Overview
It's best to begin a contract on the first day of the month when work will begin, and end it on the last day of the month when work will be completed. However, you may sometimes want to start a new 12-month contract mid-month. Because contracts should never be longer than 12 months, you may be wondering what to do.
This article describes three options for “normalizing” a contract that starts mid-month to the first of the month instead.
Things to know
No matter which option you pick, make sure that all services and work tickets related to the contract are completed between the start and end dates of the contract.
Be sure to communicate clearly with the customer to make sure they aren’t surprised by
Option 1: Create a contract or work order for the initial partial month
When starting a new 12-month contract in the middle of a month, many people choose to create a work order or a small one-month contract with only the services needed for that partial month. After that initial month, you start a 12-month contract opportunity and the start and end dates of that contract would be your rolling 12 months going forward.
Example: A new client wants to start service on May 15th, and you create a contract or work order for just the services from May 15th to May 31st of the current year only. Then you create a full 12-month contract that starts June 1st and goes through May 31st of the following year.
Option 2: Start the contract mid-month and cut it short by half a month
Start your first year’s contract in the middle of the month but end it earlier than usual. For example, if you start a contract on April 14th, you can run it until March 31st of the next year without any invoicing problems. After that, your future contracts will start on April 1st and run the full 12 months.
Note
Make sure you estimate the correct services and service occurrences for the reduced contract length.
One factor to consider in this approach is how you invoice the first partial month. Make sure to set up your payment schedule correctly to spread the dollars as desired. Verify you only have the correct services and service occurrences for that length of contract
It's important to ensure that you update services and quantities on the renewal if you have removed some from the initial contract. This will likely change the overall contract price and may need to be explained to your clients.
Option 3: Start the contract mid-month and end the contract in a month of your choosing
You might not always have full 12-month contracts, or you may prefer to renew at a specific time each year. You can start a contract in the middle of a month and choose when to end it, as long as it lasts less than 12 months.
For example, if you sign a new customer on June 15th and want all renewals to start on January 1st, you would set the contract from June 15th to December 31st. Only include services that will occur during that time period to ensure your monthly billing is correct. Then create a new contract starting on January 1st that will contain a full year's worth of services.