Business Purpose
Agricultural grain companies often utilize fees in contracts as a way to account for various services, costs, and contingencies associated with the procurement, storage, and sale of grain commodities. Here are some common ways in which fees are used on contracts by grain companies:
- Storage Related Fees: Grain elevators and storage facilities charge fees for storing farmers' grain. These fees can vary depending on factors such as the volume of grain, the type of grain, and the duration of storage. Farmers pay these fees to the grain company for holding their grain until they decide to sell it.
- Handling Fees: Handling fees cover the costs associated with unloading, inspecting, and loading grain. These fees are typically charged to farmers when they deliver their grain to the elevator. The fee may vary based on the type and quantity of grain being handled.
- Quality Adjustment Fees: Grain quality can vary, and grain elevators may charge fees for adjusting the quality of grain to meet certain specifications. For example, if the moisture content of grain is too high, the elevator may charge a fee for drying it to an acceptable level.
- Grading and Inspection Fees: Grain companies often provide grading and inspection services to determine the quality of the grain. Fees may be charged for these services, and they can impact the final price the farmer receives for their grain.
- Transportation Fees: Grain companies may offer transportation services to move grain from the farm to the elevator or from the elevator to other destinations. Transportation fees cover the cost of logistics and may vary depending on distance, mode of transport, and other factors.
- Brokerage Fees: Grain companies may act as brokers to help farmers sell their grain to buyers. In such cases, they charge brokerage fees, which are typically a percentage of the sale price.
- Contract Fees: Some grain contracts may include administrative fees or contract management fees. These fees cover the cost of administering the contract and ensuring compliance with its terms.
- Risk Management Fees: Grain companies may offer risk management services to help farmers protect themselves against price fluctuations. Fees may apply for these services, such as hedging or options contracts.
- Documentation and Reporting Fees: Grain companies often generate documentation and reports related to the transactions, which may incur additional fees. These documents are essential for record-keeping and compliance purposes.
- Late or Penalties Fees: Contracts may include provisions for late delivery or other breaches of terms, leading to penalty fees or interest charges.
These fees are essential for grain companies to cover their operational costs, manage risks, and provide various services to farmers. They also help ensure that grain is handled, stored, and transported efficiently and meets the required quality standards. The specific fees and their structures can vary significantly between grain companies and may be subject to negotiation as part of the contract terms.
High-Level Overview
Fees can be associated with every logistical document throughout the deal's lifecycle, up until the final settlement phase. SAP Agricultural Contract Management allows collection of fees in the commodity settlement process as well as accrual generation.
The attachment of fees can occur through two distinct methods:
- Manual Entry: Users have the option to manually input fees during a transaction, providing flexibility and control over fee management.
- Automatic Derivation: Fees can also be automatically determined using flexible Business Rules Framework (BRF) rules, streamlining the fee calculation process.
Accrual Capabilities
SAP Agricultural Contract Management offers robust accrual capabilities, enabling the tracking of the financial impact of predefined fees prior to invoicing or realization. This feature encompasses the following functionalities:
- Accrual: SAP Agricultural Contract Management allows users to accrue fees.
- Fee Reversal: Users can reverse fees when necessary.
- Accrual Display: SAP Agricultural Contract Management provides a display function for accrued fees.
- Third-Party Sales Accrual: Users can accrue fees related to third-party sales.
- Third-Party Purchase Accrual: SAP Agricultural Contract Management supports the accrual of fees associated with third party purchases.
- Intercompany Accrual: Intercompany fees can also be accurately accrued within the system.
Separate Invoice Creation
SAP Agricultural Contract Management facilitates the creation of separate invoices for fees before the commodity settlement process. These pre-settled fees are then factored into the final commodity settlement. However, it's important to note that creating separate invoices for storage fees is not supported. Key features of this functionality include:
- Separate Invoice Generation: Users have the option to generate distinct invoices for fees.
- Invoice Reversal: SAP Agricultural Contract Management allows for the reversal of separate invoices when required.
- Invoice Display: Users can readily view and display separate invoices.
- Third-Party Sales Invoice (SI) Generation: The system enables the generation of SIs for third-party sales fees.
- Third-Party Purchase SI Generation: Similarly, SAP Agricultural Contract Management supports the creation of SIs for third-party purchase fees.
- Intercompany SI Generation: Intercompany fees can be incorporated into separate invoices as needed.
FLAT
Fee Type - FLAT - A FLAT amount is charged.
UOM
Fee Type - Per UOM - Fee rate maintained as X currency per Y UOM.
NPE
Fee Type - NPE - NPE - per UOM rates maintained for the following:
- In-charge
- Recurring charge
- Maximum charge
Carry
Fee Type - Carry - Carry - per UOM rates maintained for the following:
- Initial charge
- Recurring charge
- Maximum charge
- Premium charge
Characteristic
Fee Type - Characteristic - Different rates based on different tiers of the characteristic.
Percentage
Fee Type - Percentage is based on the following:
- Based on percent of prepayment agreement amount
- Based on percent of settlement gross amount
