Passthrough Enhancements for Delta 3 (Doc ID 2229220.1)

Last updated on SEPTEMBER 27, 2021

Applies to:

Purpose

 This note describes the impacts to the existing application as the result of enhancements provided in Delta 3 patch that provides users:

• Ability to author passthrough Contract lines with advance disbursement terms defined on them and disburses passthrough amounts in advance.
• Ability to define and derive obligation amounts for passthrough lines including advances during termination and passthrough the same to the vendors based on passthrough terms
• Define and distinguish a service schedule for a contract service line from an expense schedule
• Provide the ability to define predefined increase/decrease amounts or percent and derive the payment schedules for passthrough lines based on these parameters
• Passthrough Transaction Activity Report which displays passthrough activity details and summary for identified periods and passthrough lines enhanced for Advance passthrough lines and Metered Usage Service
• Ability to update passthrough vendor/Site on an active passthrough line including Fee/Service/Usage and automatically handle all downstream adjustments from the reassignment of vendor

Scope

 Business Background

Author and Enable Advance Pass-through lines and Disbursement of the same in advance

Lessors, in order to satisfy vendors and help them manage cash flow, may arrange to pay the service vendor in advance and bill and collect later based on the billing schedule. Since funds may be paid in advance to vendors, the lessor must carefully track what has been paid/received from the lessee (i.e., the “pass-through” amount becomes actually eligible to be paid) and make adjustments to any pre-paid amounts. Adjustments include adjusting pre paid amounts to correct service periods or reducing from future payments in case pre paid amounts look unrecoverable etc. This is not only to insure the lessor is correctly paid, but also so the vendor knows exactly when the eligible amounts occurred and for what amount, what contract and what dates. Advance disbursements will be identified and recognized as “Advances” and the available advance balance shall be reduced with each disbursable payable invoice.

Enhancements in passthrough of Termination Obligation for passthrough lines
Determine the termination date for a passthrough service based on the period of service in the associated service schedule and the requested termination date of any related serviced asset
Calculate termination amounts for any passthrough service based on the effective date and the contractual terms and conditions or meter readings in the service being terminated is for metered usage together with the remaining payments, fees and termination fees or penalties
Disburse amounts to passthrough vendors due based on the terms and conditions and for which the disbursement is eligible. This includes amounts based upon receipt of cash, invoicing or due date from customer for a terminated passthrough service or serviced asset. This may also be for any advanced disbursements for periods that are paid to the service vendor but are terminated. All applicable processing fees and retained fees must be taken into account.
Adjust billing or disbursement transactions depending on the effective date of the termination and the periods of service that have been billed or disbursed as of that date
Continue service contract processing and its pass-through in cases where the asset financing is terminated (ie, the lessee buys-out the asset from the lessor)

Service and Expense Schedule
Oracle Lease and Finance Management (OLFM) enhanced the process of defining a contract service line by providing the ability to define a service schedule that includes the effective from date, the effective to date, a number of periods and a frequency. The same set of values can be used to define an expense schedule for the service. When defining the data, if the expense schedule and service schedule are not the same, then provide a payment schedule in details of the service line passthrough terms. In such cases, the disbursement is not paid as a scheduled expense, but based upon the agreed passthrough terms.

Scheduled increase/decrease of Service billable amounts:

When originating a new contract, vendors often will include multiple years (or other defined periods) upon which the service payment amount will increase with each anniversary. This is often called a “renewal rate”. This can happen both for regular types of service payments or for usage-based services.
Alternatively, vendors may write service contracts that give them the ability to decide on a “renewal rate” upon a future date closer to the end of the original service term. In such cases, the vendor will evaluate their portfolio of contracts periodically and identify a set of contracts for which an increase is agreed upon with the customer. The vendor must advise the lessor so that the service billing amounts can be adjusted. Additionally access may be provided to the Vendor to make agreed changes between Vendor and Lessee to these contracts.
While less common, the service payments may also be decreased.

Generate Passthrough Transaction Activity Report for Vendor Reporting and Revenue Recognition

Passthrough Transaction activity report will have to display passthrough data pertaining to contracts with disbursement in advance as well as contracts which have metered usage service.

Reassignment of Vendor for Passthroughs

The vendor (or vendor site) responsible for delivery of the service on a passthrough may need to be updated when: a vendor ceases to operate or is bought out by another vendor, the vendor reorganized their legal organization structure, the vendor sells off one or more contracts to another vendor, etc. If there is a replacement for the vendor then lessors may continue the same passthrough line with all the relevant terms and conditions, but simply replace the passthrough vendor party.
When performing a vendor reassignment, the reassignment may be for multiple contracts and/or multiple contract lines. There is typically an effective date and all contracts and lines associated to the original vendor that match the criteria are reassigned to the new vendor. Any disbursement adjustments required to correct the paid amounts to the original and new vendor are handled during the reassignment (e.g., original vendor was paid too much and new vendor needs to be paid for the relevant periods of service).
Typically, the reassignment request requires an approval. Therefore, the information needed to reassign vendors and the set of affected contracts is grouped as a request and routed for approval. Upon approval, the changes are made to the contracts and passthrough lines automatically and the required adjustments initiated automatically.

Details

My Oracle Support provides customers with access to over a million knowledge articles and a vibrant support community of peers and Oracle experts.