How to Use Subscription billing Functionality in Dynamics 365 Business Central

I want to show you new subscription billing functionality in Dynamics 365 Business Central. Microsoft has included this in the 2024 release Wave 2, so let’s take a quick look at how it works and how you might be able to use it in your business.

Sales Order Process

We’re going to go through this process here and what this is, this is a sales order process that includes an item that also includes an optional warranty item that we can charge to the customer if they want to.

So what we’re going to do is we’re going to put a sales order in, we’re going to recognize extended warranty, and then we’re going to set that extended warranty up in the contract so that it can be billed on a regular basis.

And we can also defer the revenue for 12 months going forward.

Starting a New Sales Order

So let’s get started.

We’re going to start a brand new sales order.

I have got a customer here.

I’m going to add a line item.

The item we’re going to add is an Airpod.

It’s a coffee maker.

Let’s add that.

And when we do that, it’s going to bring up the service commitment package we have associated with this item in our inventory.

That service commitment package includes this one extended warranty.

You can see the details here.

The cost of the warranty is equal to 7% of the selling price of that Airpod.

It’s going to be a 12-month contract.

I’m going to bill it all upfront and then I’m going to defer the revenue for the remaining 12 months.

So we’ll assume that the client wants to go ahead with this.

We’ll say hit OK.

Adding the Warranty to the Order

So now it’s part of the order.

You will notice that it’s not a line item on the sales order.

It’s a separate area.

We’ll take a look at that.

We’ll put a quantity of 15 in here.

We can always go back to the sales order and look at the service commitment for the line item by clicking on this here.

Here we see the detail of that warranty, the service commitment here the price is based on 7% of the selling price of the item in a sales order.

You can see the unit price here and the extension.

You will also notice that service commitment does not show up in the body of the sales order because what we are going to do with that is we are going to create a contract just for those service commitments.

We will bill those separately.

Printing the Order Confirmation

Another way to look at the service commitment for a particular order is to print out the order confirmation.

So let’s do that.

There’s a new report for that.

I’ll select that one here and we’ll preview it.

Here’s the order confirmation.

We can see the product line item from the sales order.

It also references the extended warranty here.

This is the per unit price.

We scroll down, we can see the total of the recurring services, which is the service commitment.

Posting the Sales Order

All right, so I’m done with the sales order.

I put the line items in there.

It’s everything the client wanted.

We also noted that they’re going to get the extended warranty, and we’ve looked at that.

So let’s post a sales order and move forward.

We’ll post this.

I’m logged in as a business manager to Business Central.

This is my role center.

If I scroll down, I can see some additional tiles that Microsoft has added to the Role Center.

You can see that here.

The service commitments without a contract.

We’ll look at that.

Let’s open that up.

Creating a New Contract

Every service commitment is going to need a contract in order to bill it and also recognize the revenue for it.

So here’s the line item from the sales order.

We can assign it to an existing contract if we want to, but we can easily create a new one.

Let’s create a new one.

All you need to do is click on the customer name field.

It’s going to fill in the information for that customer and assign a new contract.

I’ve also used contract type, and this is basically a tag.

Select that and that’s all I need to set up a contract.

It’s very simple.

Let’s go ahead and hit OK, and the last thing I want to do is assign this particular line item to the contract.

I’ll go up here and do that and I’m done.

Recurring Billing

Next, let’s go to the recurring billing piece here.

We’re going to create a sales invoice that represents the cost of that enhancement plan.

So go ahead and do that is recurring billing and I’m going to select the billing date of September 30th.

I’m going to leave the billing to date blank.

That allows the system to look at all the contracts and bill accordingly.

So I’m going to select this here, I’m going to use this billing date, and then I’m going to create the billing proposals.

I like that.

And I will then go and create the documents.

Let’s create the documents and I’m done.

Creating a Sales Invoice

I have created a sales invoice that represents the cost of this enhancement plan to the client.

