Escalation is the automatic price increase of a multi-year maintenance contract at the contract's anniversary date. Contracts are usually escalated because costs increase. These increases can be attributed to several factors, such as an increase in the cost of parts, material, subcontracts, travel, or labor. Escalation adjusts the price of a maintenance contract, by cost category, on a predetermined basis (e.g., Consumer Price Index or inflation index).

Escalating a maintenance contract involves the following:

Step 1: Mark the contract escalation setup option.

1. Choose Microsoft Dynamics GP > Tools > Setup > Service Management > Maintenance Setup > Maintenance Options.
2. Mark the Escalate Contracts check box in the Maintenance Options window. The Distribute Amounts by Cost Category check box is marked and disabled by default. This allows you to escalate by contract amount or by cost category.
3. Choose OK.

Step 2: Set up escalation indexes

Escalation indexes are usually set up at the time you set up your system or when your escalation strategy changes. Examples of indexes are CPI for Consumer Price Index or SPI for Standard Price Index.

1. Choose Microsoft Dynamics GP > Tools > Setup > Service Management > Maintenance Setup > Escalation Index.
2. Enter an escalation index and description.
3. Choose Save.

Step 3: Set up escalation index detail

Escalation rates must be set up for each month and year that you will be escalating contracts. You must set up an index detail for each cost category you will be escalating. You can choose to escalate by a percentage or an amount, or both. If you escalate using a percentage and an amount, the escalation amount will be a sum of the two. For instance, if your original contract amount is $1,000 and you escalate it 10% and $250, the escalated contract amount is $1,350, or $100 (10% of 1000) + $250 + $1000.

1. Choose Microsoft Dynamics GP > Tools > Setup > Service Management > Maintenance Setup > Escalation Detail.
2. Enter an Escalation Index ID. You can choose the expansion button in the Escalation Index ID field to open the Escalation Index Detail window, which lists existing escalation index details.
3. Enter a Year and choose a Month from the drop-down list. The year and month must fall within the contract dates for escalation to occur. Choose ALL for all months.
4. Use the lookup window in the Cost Code field to choose a cost code. Choose ALL for all cost codes.
5. Enter a Percentage or Amount to escalate, or both. You can set up to only escalate the first year by setting up the escalation amount on the first year and then setting up zero amounts for the remaining years. If you find that you want to escalate another year, you can change the amounts for the contract for that year. Go through the routine of build escalation each year after you set the amounts for that year's escalation.
6. Choose Save.

Step 4: Set up a maintenance contract.

1. Choose Cards > Service Management > Service Manager.
2. Select a customer and choose the Contract button.

3. Set up your maintenance contract as usual. 

   The Escalation Frequency field defaults to At Anniversary. The only other option is None. You cannot add to these options. If you choose None, your contract will not escalate.

   The Anniversary Date field defaults with a date 365 days from the contract's start date on contracts spanning more than one year. Contracts less than 365 days have an anniversary date matching the contract's expiration date.

4. Choose how much in advance to be notified of a contract escalating by entering a number of days in the Escalation Notification Days field. The Maintenance Contract Escalation Notification report lists those contracts that will escalate based on the contract's escalation date and escalation notification days. For example, if your contract's escalation date is December 31, and you would like to be notified 45 days in advance of the escalation date, the contract would appear on the Maintenance Escalation Notification report for November. The escalation date defaults from the Anniversary Date field.
5. Mark the Automatically Escalate check box if you would like the contract to escalate without a salesperson's approval. If you do not mark this option, the contract will not escalate unless the Approved By and Approval Date fields are complete in the Maintenance Contract Escalation window. When escalating contracts annually, the contract's start and expiration dates must be longer than one year.

Step 5: Assign escalation indexes to the maintenance contract.

