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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.”
Broker contract management 5
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.
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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.
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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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