18.2. Leasing/Insurance/Loans

With SocrateCloud you can manage the following contract types:

• leasing contracts;

• insurance contracts;

• credit contracts.

You can manage this type of contracts in the Leasing/Insurance/Loan window, found in Main Menu>Partner Relations>Contract Management.

For each of the contract types you can manage the following:

• installments detailed on rates and interests;

• past and reevaluated values;

• controlled generation of vendor invoices;

• revaluation of contract amounts in foreign currencies;

• future rates influence on the cash flow.

Leasing Contracts

In order to add a leasing contract, you need to take the following steps:

1. Enter main contract data;

2. Define Assets;

3. Allocate Assets to the Contract;

4. Complete and post the Contract;

5. Generate Installments;

6. Invoicing - generate vendor invoices;

7. Periodic revaluation - for contracts in foreign currencies

The main contract date is entered using the Leasing/Insurance/Loan window. The following fields are available:

• Document No, Description, Comment

• Document Type - document sub-type, variation of the “Contract” base document type;

• Contract Date - the date when the contract was sealed;

• Account Date - the date when the contract will take effect;

• Business Partner, Location, User/Contact - identification elements of the vendor, contact and location;

  • starting with 15.11 the business partner can be edited even if the contract is completed, with the following limitation: When changing the business partner the user must also enter a GL Journal to transfer the amounts for the account elements used on the contract from one business partner to the other;

• Customer No - internal number given by the customer;

• Customer Date - contract beneficiary receipt date;

• Representative - the beneficiary's assigned representative for the contract;

• Contract Source, Contract type - selected according to the definitions and the internal classifications made during the contract setup;

• Sent date - date when the contract was sent for approval/signing;

• Date received - date when the approved/signed copy of the contract was received;

• Contract Status - a list with predefined statuses, applicable by the operator with the purpose of tracking the contract's general situation;

• Start Date, End Date - the contract's running interval;

• Number of Months - the total number of months that the leasing contract's installments will run for;

Financial section:

• Currency - the contract's currency and exchange rate;

• Amounts - all the contracted amounts expressed in the contract's currency. The amounts in the “History” fields should only be entered for the currently running contracts for which you only wish to track the rest of the rates that have not yet reached their due dates;

• Products - the products will be entered for each amount entered in the contract and are used to:

  • determine the content of the invoices generated from the contract, for each particular installment;

  • determine the VAT amounts, if applicable, in order to have complete influence over the cash flow;

  • establish the contract's posting rule.

Invoicing section:

• Bill To, Location, Contact - business partner to be invoiced;

  • for a contract with a business partner, invoices can be sent to a different business partner.

Reference section - are used to indicate the accounting dimensions that are influenced by the respective contract. These will be used for posting and for the invoices generated from this contract:

Status section - the contract is a document and follows the document type workflow which contains the following document statuses: Drafted, Complete, Voided and Closed.

• Document Status - indicates the current document status;

• Document Action button:

  • once you have added all the data to the contract and have entered the assets, the contract can be completed - status changes from "Drafted" to "Completed". This will make the contract take effect in the system and its data can no longer be modified.

  • if the contract has been operated wrongly, it’s status can be changed to Void and

  • if the contract has finished its validity period, it’s status can be changed to Closed.

• Generate Contract Installments button - starts the process used to generate contract installments;

• Delete Contract Installments button - is used to delete the contract instalment records from the Scheduler tab;

Scheduler tab - is used to manage contract rated.

Assets tab - a leasing contract can represent the entry source for one or multiple assets in the organization's patrimony. Assets need to be defined as described in Fixed Assets.

• once the assets are defined, it is mandatory to return to the leasing contract and enter the respective assets in the Assets tab.

• Note: Do not complete the contract until you have added the assets in the Assets Tab!

Accounting Consequences

Posting a contract will generate two Debit/Credit accounting transactions pairs, as described below:

The Deferred Expenses account has become available starting with version 13.04:

• • it has been added in the accounting definitions of the Business Partner, under the Payment Discount Revenue field

  • it has been added in the accounting definitions of the Business Partner Group and Vendor.

Generate Contract Installments

Based on the values entered in the contract, you can generate installments for the leasing contract by using the Generate Contract Installment process. All the obtained installment values can be modified as long as they have not been used to generate any invoice.

