Microsoft Dynamics AX 2012 R3, provides functionality to manage royalty agreements and claim amounts, book their accruals and manage payments. In today’s post I will try to explain the procedure of Royalty Management.

What is a Royalty?

Royalties can be defined as paying certain amount to the owner of a property or a brand for the usage of property or brand. Normally, the original owner of a product sells their product against a certain share of future revenues.

The common practice is the usage of Brand names by third party, in this case, a company use a brand owned by another company and pay a specific percentage of sales to the brand owner.

Microsoft Dynamics AX2012 R3 provides complete solution of Royalty Management, whereby, organization can manage royalty agreements, claims and their payments. In the following lines, the solution is illustrated to help consultants and users:-

Royalties Management with Microsoft Dynamics AX 2012 R3

Parameters – Accounts Payable

In the accounts payable parameters, select the “Broker and Royalty” tab as shown in the following screen shot.

Starting day of week would be required in case of royalty calculated on weekly basis.
The accrual account is the liability account in which the royalty liabilities would be credited
The expense account is the charge account where the royalties would be charged.
Procurement category is used for vendor invoice creation to pay the royalty liabilities.

Royalty Agreements

After setting up parameters, the next step is to define the Royalty Agreement, for this purpose, in accounts payable module click common click royalties and then click royalty agreements, as shown in below screen shot.

The following is the royalty agreement form which has two important parts i.e. Header and Line.

Royalty Agreement – Header

In the header section of Royalty Agreement, provide the information of vendor to which the Royalty is payable and then provide the basics of calculations.

Field	Description
Royalty contract	Enter the identifier for the royalty agreement; the identifier is used to determine the royalty type and default ledger accounts for this agreement.
Vendor account	Select the vendor for the royalty contract.
Description	Enter a description of the agreement.
Unit	Enter the unit of measure for the royalty quantity.
Unit type	Select or view the royalty agreement unit type. The values are Inventory unit and Catch weight unit.
Unit of measure royalty option	Select the unit of measure royalty option for the royalty agreement. This option identifies the unit of measure for the royalty line. If you use the Exact match option, the unit of measure for the royalty line must exactly match the unit of measure specified in the sales order. If not, the royalty does not qualify. If you use the Convert option, the unit of measure for the royalty line is the same as the unit of measure for the royalty agreement. The royalty unit of measure is converted to the sales order unit of measure, or the catch weight unit of measure, based on the option selected in the Unit type field.
Calculation date type	Select the date type, which is used for royalty calculation. The values are: Created: The date when the sales order was created Requested receipt date: The requested receipt date of the sales order Requested ship date: The requested ship date of the sales order
Start date	Enter the date on which royalty management begins to create accruals based on the agreement. If the agreement is effective immediately, leave the field blank.
End date	Enter the date on which royalty will no longer be created based on this agreement. If the agreement does not end, leave the field blank.
Cumulate sales by	Select the period during which invoiced lines will be added and compared against the agreement. The options to select from include Invoice, Week, Month, Year or Customized period.
Period type	When Cumulate sales by is Customized period, you have to select the period type to cumulate the sales.
Taken from	Select whether the royalty value is based on the gross or net of the sales order line.
Accrual account	Enter the ledger account to be used for interim liability postings.
Expense account	Enter the ledger account to be used for interim expense postings.
Currency	The currency type determines the currency in which royalty is remitted. You can specify a generic currency, which is converted on the order, or you can specify a specific currency for the royalty.
Approval required	Select if royalties created from this royalty agreement require approval before they are processed to the ledger accounts.
Calculate by	Select if the royalty break is based on quantity or amount.
Validated	Shows whether the royalty program is validated.
Validated by	Shows whether the royalty program is validated.
Item number	Select the items which qualify for this royalty agreement.
Product name	Shows the product name of the item.
Unit	Shows the sales unit of the item.
Site	Shows the default sales site of the item.
Warehouse	Shows the default sales warehouse of the item.
Location	Shows the default issue location at the default sales warehouse.
Note	You can enter specific notes for the royalty agreement.

