If a customer does not meet the terms of a contract, a penalty is applied. Each Contract Term must have at least one associated Penalty. You must create Contract Terms before you can create Penalties. Penalties are calculated at the end of every billing cycle, regardless of the Term Commitment.
There are five types of Penalties:
Fixed Fee - The Fixed Fee Penalty is the amount specified in the Penalty Amount field on the Contract Penalty window. The amount of the Fixed Fee is added to the customer's invoice. When used with the Term Commitment term type, this can also be referred to as a One-time Fee since breaking a term-commitment contract can happen only once.
Minimum Fee - The Minimum Fee Penalty is the difference between the Term value (the amount the customer agreed to maintain) and the actual usage for each billing period. If the actual usage is less than the term value, the difference is added to the customer's invoice. This penalty is used only with the Minimum Usage Guarantee Term Type, whose Units must be Currency.
MRC Multiplier Fee - The MRC (monthly recurring charge) Multiplier Fee is the sum of the associated product charges that are selected when assigning the contract to the customer, multiplied by the number of months remaining on the broken contract, then added to the customer's invoice. This penalty is used only with the “Term Commitment” Term Type.
Multiplier Fee - The Multiplier Fee Penalty multiplies the Penalty Amount by an associated entity (such as the number of services the customer is short in a Service Count Commitment), then adds the result to the customer's invoice. This penalty is used with the Minimum Usage Guarantee, Maximum Usage Guarantee, and Service Count Commitment Term Types.
Prorated Fee - The Prorated Fee divides the fixed amount of the penalty by the number of time units in the contract and then multiplies that amount by the number of time units left in the contract when it was broken. This penalty is used only with the “Term Commitment” Term Type.
For example, a customer has a 12 month term commitment contract with a $200 Prorated Fee penalty. The contract starts on 1/1/2004. He then disconnects on 4/15/2004. This leaves him with 8 ½ months remaining on his term commitment. When the biller assesses the penalty, it will first round the remaining months up to 9, from which it gets a ratio of 9/12 or .75. This customer is then charged .75 * $200 = $150.
Notes:
If the contract is terminated in the middle of a time unit, the remaining partial time units are rounded up for penalty calculation.
The time units must be the same for both the billing cycle that the customer is in, and the contract terms of the contract that is assigned to that customer. For example, if the customers who are to receive the contract belong to a billing cycle that is billed monthly, the contract terms must be monthly. If the customers who are to receive the contract belong to a billing cycle that is billed weekly, the contract terms must be weekly.
To add a new penalty see New Contract Penalty.
See also: