Billing maintenance plans on their cycle
How a manufacturer bills maintenance plans on their cycle with Industry CRM subscriptions, keeps plan revenue apart and treats prepaid plans.
By Achekam · · 4 min read · For Manufacturing businesses in South Africa, Nigeria, Kenya
Launching soon. The Industry CRM add-on described in this article is launching soon. This article describes it as it will work at launch.
Selling a machine is a single event. Keeping it running is a relationship. Many manufacturers of compressors, refrigeration units, pumps, generators or packaging equipment earn steady income from maintenance plans: a quarterly service visit, an annual inspection, a set of call-outs included for a fixed fee. That income is valuable precisely because it repeats. It is also easy to lose track of, because the plans renew on different dates, some are paid monthly and some a year in advance, and the service team and the accounts team often keep separate lists.
The Industry CRM's Manufacturing & distribution pack, with the subscriptions that arrive in its third wave, gives maintenance plans a proper home: a catalogue item, a billing cycle, revenue posted to the right account and prepaid plans treated as deferred revenue. This article explains how those pieces fit together and what to decide before you set the first plan up.
Maintenance plans in the starter catalogue
The Manufacturing pack's starter catalogue lists the after-sales services a manufacturer typically sells: installation, commissioning, service visits, maintenance plans, out-of-warranty repairs and call-outs. They post to two revenue accounts, 4350 and 4360, so service income sits apart from the sale of goods.
The items are unpriced. Switching on an industry pack adds that industry's revenue accounts to the chart of accounts and its unpriced starter items to the catalogue, and the business sets its own prices. If an account code the pack needs is already used in your chart for another type of account, the activation is refused and names the account, so check your chart first.
Before pricing, decide what your plans actually are. A typical range:
| Plan | What it usually includes |
|---|---|
| Basic | Scheduled service visits only; parts and call-outs charged extra |
| Standard | Scheduled visits plus a set number of call-outs |
| Comprehensive | Visits, call-outs and wear parts, with exclusions written down |
Write each plan's inclusions and exclusions before anyone sells it. A plan whose scope is vague becomes a plan where the customer expects everything for free.
Subscriptions and renewals
Bookings, subscriptions and renewals, milestones, retentions and deferred revenue belong to the Industry CRM's third wave. For maintenance plans, subscriptions and renewals are the heart of it: a plan is set up once and billed on its cycle, instead of someone remembering to raise each invoice, and its renewal date is something the business can see coming.
To make that work, settle a few things for each plan:
- the billing cycle: monthly, quarterly or annually in advance;
- the start date, ideally tied to the machine's installation or the end of its warranty;
- the renewal terms: whether it renews automatically and with what notice of a price change;
- who reviews plans before they renew, to catch machines that have been sold, scrapped or moved.
A plan that renews without anyone checking can keep billing for equipment that no longer exists, which is a quick way to lose a good customer's trust.
Revenue posted per account
With the Industry CRM, an invoice line names the revenue account and the product it sells, so revenue is posted per account and cost of sales goes into the same journal. For a manufacturer, that separation is the point: machine sales, spare parts, and service and maintenance income each land in their own account rather than in one sales figure.
That lets you see, month by month, how much of your income repeats. Service revenue is often steadier and more profitable than equipment sales, and a lender or buyer valuing the business will want to see it on its own. How the pack's service items reach the ledger is covered in more detail in service revenue in the ledger.
Prepaid plans as deferred revenue
Customers on annual plans often pay a year upfront. That money is not yet earned on the day it arrives: you owe the customer a year of service. Investopedia's explanation of deferred revenue sets out why payment received in advance for subscriptions or services is a liability until delivered, and how it is recognised over time.
Deferred revenue is part of the same third wave as subscriptions. In practice, an annual prepayment should sit as a liability and be released to service revenue across the months of cover, so each month's income reflects the service actually provided. Agree with your accountant how plans with uneven service, such as one large annual inspection, should be released; straight monthly release is not always the right answer.
The same logic in a software business is explained in annual prepayments as deferred revenue.
Service visits under a plan
The plan is only as good as the visits it pays for. Link the commercial record to the service work:
- Identify the machine. Record its serial number on the plan. The Manufacturing pack keeps warranty claims with serial numbers, and using the same serial numbers for plan visits keeps each machine's history in one trail.
- Record each visit. Date, technician, work done and parts used, so you can show the customer what the plan delivered.
- Charge what is outside the plan. Parts or call-outs beyond the plan's inclusions are invoiced as out-of-warranty repairs or call-outs from the catalogue, with their own prices.
- Review profitability. Once a year, compare each plan's income with the cost of the visits and parts it consumed. Plans that lose money need a new price or a narrower scope.
The pack also keeps Dealer accounts and quote requests. If dealers sell plans on your behalf, decide whether the plan is billed to the dealer or to the end customer, and record that on the dealer's account from the start.
Getting ready
Define two or three plans with written inclusions, price them, decide their billing cycles and renewal rules, and agree with your accountant how prepaid plans are released. List the machines already under informal service arrangements, with serial numbers, so they can move onto proper plans.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
