Understanding Full-Service Contracts (all-inclusive service agreements)
A Full-Service Contract (FSC) is like an insurance policy for customer equipment, whereby the equipment is “covered” by a service company against breakdown. Customers typically pay a monthly “premium” for this coverage. In return, repairs to any covered equipment are performed at no additional charge (or perhaps no charge beyond a nominal “deductible” fee).
These full-service contracts are sometimes referred to as Full-Service Agreements. Be sure not to confuse a full-service contract with an ordinary planned maintenance “Service Agreement”. A planned maintenance service agreement is often part of a Full-Service Contract, but they are not the same thing. See the related topic, “Service Agreements – Entering Service Agreements” for more info.
Preliminary Setup
Full-Service Contracts can typically become a sizable profit center for most businesses. To take advantage of everything the program offers, it is recommended to setup Total Office Manager with the ability of tracking all the activity associated with full-service contracts. This includes setting up COGS and Income accounts in your Chart of Accounts; setting up a separate department for Full-Service Contracts; setting up a separate item category for Full-Service Contracts (facilitates FSC activity on reports); setting up a “service” invoice item for FSC labor; and setting up an FSC “discount” invoice item to be applied to covered work performed as part of the contract.
Setting Up FSC Income and COGS Accounts
Specific accounts for income and for cost of goods (COGS) on full-service contracts allow for complete tracking of FSC related income and COGS. An example of each might be:
- COGS – Full-Service Contracts
- Sales – Full-Service Contracts
See the related topic, “Chart of Accounts List” for more info on setting up accounts. Be sure to verify setup of any COA accounts with your accounting professional. The examples cited in this help topic are only suggestions.
Setting Up an FSC Department
Having a separate Full-Service Contracts department for this profit center allows creating an income statement for that single department, among other benefits. See the related topic, “Department List” for more info on setting up departments.
Setting Up an FSC Item Category
A separate item category for Full-Service Contracts allows for complete utilization of reports in the program. See the related topic, “Item Category List” for more info on setting up categories.
Setting Up an FSC “Service” invoice Item for Labor
A Service Invoice Item should be setup for FSC Labor. This is the item which typically appears on the monthly invoice.
Setting Up an FSC “Discount” invoice Item
A Discount Invoice Item should be setup for FSC work performed. This will allow the costs of FSC work appearing on invoices to be “zeroed out”, so that the customer sees the value of work performed while at the same time not increasing the customer’s A/R balance for the covered work.
Usage
Having all necessary elements setup, Full-Service Contracts can now be sold, and subsequent monthly reminders setup to collect payments on those contracts.
Initial Sale of an FSC
The sale of a Full-Service Contract will usually include the first month’s payment which appears as the “Service” invoice item setup previously. It will also probably contain one of your existing service agreements as a complementary part of the FSC.
If the initial FSC sale includes a service agreement, you will be prompted to “do the paperwork” associated with the service agreement portion of the sale. It is recommended that as this service agreement paperwork is done, reference the FSC sale/invoice number in the description field of the associated service agreement. Doing so will help in management and renewal of both the FSC and the service agreement, as well as providing good general documentation. Continue completing the service agreement paperwork in normal fashion.
Use the service agreement to manage planned maintenance visits (work orders) for the FSC and to determine for renewal purposes when the FSC is about to expire (see the related topic, “Service Agreements – Managing & Renewing” for more info).
Setting Up Memorized Monthly Payments & Reminders
When appropriate, record a sale for the customer’s first automatic monthly payment (which would actually be the 2nd premium payment of 12). This transaction will be the basis of memorized payment transactions for the remainder of the contract, so it is recommended to set it up thoroughly by noting the contract number in the internal memo field, picking the appropriate department, and selecting the service agreement to which the FSC is associated. When all is set, click Menu | Save, to manually save the form and leave it displayed.
After setting up and saving the customer’s first automatic monthly payment (the 2nd of 12), the transaction can be memorized so all of the remaining monthly payments can be setup along with reminders. To do this, simply click Menu | Memorize, and use the “Add Memorized Transaction” form.
FSC Service Calls
When a service call for a full-service contract customer takes place, prepare a work order and run the service call in your normal fashion, making sure to pick the FSC department on the work order and associated invoice. Get labor into the invoice via the timesheet by picking the FSC labor item in the Service Item field and ticking the “Reimb” checkbox. This item will then appear on the customer’s reimbursables list which can be checked when preparing the actual invoice (see the related topic, “Reimbursables List” for more info). Invoice for materials in normal fashion.
The previously setup FSC discount is now used to “zero out” the total amount of the service call. This way the customer will receive an invoice which shows the non-FSC pricing they would have normally paid, then the FSC discount benefit which “zeros-out” their balance – or at least reduces it to the nominal deductible charge, depending on how the particular FSC is setup. The business cost of the discount can then be tracked via whatever COA account to which the FSC discount was pointed.
Tips
- It is the service agreement associated with an FSC which is used for managing renewals of contracts about to expire. Creating separate service agreements easily identified as part of an FSC will help. For example, suppose many customers already own an existing “SEA-2” which is not part of an FSC. When filtering for service agreements about to expire, all “SEA-2” agreements will appear, whether they are part of an FSC or not. Instead, consider setting up a similar service agreement as the SEA-2, but called something like “FSC-SEA-2”. This will make it very easy to filter for FSC service agreements which are about to expire.
- Including a deductible charge for which FSC customers are still responsible will help to reduce flagrant, continuous, petty service calls never intended to be covered by a full-service contract.
