Business cases and contract types

EXAMPLE  Your organization Your Autotask instance may be configured to use one of the following terms instead: Account, Business Unit, Client Company, Customer, Site. has a set of standard hourly rates, but certain customers give you enough business to justify discounted rates. What contract type should you use?

This is the classic case for setting up a Time & Materials contract. It allows you to change the rates for a specific customer, either across the board or for specific projects or tickets without changing your overall billing rates. Billing is still based on the time and materials billing method, but you can lower or raise the hourly rates you charge for your services.

EXAMPLE  Your organization is transitioning to a managed-services business model. Instead of hoping that something breaks so you can fix it, your job is now to keep the customer's equipment performing flawlessly. You do this by monitoring the customer's equipment, and by performing routinely scheduled maintenance.
For the customers, it makes the cost of IT services predictable and something they can budget for, and for your company, it provides a recurring revenue stream. Your difficulty is to determine what is covered under this arrangement, and if you are making money. What contract type should you use?

Recurring Service Contracts do the following:

• Track the Services and Service Bundles that are part of a contract, and how many units (servers, PCs, printers) are covered.
• Generate a billing item at regular intervals (monthly, quarterly, semi-annually, or yearly), calculated as a fixed amount per unit (such as a PC or a software license).
• Manage adjustments to the services covered under the contract, as well as to the number of units being covered, by automatically generating a separate prorated billing item. With the recurring service contract, just change the quantity of units in the contract, and the new recurring amount is automatically sent to billing, with the partial month prorated.
• Can be associated with specific devices Your Autotask instance may be configured to use one of the following terms instead: Asset, Configuration Item, Installed Asset, Installed Product. in Autotask. Then, when that device is selected on a ticket (for example a printer you are performing maintenance on), the contract is automatically applied to the ticket.
• Keep track of contract costs (labor, license costs, and cost of contract, ticket and project charges). A built-in profitability monitor tracks all time charged against the contract at each resource's internal rate, and reports that information against all revenue collected on the contract for the same period. LiveReports profitability reports can be generated in real time, any time, for any period, across the entire portfolio or for a specific customer.

This type of contract is usually billed monthly or quarterly. The rate can vary based on users, equipment or volume of use. This arrangement often supports remote monitoring, backup disaster recovery and SAAS offerings.

EXAMPLE  Your organization’s managed-services business is growing. You are now looking for ways to make your business run even better. One option is to lease equipment to your customers. That way you can be sure that the equipment you manage meets your standards for age and reliability. You are also offering Taskfire to more customers, and would like to use Autotask to manage the Taskfire licenses and other software licenses you provide to your customers. How do you incorporate these features into different customer contracts, track your vendor costs, and ensure that you are charging a fair price and making profit?

With a Recurring Service contract, your Autotask Administrator can create “services” based on providing hardware or software over a specific time period at a set price. Each service can represent one piece of hardware; a hardware grouping, for example, a workstation; or one “seat” for a license, for example, for Taskfire by Autotask or an accounting software package. The service can be a standalone option, or grouped with other services as part of a service bundle. You then add the service or service bundle to a recurring service contract, and specify how many units of each service or bundle the contract will cover. The contract generates a billing item for each service or bundle every billing period.

For example, you have a customer that needs five new workstations. In the past they would buy the workstations. But instead, you may want to lease the workstations from one of your vendors and then re-lease them to the customer. You could have a service named Workstation that includes all the necessary parts, including software. Another option is to have separate services for, say, hardware and software licenses, and then group them into a service bundle. Add the new service or bundle to a recurring contract and set the number of service units to 5. Autotask then adds a new billing item every billing period to cover the price of the 5 workstations. If needed, you can adjust the unit price and number of workstation units at any time. If you change the number of units during a billing period, Autotask creates a pro-rated billing item to include the change.

You can also add a Unit Cost to each service. Autotask will include these costs when calculating the recurring service contract profitability. Profitability also includes the costs for labor delivered under the contract, and project/ticket charges associated with the contract. You can also associate a service with a vendor. When you add a cost and vendor, you can report on costs and service usage by vendor or source, reconcile bills from your service vendor against the services you are using and/or reselling, and track and manage your software licensing.

