Warranty Management
Overview
Managing warranties for the items you sell can be a time consuming and complex task. When working on a client's equipment, quick access to the warranty information is critical. Often organizations offer third party warranty programs or optional extended warranties where the revenue is deferred from income and recognized over the life of the coverage. The software provides a solution to all of these issues by allowing you to create warranty codes that can be assigned to the items you sell for standard coverage and then providing the ability to create and manage additional warranty agreements with the ability to defer and recognize income automatically. Like PM agreements, ServMan uses a Job record to manage these extended agreements allowing you to monitor and report the life time cost of the agreement by using standard job cost reporting.
Create your warranty codes; then assign those codes to the items you sell. For information on how to do this, click HERE. You can then check the "update to client systems database" on the item master to automatically create systems records for the client location where the equipment was installed. The information for the warranty is automatically written to the clients system record for easy access and review. As a final step, you must run the Warranty Wizard to create the contracts.
Warranty Programs
To set up your Warranty Programs, you must first have a Warranty Reserve GL account for each trade. This account must be resolved both directly and when masked.
Set up Warranty Reserve GL Accounts
- The account should be an "Other Current Liabilities" account
- Check the "Is a WIP Account" checkbox
- Make sure the account clears to a non-masked account for income.
Create Warranty Job Groups
Master Files -> Miscellaneous -> Job Group Codes
- Create a unique code to identify this Job Group, and add a description
- On the Amortization Settings Tab - enter in the Default GL codes to debit and credit.
Important Note: Currently, the Job Group Settings displayed below ARE NOT USED IN THE WARRANTY WIZARD PROCESS, however we DO recommend you set the GL Accounts to match the desired amortization settings set on your Warranty codes. However, ff you need to adjust an Amortization Schedule, the codes in the Job Group will be used. You want to make sure both the Job Group and the Warranty code use the same GL account numbers. - This behavior will be modified, and HELP will be update, when this is change released.
More learn more about Job Groups, click HERE.
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Create Warranty Codes
Warranty Codes are accessed under Modules->Inventory->Warranty Programs or from the Inventory Navigator at the bottom center.
- Enter a unique Warranty ID Code, up to ten characters in length - Make these codes as descriptive as possible -like 1YRP-3YRL, for one year parts and three years labor. This will allow users to select the proper code without looking at the description.
- In the Description, enter your program details. This is unlimited text that could optionally include on a variety of internal or external documents.
- Enter the length of the warranty, in days, for both parts and labor.
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Amortization Tab - Setting Program Deferred Revenue Defaults
Each Warranty Code, (Program) could have its own GL accounts for managing the deferred revenue. Set the Deferred Revenue account you want to route the deferred revenue to for this warranty program. Note, you can use a masked GL code in these fields. This allows you to route the income to different GL codes based on the Department or Branch that sold it.
Similarly, enter the Income account you will debit when creating your warranty reserve. (The user will be prompted for an amount of money to defer, this amount will be debited from the income account and then credited to the reserve account.) An amortization schedule will then be created on the longer of the Parts\Labor durations to manage the realization of the income. Note - the income account also supports GL Masking.
- Enter the same GL codes here as you did on your Warranty Job Group. Contact ServMan Support if you need assistance.
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Creating a Standard Warranty (Manufacturers Warranty)
- For each item you will provide a warranty for, enter the appropriate warranty code. (This is set on page two of the item's setup.)
- Set the option to "update to client System Database" and set the System Type. This is especially important if using the PM Module.
- When sold, a record will be added to the client Systems database complete with Invoice information as well as warranty expiration and system information.
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Using the Warranty Contract Wizard
The software provides a Warranty Contract Wizard to simplify the creation of extended warranty agreements for your clients.
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From the job, order, or invoice screen, press the Menu button and select "Create warranty contract with job amortization"
The Warranty Contract will be set up as follows:
- Select the Warranty Program you will be using.
- The Job to debit income, the client's AcctNo, name and address fields will all be filled in when the contract is created from an order or invoice.
- Enter the Start Date for the coverage to begin
- Select the Job Group, Department and worktype to use for orders created under the warranty agreement. These will be "remembered" and pre-filled with the information from the previous job to make entry easier. Make changes if necessary.
- Enter the warranty contract value/amount. This is the amount you wish to move from income to warranty reserve to cover the cost of the warranty.
- Click the NEXT button
Select the systems covered
- Check the Include checkbox next to the equipment that will be covered under this program. All equipment posted to the account location will be displayed on the screen.
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- If your specific equipment is not listed here, confirm that the equipment has been posted to the Job and then try again.
- NOTE: The software will NOT require you to select equipment. However, you are strongly encouraged to link the covered system records to get the full benefit of the module.
- Press NEXT to continue.
Verify Amortization Schedule
- Confirm or adjust the amortization schedule as desired.
- Remember - if you manually adjust the schedule, your GL accounts will change to those set up on the Job Group. If the Job group GL codes are set the same as the warranty GL codes, as advised above, they will remain correct.
- If you manually adjust the schedule, it must balance to the total being deferred to proceed.
- Press the Finish button to complete the setup and optionally review the Job Record created by the software.
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Recognizing Warranty Deferred Revenue
When you create your warranty agreements, amortization schedules are created for each.
- To "recognize" the revenue, run the "Create Journal Entries from Job/Contract Amortization Schedules" procedure located under Modules->General Ledger option on the tool bar.
- Enter the date range to recognize
- Check the "Realize to current period if qualified fiscal year is closed" checkbox, if desired
- The system will not double book revenue if run twice for the same period.
- You will receive the Notice shown below. Press Yes to continue.
- Income will be posted to the Clearing Account associated to the deferred revenue account being credited. (Depicted on the screen below).
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Viewing the Warranty Agreement
Warranty Agreements are stored as Job Records and can be located either from the clients Jobs/Contract tab or by using the Job SmartView.
- Warranty records will have both the Is a Contract AND Is a Warranty boxes checked with Expiration dates and Contract Amount filled in based upon what you entered in the wizard
- Equipment covered under the program will be listed on the Systems tab.
- The Warranty Tab displays the warranty detail based on the Program/Warranty Code used to create it.
- There is an amortization schedule for realizing income.
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Viewing Extended Warranty Information From a System Record
From the client Systems tab you will notice the following:
- System records will include Warranty information in the systems grid to the far right. If a contract is expired it will be highlighted in Red.
- If you open a Systems record the standard warranty applied from the item when it was sold will be listed first followed by any extended amortized warranty's listed in the grid below.
Creating a Warranty Contract from WIP Reconciliation screen
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