The current one-time invoice functionality cannot be used for rent credit functionality. While the user is able to specify a lease and whether the invoice is an AP or AR invoice, due to the ways in which payment schedules are entered for AR and AP leases, the one-time invoice screen can be a bit confusing. Instead, the user should just be prompted to specify whether the invoice is a credit or debit. Additionally, the system should determine whether the Accounting Type should be Accounts Receivable or Accounts Payable.
The user should just be required to specify whether the invoice is for a debit or credit. A debit would be an invoice where the tenant must make a payment. A credit would be where the landlord is reducing the amount that must be paid by a tenant. Selecting the lease and the credit/debit type should automatically determine whether the invoice is an AR or AP invoice.
In the case of a debit, the user should be allowed to pick the expense category for the invoice (OPEX, Utilities, CAM, RE Taxes, etc...) and should result in a PLI getting created for that amount. If the lease is an AP lease, then the debit invoice should be designated as an Accounts Payable Invoice as this represents an additional payment that must be made by the tenant to the landlord. If the lease was an AR lease, the debit invoice should still represent an additional payment that should by paid by the tenant to the landlord - and because of how AR leases are supposed to be entered into TRIRIGA, this should also generate a PLI as Accounts Payable.
Right now, the Contracts>Payables>Invoices>Real Estate (the RE Invoice form) just allows for invoicing. So, if you select Accounts Receivable in the Invoice Type, you’re only able to select from a list of Accounts Receivable leases. This makes it so that a rent credit cannot be added to the lease without doing a revision and then perhaps creating a payment schedule to offset the rent. Likewise, selecting an invoice type of Accounts Payable then restricts you to selecting only AP leases – so you would not be able to not be able to issue a rent credit to your tenant if you have an AR lease.
With an enhancement, the Contracts>Payables>Invoices>Real Estate form could be used to enter a rent credit even if the contract is in an Active state. Instead of requiring the user to specify the Invoice Type as AP or AR, the user should just need to find the appropriate contract. Then a new field should be added to allow the user to specify whether they are entering a debit or credit record. A debit record would be one in which the tenant needs to make a payment. A credit record would be one where the tenant is credited an amount.
As an example, if you have an AP lease that pays $1000 per month for rent, if the user enters a Credit record of $3500, then this should basically offset 3 ½ months of rent.
So, if the Rent Credit was given by the landlord on 9/15/2022, then it might offset October, November, and December rent in FULL, plus it could offset half of the January rent. It would be helpful to allow the user at the time of entering the rent credit record to also pick/find the Payment Line Items to offset. The user could pick the 10/2022, 11/2022, 12/2022, and 1/2023 rent payment line items. Then a workflow could iterate through the PLIs and create offsetting PLIs for those same months and expense types until the rent credit amount is fully used.
The net result is that the system would generate Payment Line Items for -$1000 for 10/2022, 11/2022, and 12/2022 as well as -$500 for 1/2023. When the rent roll is processed for October, it would see a PLI for $1000 and -$1000 (both for the Rent payment type) thereby canceling any payment. I’m not exactly sure what makes the most sense in terms of whether the -$1000 offset should be created as an AP PLI with a -$1000 amount or an AR PLI with a positive $1000 amount. I would imagine for purposes of reporting and rollups/summations, it might be better to create an AP PLI with a negative amount.
When a rent credit is added, the form should also keep track of any unused balance from the rent credit. If the landlord issued a $3500 rent credit and the user only selected 3 PLIs of $1000 each, then there should be $500 of rent credit remaining – and possibly keep it from being fully closed/completed until the full credit is applied.
In the event of a debit type of invoice, I think it would be sufficient to simply create an AP PLI for the full amount since this is just an additional payment and is not offsetting any existing PLIs.
Important Note: Some may argue that this sort of rent credit tracking and reconciliation should be handled by the ERP financials system, but in IBM's case, the offsetting of rent payments must occur before things get sent to Accounts Payable. Please consult Natalia Lopez for additional information about this requirement.
Open question for David Kirwan: Does a rent credit (like in the example above) need to be taken into consideration in the accounting schedule for the lease?