For example, if you re-lease the five workstations as described above, the workstation service can indicate what vendor is supplying the workstations and what your cost is. When you add the service to the contract, that information carries through to your contract related and organization financial reports.

Recurring service contracts offer many flexible options for creating services and managing services on a contract. These options allow you to meet a wide range of customer needs within the same type of contract.

EXAMPLE  You have just won a bid on a network installation project for a turnkey installation at a fixed price. The terms of the agreement are that you will be paid in three installments, due when specific deliverables have been met. You will want to track the cost of the labor to determine if the project is profitable.

With a Fixed Price contract, your company agrees to complete a set of tasks for one fixed price, regardless of the internal labor and materials costs you incur. Many projects are billed out under a fixed price contract. You still want to track labor on the project, and you want to know the cost of labor and materials, but billing is not going to be based on the labor, but rather on pre-arranged billing milestones that are part of a fixed price contract.

Milestones are progress payments on fixed price projects. You add and manage contract milestones from the Contract Milestones view.

EXAMPLE  Your customers purchase services from you in blocks of prepaid hours. You need to keep track of how the hours are used up, and when the customer needs to purchase another block of hours.

A Block Hour Contract is set up when clients prepay for a block of hours, usually at a preferred rate, and then the prepaid hours are reduced as billable work is performed. The contract maintains the balance of hours.

Although each block hour added to a contract has the same value, you can charge more than one block hour for one hour of labor by setting up different block hour multipliers for billing for certain roles. This allows you to charge different rates for different levels of expertise. Autotask automatically computes the varying rates accordingly against the prepaid hourly rate.

Block Hour contracts also include the ability to set up rules that automatically trigger reminders or the addition of more block hours if the number of available block hours falls below a specified amount. You can also set up an overage amount to charge for labor if you run out of block hours.

EXAMPLE  Your customer pays you a Retainer. You need to keep track of how the amount is used up, and when the customer needs to make another retainer purchase.

Retainer contracts allow the customer to prepay for services but, unlike block hours, retainers track pre-payments for future services and charges in terms of currency amounts instead of blocks of time. The retainer balance is reduced by services performed at the contract rates, which can be the same or different from the standard billing rates, and by contract charges.

Like block hour and per ticket contracts, Notification Rules can be used to notify resources or automatically repurchase a preset retainer amount when the contract balance drops to a set threshold. In addition, unlike with block hour or per ticket contracts, project and ticket charges can be deducted from a prepaid retainer.

If an optional Retainer Tax module is installed, even the tax levied on labor and charges can be subtracted from the retainer purchase. Refer to Adding tax to retainer contract items.

EXAMPLE  Your customer pays you on a per-ticket basis. They pre-purchase a group of tickets on a monthly basis. You must keep track of how the ticket purchases have been used, and when the customer should purchase more.

Per Ticket contracts allow customers to prepay for a set of tickets. The ticket is deducted from the purchased balance when it is marked complete, but the deduction is set to the date the ticket was created. For example, a ticket created on 3/31/2022 and completed on 4/2/2022 would be deducted from the March 2022 incident purchase.

Like block hour and retainer contracts, Notification Rules can be used to notify resources or automatically purchase a set of tickets when the contract reaches a certain threshold.

EXAMPLE  Your customer has seven contacts that fall under your contract. They are associated with the "Managed Services: User-Based" billing product, for which you charge $100/month. You are also billing by the device for four Datto Siris devices that are providing continuity services.

More and more, customers like the simplicity of billing by the user or device. You can set up billing rules that automatically generate monthly charges based on the number of contacts and/or devices. Billing rules also support price tiers and volume discounting. Refer to Billing by the contact or device.

Technically, billing rules can be associated with any contract type. Best Practice, however, is to use a Fixed Price contract or Recurring Services contract. That way, you capture the cost of labor without double-billing, and the revenue from the billing rules.