Escalation - Equipment billings

It is typical for businesses to pass on price increases, such as internal cost escalations, to customers. In terms of maintenance contracts, the increases are passed onto customers through renegotiating the billing rates. However, it is not necessarily the case that an escalation of internal costs by 5% results in the customer agreeing to increase the billing rates by 5%. Clauses in the contract determine how escalations will be calculated, negotiated and applied. This is why billings are escalated independently of the costs, and hence why AMT does not automatically escalate the billings by the same percentage as the costs – new rates must be entered by users.

If new billing rates are not entered into AMT, AMT’s billing forecast (revenue) will be either under or overstated. AMT will always forecast the total revenue that will be earned based on the billing schedule alone. When entering new rates into AMT, the new rates must be entered per asset, because the usage at which the billing rate changes will be different for every asset.

Example

• On 1 July 2019, a customer agreed to a billings increase of 5%, resulting in the rate increasing to $27.50 per hour.
  • Truck 001 had 26,029 hours, and from that point $27.50 was applied.
  • Truck 002 had 25,892 hours, and from that point $27.50 was applied, and so on.

Refer to Apply Billing Escalations for more information.