How to manage Contracts
- Add contracts manually
- Different types of contracts
- Other leasing and rental contracts
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- [under translation] Adjustment, early termination and renewal of contracts
- Manage contract lists
Add contracts manually
Different types of contracts
Explanation of contract types
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Financial leasing – There is an agreed residual value in the contract. At the end of the rental period, you as a customer are obliged to appoint a buyer for the equipment, or alternatively redeem the equipment yourself.
For accounting according to IFRS, the residual value is included in the asset calculation only if the assessment is that the contract will be bought out at the end of the contract period. For example, for cars where it is common to change the car at the end of the lease, it is therefore most correct to only count the rental cost in the asset calculation.
Operational leasing – Means that the advantage of owning the equipment accrues to the supplier or finance company and that the customer only pays a rent to use the object for an agreed period of time. There is a residual value position guaranteed by the finance company/supplier. Since the rents mostly consist of amortization, the residual value position is far more important than the interest rate in the contract. This means that even contracts with a very low interest rate can be very disadvantageous if the finance company/supplier has taken a residual value position that is too low.
Also to consider for operational leasing is that there is a requirement that the equipment be returned in a certain condition (for cars condition + #km driven).
Rent - Lease contracts have no residual value, but just as it sounds, you rent the equipment from the lessor. If the contract applies to the rental of equipment, for example IT, copiers, coffee machines, etc., it is important to know that the contract is a financing contract that usually goes through a finance company and not through the supplier. It is important to terminate the rental contract in good time before the end of the contract period, otherwise the contract will be extended, often with the same rent as during the contract period, this despite the fact that the equipment is usually fully amortized. The notice period for the contract is stated in the general terms and conditions and is usually between 6-9 months.
After the end of the contract period, ownership of the equipment formally passes back to the supplier. In some cases, however, you can buy out the equipment if you want. It is therefore good to agree with the supplier on the amount even before the start of the contract. Don't forget that you have already paid for the equipment during the actual contract period.
Renting premises normally means that they are rented by a property owner without any connected financial company, so the rent does not include "repayment". However, it is important to keep track of the notice period (usually between 9-12 months), as missed notice often means an entire contract period is extended, which is expensive and unnecessary if you might have wanted to move or renegotiated the contract.
Functional rent – Is a rental contract but where the equipment in the contract usually requires some form of service (eg printers or coffee machines). In the contract, the service fee is usually included in the rental cost, and without further specification it can then be difficult to determine the reasonableness of the rental cost.
Other agreements - not for reporting
In Leasify, "other contracts" means contracts that should not be the basis for accounting or analysis of interest. Here you can enter all other contracts you want to control so you don't miss renegotiations, terminations and control of conditions.
Other leasing and rental contracts
Contract templates:
Other leasing and rental contracts
Enter a description* (mandatory field)
The description will be shown in the overview view of all contracts. Write a short and clear description wo that you can easily understand what the contract concerns.
Equipment
Here you can be as detailed as you wish to be. If you have a long product list, it is also convenient to write "see attachment" or similar and attach the associated file.
Contract number* (mandatory field)
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[under translation] Adjustment, early termination and renewal of contracts
Amendment and renewal of contracts
For example, changed contract length, new monthly cost and how environmental are handled.
Agreements that do not change during the contract period do not need to be handled at all, - the system automatically discards the agreement on the specified end date and the only thing you need to do is archive the agreement, so you do not have to keep it among your active agreements.
But agreements that somehow change need to be managed, and for that there are three simple functions that handle the whole change smoothly.
1.) Early termination of the contract
- Enter date (select the last month, as the system always executes based on the last day of the month) and click "Save".
The agreement is cancelled as of the date stated and the difference between asset and liability is recognised as "other operating income" in the earnings report.
2.) Extend/re-evaluate the agreement
- Set dates (the system always counts per the first of the month)
- Enter how many months from the date you specified above that the contract is to run. The function can of course be used both if the agreement is to be shortened, extended or just adjusted with the same number of months left as in the original version.
- Enter the accounting depreciation period (this figure will automatically be the same as the number of months but can be adjusted manually).
- Enter new lease/rental fee
- Enter any new residual value (only in the case of financial leasing)
- Indicate if there is any discount in the new version (most common for real estate contracts)
- Click "Save"
The system now takes with it any debt and asset from the previous version of the agreement and creates a new version called "The Agreement (Extended)".
Important aspects for this function:
- In the case of financial leasing, new residual value must be calculated and stated so that the interest rate does not go wrong
- If the contract length and fees change, the agreement will be revalued and the revaluation amount will be added to the cost (does not apply to financial leasing).
- For example, in the case of green car , this function is used as above in operating leasing and at IFRS where discounted rents are used for asset calculation. The reduced monthly fee will reassess the agreement's liability and assets. For contracts where the price is used as the asset value, for example, financial leasing, the function "Additional amortization" is used, - see below.
3.) Additional amortization
- Set dates (the system always counts per the first of the month)
- Describe what is meant - for example "Green car premium"
- Specify amounts to be deducted from liabilities and assets
- Click "Save"
The system will now calculate a new monthly cost based on previous debt, amortization amount and remaining time. Other settings are the same based on the agreement such as interest, residual value, depreciation rate, etc.
Manage contract lists
Export contract list to excel
To export data from contract list to excel, follow the below steps.
Start by going to "All Contracts".
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Once inside all contracts, select All Contracts or only those you want to export.
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Then select - "select select action" and export to Excel. If you want to do the same for the archived contracts, use the same steps but from within the "Archived Contracts" view.
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Select a name for the export file and "run action"
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Tap the top right of the ringer and tap on the export you want to download. Then it will download an Excel file to your computer.
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