Royalty Agreement – Lines

At the line level of Royalty Agreement, provide the information on the basis of which the royalty amounts would be calculated, in also contains the specific items on which royalty has to be calculated. However the item on which the royalties are calculated can be defined at the header level but in case, the royalty is payable to one vendors on all sales and to one another vendor on sales of a specific item, the specific item will be described at the line level.

Field	Description
Royalty code	Enter the identifier for the royalty agreement; the identifier is used to determine the royalty type and default ledger accounts for this agreement.
Description	Enter a description of the agreement.
Vendor account	Select the vendor for the royalty contract.
Calculation date type	Select the date type, which is used for royalty calculation. The values are: Created: The date when the sales order was created Requested receipt date: The requested receipt date of the sales order Requested ship date: The requested ship date of the sales order
Currency	The currency type determines the currency in which royalty is remitted. You can specify a generic currency, which is converted on the order, or you can specify a specific currency for the royalty.
Unit	Enter the unit of measure for the royalty quantity.
Amount type	Select the amount type of the agreement: Amount per unit: A certain amount per sold unit. Fixed amount: A fixed amount for a range of quantities sold. Percentage: A certain percentage of the net amount sold.
Start date	Enter the date on which royalty management begins to create accruals based on the agreement. If the agreement is effective immediately, leave the field blank.
End date	Enter the date on which royalty will no longer be created based on this agreement. If the agreement does not end, leave the field blank.

Royalty Agreement – Lines – General Tab

Field	Description
Royalty code	Enter the identifier for the royalty agreement; the identifier is used to determine the royalty type and default ledger accounts for this agreement.
Note	Enter a comment or note for the agreement.
Description	Enter a description of the agreement.
Vendor account	Select the vendor for the royalty contract.
Currency	The currency type determines the currency in which royalty is remitted. You can specify a generic currency, which is converted on the order, or you can specify a specific currency for the royalty.
Unit	Enter the unit of measure for the royalty quantity.
Calculation date type	Select the date type, which is used for royalty calculation. The values are: Created: the date when the sales order was created Requested receipt date: the requested receipt date of the sales order Requested ship date: the requested ship date of the sales order
Start date	Enter the date on which royalty management begins to create accruals based on the agreement. If the agreement is effective immediately, leave the field blank.
End date	Enter the date on which royalty will no longer be created based on this agreement. If the agreement does not end, leave the field blank.

Royalty Agreement Lines – Selection Tab

Field	Description
Item number	Select the items, which qualify for this royalty agreement.
Product name	Shows the product name of the item.
Unit	Shows the sales unit of the item.
Site	Shows the default sales site of the item.
Warehouse	Shows the default sales warehouse of the default warehouse.
Location	Shows the default issue location of the item.

Royalty Agreement Lines – Royalty Amount Tab

Field	Description
From value	From quantity/amount in which a royalty has to be calculated.
To value	To quantity/amount in which a royalty has to be calculated.
Value	Enter the value of the royalty.

Following is the basic process flow for royalty claims, when items which are associated with royalty agreements are invoiced through sales order, the royalty claims are created. The royalty amount can be viewed in sales order line>Price Details>:

Royalty Claims

Click Accounts Payable>”Royalties”>”Royalty Claims”, to cumulate and process royalty claims.

In case approval is required on royalties, the royalties can only be cumulated after approval.
The status column on royalty claim provide following information about the claim:-

To calculate: The final royalty amount is pending completion of the cumulate royalties run. This status applies to royalty claims that are generated from weekly, monthly or yearly agreements.
Calculated: The claim was cumulated and is pending approval.
Approved: The claim had been approved if approval is required.
Mark: The claim is available for processing.
Processed: The claim was processed and a vendor invoice was posted.

Cumulate Royalty Claims

After invoicing the sales order, user has to cumulate royalty claims. This will sum up royalty claims amounts. The royalty amounts can be cumulate on each invoice, week, month, year or a customized period.

Once the royalties are cumulated and processed, the status of royalty claim will be set as “completed” and the vendor invoice will be posted, which can be paid.

Source: http://thedynamicsblog.com/managing-royalties-with-microsoft-dynamics-ax-2012-r3/

Microsoft Dynamics AX Solutions

Wednesday 29 July 2015

Managing Royalties with Microsoft Dynamics AX 2012 R3