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Can Your ERP Manage the Complexity of Rental Charging and Billing?

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For those ERPs with their roots in manufacturing and retail businesses, the equipment rental industry is a confusing minefield when it comes to charging and billing. Whether your business focuses on day/week/month type calculations, your equipment drives the use of excess hours and shift based charging, or if you include labor and maintenance within your charging profiles, rental charges are complex.  Most generic ERP systems do not support these complex charging methods right out of the box.

The basic problem is that traditional ERP’s are developed to address quantity, price, and discounts.  They can do some fantastically complex things with those 3 pieces of information. A rental ERP; however, needs to deal with 4 factors: quantity, rate, discount, and duration. Duration is what makes things very complicated.  It’s like adding a 4th dimension to an architectural drawing and it’s not just as simple as multiplying the quantity by the number of days or hours.

Where does your day start? Midnight or 24 hours from the time the rental started?   If the customer takes it out on a Saturday for 5 days is that the same price as if they took it out on a Monday for 5 days.  If they take an excavator out for 1 day, do they get charged a 1-day rate, or 50% of the weekly rate because you have a minimum charge baked into your calculations?

If you charge in advance, which is prevalent in some niches within the equipment rental industry, what happens if you price for 4 weeks and the customer brings it back after 2? If you charge in arrears and the customer takes 3 deliveries during the course of a month, do you try and pro-rate them all to a nice neat end of month single invoice, or bill them separately on their individual anniversaries?   What happens if there is a public holiday mid-month and the customer doesn’t’ expect to be charged for holidays?

When your customers are large enough to demand their own special charging rules life gets even more complicated for the ERP. If your business thinks in terms of 6 day weeks, but your customer wants a 5-day charge, or perhaps your customer wants consolidated billing across all job sites and all contracts on a specific day of the month.  Then how to you handle it?

We regularly receive requests for proposals (RFPs) from rental companies looking for software. Often, particularly when the RFP has been put together by external consultants we see that rental charging is relegated to a few questions out of hundreds.  Charging your customer and getting your billing right is one of the most important things that your ERP system must be able to do.  If you don’t have this absolutely fundamental building block in place from day one you’ll find that your ERP is incapable of delivering what you need without development and customization.

So if you’re looking for new software and exploring different ERP options, make sure you take the time to include very specific examples in your RFP. Don’t assume that a generic ERP analyst will understand what you mean if you simply use generic industry terminology. The chances are they won’t. We would strongly advise devoting an entire section of your RFP to charging and billing at a level of detail that prevents the ERP vendor from just answering “yes” to a generic question.

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