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AX 2012 R3 Royalty Management

Maurice Cohen

Maurice Cohen

The Microsoft Dynamics AX/D365 Support Team at Avantiico is focused on solving our client’s problems, from daily issues to large and more complex problems.

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A new feature released with Dynamics AX 2012 R3 is royalty management. A royalty is a fee that one party (the licensee) pays to another party (the licensor) for the use of intellectual property. Dynamics AX 2012 R3 enables an organization to manage royalty agreements, track royalty transactions and approve them for payments. In this blog, I will highlight the main steps to enable royalty tracking and process a sample transaction.

Prerequesites

In order to use royalty management, make sure that the configuration keys are enabled under System administration > setup > Incense configuration

License configuration in Dynamics 365

You must then setup the Broker and Royalty tab under the Account payable parameter form. The purpose of these parameters is to define how a company handles royalty payments by specifying a journal to post royalty accrual and what ledger accounts to use.

or-royalty-management-screenshot in Dynamics 365

You can now create a royalty agreement under Accounts payable > Common > Royalties > Royalty agreements

or-royalty-management-screenshot in Dynamics 365

The header section defines the terms of the agreement: How often royalties are calculated for payment, the vendor the royalty will paid to, whether the royalty is based on amount or quantity, dates and if an approval is required. Optionally a list of items can also be assigned at the header level.

The line section defines the various royalty codes, item assignments and royalty amounts. The example below shows a 5% royalty will be paid for item T0020 when the amount sold is between 1 and 5,000 Dollars over a 1 month period and a 7% royalty above 5,000 dollars.

or-royalty-management-screenshot in Dynamics 365
or-royalty-management-screenshot in Dynamics 365

Every time a sales order is invoiced for the item in the royalty agreement, the system creates a royalty claim record under Account payable > Commons > Royalties > Royalty claims. From this view, you can cumulate royalties according to the agreement terms, approve and process royalties for payment.

or-royalty-management-screenshot in Dynamics 365

Note: The sales order invoice does not create an accrual in the ledger.

Process Royalties

Once royalty claims are created, they can be reviewed and approved for payment. In our example we had 2 sales orders that were invoiced in the last month for a total of 12,000 dollars. So based on the royalty agreement, the system should calculate a 7% royalty as the total amount invoiced was greater than 5,000 dollars.

The first step is to cumulate the claims which calculates the amount of royalties to be paid based on the agreement terms (period and amount). You can cumulate royalties by using the cumulate royalties button, specify a date range and vendor.

or-royalty-management-screenshot in Dynamics 365

If we look at one of the claims for vendor US-105 we can see that the calculated royalty amount of 420 dollars equals 7% of the invoiced amount for the sales order.

or-royalty-management-screenshot in Dynamics 365

The next step is to approve the claims. You can approve claims by clicking the Approve button. This step posts the royalty accrual journal. The posted journal can be viewed by clicking the Royalty transaction button.

or-royalty-management-screenshot
Journal voucher screenshot in dynamics ax

Note: The system creates 1 journal per claim.

The final step is to process the approved claims. This step reverses the ledger accrual entries and creates the vendor invoice. You can process the claims by clicking the “Process royalty” button and selecting the vendor.

Microsoft Dynamics AX screen - process royalties

Once the claims are processed, you can access the accrual reversal and vendor invoice but clicking the Royalty transaction button.

Royalty Transaction in Dynamics 365

Note: The system creates 1 invoice per vendor.

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