The generated amounts need to be manually adjusted to correspond to those on the payment schedule received with the original contract. The rates can also be manually entered. The installment generating process has the following running parameters:

• • Calculation Type - select "Credit" or "Leasing" depending on the contract type;

  • Interest Separate from Rate - select for the credit contracts, when the interest due date is different from the principal due date;

  • Day of Month for Interest - indicate the day used to form the interest due dates, only for credit contracts;

  • From Installment No - indicate the rate you want to start the process from:

    • for leasing contracts you can start from 0 which would represent the prepayment;

    • for credit contracts you can start from 1;

    • you can enter any other number less than the maximum number indicated on the contract, when you no longer wish to highlight the historic instalments.

Rates generation algorithm:

• Rate number = from 0 to n (n being the length of the contract in months);

  • Date = keep the date on the contract fixed and fill in the month and the year as such:

    • from the Start date on the leasing contract

    • from the Start date on the contract for the principal rate + commission, for credit

    • from the Start date, including the day in the month for the interest rate, for credit

  • The 0 rate = only for the leasing contracts, include only the values:

    • Prepayment - from the master contract document

    • Other taxes - from the master contract document

    • Prepayment VAT - generic VAT is calculated based on the product marked with the Default check box belonging to the VAT category from the product's definition

  • From rate 1 to n:

    • Interest in percent = copied from the master document

    • Capital Rate/Principle (base currency) = (contract value - prepayment) / duration

    • Interest (base currency) = Interest amount / duration

    • Insurance rate/Commission (base currency) = insurance amount / duration

    • Capital Rate/Principle = ((contract amount - prepayment) / duration) * rate (as per contract)

    • Interest rate = (interest amount / duration) * rate (as per contract)

    • Insurance Rate/Commission = (insurance amount / duration) * rate (as per contract)

    • VAT = applied VAT sum (product, VAT rate) - only informative.

If the process generates the wrong Contract Rates, these can be erased using the Delete Contract Installment process. This process will only erase those installments that have not been used to generate any vendor invoice.

Invoicing Contract Installments

When receiving a vendor invoice corresponding to a contract installment, it can be easily entered by taking the information from the contract and the respective rate. The vendor invoice will be operated as described in Entering a Vendor Invoices following the rules described below:

• fill in the Contract field on the invoice.

• the Create lines from... process allows you to get information from the indicated contract by selecting a contract installment.

  • the invoice lines will be automatically completed with the products in the contract and the value of the selected installment.

  • the invoice content can be manually adjusted by the operator.

  • the invoiced installments cannot be edited and are linked to the generated invoice.

• when voiding invoice, the line corresponding to the installment is released and becomes available to another invoice.

A vendor invoice generated this way has a specific element in the posting rule for "Interest" type products. For these items, in the Accounting tab, you need to select the Apply Dual Posting check box. Only for the products with this check box, the posting rule will be completed with:

Re-evaluating Contracts in Foreign currency

The Contract Gain/Loss Revaluation process/report located in the Performance Analysis menu, makes it possible to calculate and automatically post the exchange rate differences that have occurred due to having re-evaluated the foreign currency contracts.

The process should be run on a monthly basis or according to the current law. The report has two running options:

• generate report only - with the purpose of verifying the calculations and differences suggested by the system - obtained by leaving the Revaluation Document Type field empty;

• generate GL Journal - with the purpose of automating the posting of differences - obtained by entering a GL Journal document type in the Revaluation Document Type field.

The running parameter fields are:

• Organization (mandatory) - you can also select nodes of organizations in case of multiple organizations

• Balance Aggregation (mandatory) - it determines the accounting schema and the currency used as reference to calculate the exchange rate differences; you can only select one with aggregation on the contract dimension and whose accounting schema is in the main currency

• Revaluation Date (mandatory) - usually the last day of the respective month;

• Revaluation Conversion Type (mandatory) = the conversion type used as reference in the revaluation calculation

• Currency (optional) - only the contracts on that currency will be re-evaluated

• Business Partner (optional) - only the contracts with that business partner will be re-evaluated

• Contract (optional) - only the contract selected will be re-evaluated

• Update Balances - it is recommended that you select this check box for all revaluations, because the process requires the account balances to have been updated prior to the revaluation date; if the process takes too long to finish, then we recommend you run the Update Accounting Balance process first

• Revaluation Document Type - indicate the document type you wish for the generated GL Journal; this can be a batch or simple GL Journal, however we recommend you use the batch one

• Interest Revaluation - select this check box only when you also wish to re-evaluate the interest amounts registered as deferred expenses.