So let’s take a look at that.

Here’s the invoice right here.

Let’s open that up.

And here it talks about the warranty.

It shows the service.

It also shows the item to which it was attached.

See that here the Airpot and it lists the contract number.

So when I created the invoice, it also created the deferrals.

So let’s go ahead and look at that.

If I go to post and do a posting preview, we can see all the transactions are going to be posted.

When the sales invoice is posted, I want to look at the deferrals.

These are the deferrals here.

Let’s take a look at all the deferrals.

Here are all the deferrals for that contract.

If I scroll over, I can see the amounts.

Here’s another view of it.

I can open it up and look by year.

I’ve set this up ahead of time so you can see the deferrals by year and by month.

Let’s go ahead and do that right now.

If I open this up, none of the deferrals have been posted.

We’ll do that next.

And as they get posted throughout the year, you’ll see them recognized in this report.

Posting Deferrals

Let’s go ahead and post this.

Then next, let’s go to the contract deferrals.

Let’s open that up.

And what I’m going to do here is I’m going to release these.

In other words, I’m going to post the deferrals that we just looked at and I want to change this to the end of the year.

So what this will do is look at the deferral schedules for all the contracts I’ve got.

It’s going to post anything that needs to be posted up to December 31st of 2024.

So I can go ahead and do that.

Hit OK, It automatically posts those deferrals and I’m done for the accounting.

Let’s take a look at it.

We can now go back to the customer contract deferrals we were looking at earlier.

We can see those here.

I’ve got all of them that I’ve done.

We can open this one that we just completed.

We can see that we’ve posted all the deferrals for 2024 on this one.

See that here they’ve been posted.

That’s what this yes means.

We can also open 2025 and nothing has been posted.

We can look at the other items.

These have been posted.

You can see all those have been posted for 2024.

We did that last process to release the deferrals.

We set up through December 31st and went through and looked at all the items in this deferral schedule that need to be posted and it did it.

Setup Items

Let’s take a quick look at some setup items.

First of all, let’s look at the items.

This is my Airpod item.

This is a coffee maker I included on my sales order.

We scroll down here, see there’s a new field here on the item card.

This has to do with the service commitment option, and there’s a couple options right here also.

Using Copilot for Assistance

What I want to show you here is how Copilot is being used to assist in the help.

If we ask Copilot, Copilot will look at this field and give us results based on the Business Central information.

So Copilot looks at Business Central.

It gives us information about a specific field.

This is better than what Microsoft had before.

This is very context sensitive and actually gives you the right, correct information about this particular field.

So this is an enhancement that I just noticed recently in Business Central, and I think it’s a good step forward.

Service Commitment Packages

Next, let’s look at the service commitment packages.

So for this item, if we go to related items here, I can see the service commitments.

This is a service commitment package.

For this particular item in that package, I’ve got these service commitments.

Here, the enhanced warranty.

I can have multiple items in a package.

I can have multiple packages at the time of order entry.

You can work with a client and say, well, which of these options do you want?

1, 2, 3 or maybe none.

So all the service commitments are put together in a package, then they’re easy to use in the sales order process.

Conclusion

In this quick demo, we looked at the new subscription billing process in Dynamics 365 Business Central. Microsoft included this process in the 2024 release Wave 2. We looked at the business process where we created a sales order.

We offered a service commitment to the customer. It was an enhanced warranty. The customer took it. We included that on the sales order and we ran through the recurring billing and sales invoicing to make that happen. And we also looked at the deferrals, at the contract deferrals and how that can be posted into your general ledger. This is really kind of a nice process. This is the first look at it. Microsoft is going to expand the reporting on it. We looked at some basic reporting and list, but they are going to expand on that and make that downloadable into Excel. So this is going to get better and better, but this is the basic look at it right now.

If you’re ready to deploy Copilot in Microsoft 365, download our free guide with the link in our video description.