The sales manager can now review the actual transactions.

Broker contract management 11

5 On the Broker claims page, select the claim line that was just approved, and then click the Invoices tab.

The line specifies the vendor invoice number that was created for the broker. If the invoice has been posted

(automatically or manually), the Date and Amount in transaction currency fields contain the appropriate values.

If the invoice is still pending, those fields are blank.

6 Click Vendor transactions.

7 On the Vendor transactions page, click Voucher to open the voucher lines.

The voucher specifies that the vendor’s account is now credited, and that broker expense account 600181

(Discount & Allowances Received) is debited.

8 Close the Voucher transactions page.

The sales manager can open the Invoice journal by clicking Broker claim invoice on the Broker claims page.

Broker contract management 12

Note that the Approved field for the claim line contains the same amount as the Qualified field, whereas the

Difference field contains 0. These values indicate that the claim has no unsettled issues and can now be closed.

9 Select the claim line, and then click Close.

Demo 4 – Partially process the claim

For the second broker claim, assume that, out of the total sales quantity of 20, the customer has returned five units.

As a result, the broker no longer qualifies for the fee that is related to the returned quantity. To handle this situation,

the user must approve the second claim for the partial amount of USD 150 (USD 200 minus USD 50, which is the fee

for five units at USD 10 each).

1 Click Accounts payable > Broker and royalties > Broker claims.

2 On the line for the second claim, in the Approving field, enter 150.

3 On the Action Pane, click Approve.

Note that the Approved field for the claim line contains the amount USD 150, whereas the Difference field

contains the amount USD 50. These values indicate that the claim is still outstanding, and that the difference

must be handled before the claim can be considered closed.

The user must now handle the difference.

4 Select the unsettled claim line, and then, on the Action Pane, click Close.

The system identifies that the claim still has an outstanding amount of USD 50 and prompts the user to enter the

differential reason code.

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5 In the Reason code field, select Returned.

6 Click OK.

A message bar informs the user that the following events have occurred:

● An Expense journal posting has reversed the previous interim amount on the accrual expense account.

● The same posting reversed the previous interim amount on the accrual liability account.

Contoso is now liable to pay a broker fee of only USD 150 instead of originally qualifying USD 200.

The user can now review the actual transactions.

7 On the Broker claims page, set the Status field to Closed. Then select the second claim line.

8 In the lower section, select the claim line that was just handled, and then click the Differential tab.

The line specifies the broker fee amount that was disapproved for payout.

Notice that no journal is associated with this line, and that the Differential Journal button on the Action Pane is

unavailable. In this scenario, because Contoso, not the customer, pays the broker fee, profit or loss that is

associated with the overpayment or underpayment of a fee doesn’t have to be accounted for in the income

statement.

If you were handling differences in fee amounts in a scenario where the customer pays the broker fee, you would

notice that the system posts a differential journal at claim closing. This journal debits/credits the broker write-off

account and credits/debits the interim liability account.

Note: The write-off expense account number is specified in the Main account field for a specific reason code on

the Differential reasons page.

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9 Close the Broker claims page.

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