The capital exchange difference will be calculated for the indicated date, for each separate contract, using the formula:

[(contract amount-prepayment amount-total historic capital rates-sum(capital rate>1))] * [revaluation conversion] - RON balance of Revenue Account "Product Capital Rate"

The Interest exchange difference will be calculated for the indicated date, for each separate contract, using the formula:

[(interest amount-total historic interest rates-sum(interest rate))] * [revaluation conversion] - RON balance of Revenue Account "Product Interest Rate"

Up to SocrateCloud version 13.12 the generated GL journal will be made up by following the posting rules described in the table below:

Starting SocrateCloud version 13.12 accounts used to generate the GL Journal are those introduced in the Unrealized Revenue (CNT) and Unrealized Loss (CNT) fields at the General section from the accounting schema definition.

The generated GL journals can be found in the Reevaluation tab of the Leasing/Insurance/Loans window. Following revaluations will take previous ones into account. If the GL Journal is wrong, it can be voided and the link with the contract will be erased (it will no longer appear in the Reevaluation tab). The process can be rerun and a calculation will be made.

Note: If the revaluation done for a particular period has been completed and you try to run a second revaluation, the latter one will have all the differences equal to 0 if the results of the first one have been posted and the balances have been updated!

Credit Contracts

Below are specific elements for credit contracts that are different from those described for leasing contracts:

• you must use products that have been specifically defined for the credit contracts

• the rate type must be different for each contract

• the Prepayment Amount field must not be used

The document follows the posting rule corresponding to leasing contracts, however, it is not mandatory to post the credit contracts. If you want to post a credit contract, you need to make sure the following conditions are met:

• the contract must not contain any line in the Assets tab, so that the first monograph (#10) will not be applied;

• the business partner on the contract must have in the Deferred Expense field an off-balance sheet account (8xx) and

• the product in the Interest Product field must have the same off-balance sheet account (8xx) as above, so that the second monograph will be realised with an off-balance sheet record

When running the instalment generating process you need to enter the following data:

• Calculation Type = "Credit"

• Interest Separate from Rate = checked;

• Day of Month for Interest - indicate the day used to form the interest due dates;

• From Instalment No - indicate the rate you want to start the process from:

  • for credit contracts you can start from 1;

  • you can enter any other number less than the maximum number indicated on the contract, when you no longer wish to highlight the historic instalments.

Leasing/Insurance/Loans Reports

With SocrateCloud you can generate the following types of Contract Reports:

• • Leasing/Insurance/Loans Status Report;

  • Leasing/Insurance/Loans Obligations Report;

  • Leasing/Insurance/Loans Installments Report;

  • Open Leasing/Insurance/Loans Report;

  • Contract Gain/Loss Reevaluation.

Starting with SocrateCloud v14.11 the Exclude finalized contracts field is available for Open Reports, Status Reports, Obligation Reports and Instalment Reports. With this field you can exclude from the report contracts with the following statuses: “Canceled”, “Closed”, “Suspended”.

The Leasing/Insurance/Loans Status report is used to display in detail all the amounts on the contract both in the contract's currency and in the main one, including the amounts that have been re-evaluated at the respective date. The report can be exported in different formats.

The Leasing/Insurance/Loans Obligations report will display the sums obtained from Leasing/Insurance/Loans contracts that are due after a certain date. The due amounts can be presented in three ways:

• due amounts until the end of the contract

• due amounts in less than 1 year

• due amounts in over 1 year

The is useful for financial and banking reporting and will display the situation for the any specified date (if no date is specified then the current date will be used to generate the report).

The Leasing/Insurance/Loans Installments report displays the contract installments according to the selected parameters.

The Open Leasing/Insurance/Loans report displays the sums corresponding to Leasing/Insurance/Loans contracts that have not been invoiced. It will show the situation at the current date depending on the selected parameters.