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Non-Natural Breakpoint: Example

The non-natural breakpoint is not related to base rent. It is based on the breakpoint amount, an annual monetary amount negotiated as a part of a lease, and a non-natural breakpoint percentage, a percentage factor also negotiated as a part of a lease.

The calculation determines the amount to bill for excess sales. If the amount to bill is greater than zero (0), the amount is billed on a separate invoice, otherwise there is nothing owed or credited.

Breakpoint billing is always performed at a specified breakpoint billing frequency. The breakpoint billing frequency value is set in the Sales Based page.

The year-end breakpoint reconciliation is performed at the end of the calendar (or fiscal) year, the lease year, or the tenant fiscal year. This acts as a true up taking the annual sales reported and comparing it to the total of previous sales reported and invoicing for any differences in calculation.

During the annual breakpoint reconciliation, the annual breakpoint amount is subtracted from the total annual sales and that total is multiplied by the non-natural breakpoint percentage to give a subtotal from which the total billed to date amount is subtracted to determine the year-end amount to bill. If the year-end amount to bill is positive, the amount is billed on a separate invoice.

The prorated breakpoint amount can be calculated as follow: 

  • Days in period

    • The prorated breakpoint amount is calculated by multiplying the daily rate by the days in a period.

Currently, only the Days in period method is available. Equal per period will be available in a future release.

Calculation Formulas

The base calculations for this method are as follows: 

  • The amount to bill is calculated with the following formula: 

    • (Total sales in period - Prorated breakpoint amount) * Non-natural breakpoint %

  • The year-end amount to bill is calculated with the following formula and logic based on a calculated subtotal.

    Subtotal = (Annual sales - Annual breakpoint amount) * Non-natural breakpoint %

    • If Subtotal > 0, Year-end amount to bill = Subtotal - Total billed to date
    • If Subtotal < 0, Year-end amount to bill = 0 - Total billed to date

Days in Period Example

Days in Period Table
Annual Breakpoint Amount: 2,158,400.00
Non-Natural Breakpoint %: 5%
Calculation based on: Two months having a total of 60 days
Sales numbers: 112,000
   
Normalize for set time frame: (60 days/365 days)

Days in Period

Amount to bill formula:

(Total sales in period - (Annual breakpoint amount * Normalize time frame)) * Non-natural breakpoint %

= (112,000 - (2,158,400 * (60 / 365))) *0.05

= (112,000 - 354,805.4794) * 0.05

= -242,805.4749 * 0.05

= -12,140.27

The amount is negative, so nothing is billed.