1. In the Maintenance Contract window, choose the Escalation button to open the Maintenance Contract Escalation window.
2. The Escalation Notification Date field completes based on the Escalation Notification Days field and the Escalation Date field in the Maintenance Contract window. If changes are made to the Escalation Notification Days field, the Escalation Notification Date field in the Maintenance Contract Escalation window updates to reflect this.
3. Assign an escalation index to each cost category you want to escalate. Not all categories need to have an index assigned. Cost categories not assigned an index will not escalate. If the amount entered in a cost category on a maintenance contract is zero, the cost category still escalates by the amount of the escalation. If you enter an incorrect amount by mistake, mark the check box in the Clear Amounts column. If a check box is marked and you choose the Save button, you will receive a message asking if you want to clear the amounts. If you clear the amounts, you must rebuild the escalation to regenerate the escalation amount(s). Otherwise, the cost category will not be escalated.
4. Choose Save and close the Maintenance Contract Escalation window. 

Step 6: Enter estimated costs

1. In the Maintenance Contract window, choose the Revenue/Cost button to open the Revenue/Cost window.
2. Enter amounts in the Estimate column for all cost categories and subcategories. The estimated costs will be escalated. If you don't enter estimate amounts, after building the escalation, the escalation amount defaults in the Estimate column. Percentage amounts will not calculate and will not update the Revenue/Costs window.
3. Choose Save and close the window.

Step 7: Build the escalation 

Perform the monthly process of building the escalation for the contracts that are approaching their escalation date.

1. Choose Microsoft Dynamics GP > Tools > Routines > Service Management > Maintenance Contract > Build Escalation.

2. Select the year and month you want to build the escalation for in the Contract Build Escalation window. Ignore the Commit Contracts of Type field.
3. Choose Build to perform the escalation calculation. If you entered estimated costs, they will also be escalated. Labor hours do not escalate, but the labor rate increases. The Escalation Build report prints when the calculation is complete, displaying the contracts to be escalated.
4. Close the Contract Build Escalation window.

Step 8: Print the escalation notification report

After building the escalation, it is a good idea to print the Maintenance Escalation Notification report. This report has a breakdown of the escalation amounts for each cost category for all the contracts that are to be escalated for a given month, as well as the estimated cost amounts. Remember, the contracts appearing on this report are based on the Escalation Notification Date on the maintenance contract.

1. Choose Reports > Service Management > Maintenance > Escalation Notification.
2. Enter start and end dates.
3. Choose Print.

Step 9: Review/modify the escalation and give approval

1. Choose Escalation in the Maintenance Contract window of a contract that had an escalation calculated. A red circle is present in the column next to any escalation indexes that were set up incorrectly, and therefore were not escalated. The original, non-escalated, amount appears in the field. You are still able to commit the escalation even though an escalation index hasn't been defined.
2. You can override the amounts that the system calculated for a specific contract by entering new values in the Accepted Billing and Accepted Estimated Cost columns.
3. If you did not mark the check box in the Maintenance Contract window to automatically escalate the contract, you must enter a salesperson name in the Approved By field and enter an approval date.
4. Choose Save.

Step 10: Commit the escalation

When you are sure that all the new amounts are correct, you can commit the escalation. To successfully commit all contracts, you must have the Automatically Escalate check box marked in the Maintenance Contract window or else enter an approval name and approval date in the Maintenance Contract Escalation window. You can re-run the commit process at any time if some contracts did not meet the commit requirements.

1. Choose Microsoft Dynamics GP > Tools > Routines > Service Management > Maintenance Contract > Build Escalation.
2. Enter a year and month to commit.
3. Choose to commit either maintenance contract escalations, master contract escalations, or both.
4. Choose Commit. This causes the contracts to be escalated at the new amount. You receive a warning message if the escalations for the year and month you choose contain errors; however, you are still able to commit the escalation.

Once a maintenance contract completes the commit process, the new contract's start date and expiration dates are advanced, the billing schedule, revenue and contract information are moved to history, new billing and revenue schedules are created, and maintenance tasks are reset.