|
|
You have a lot of choices on how to calculate your retail prices on the Inventory Details window - Retail Prices tab. For most companies, this is much more than you need. You can have a list price and up to 12 different prices for different types of customers. In addition, you can activate these prices if a customer purchases a certain quantity of items for quantity price breaks. Also, the prices can be calculated in different methods such as cost plus a percentage, profit margin to achieve discount from list price, and so on.
You can also enter in sale prices that are used if the item is sold between the start and ending sale dates.
Most retailers just use the List price feature and most wholesalers just use List price and up to two discount schedules. You do not have to use all the schedules here if you have no need for them.
Some tab functions work in relation to the window's Toolbar. Click Toolbar to view detailed information about the Toolbar button options.
Figure 1: Retail tab
A price level allows you to enter different prices or formulas into each schedule. In some competing programs, a discount schedule might always be a fixed amount off of list price. With System Five, each item can have different rules.
For example, an office supply store may be able to give steep discounts on furniture for its good customers but cannot afford to discount paper products more than 5% because the markup is so low on these items.
Note 1: It is a lot of work to manipulate each item and change the price schedules when creating new parts. System Five allows you to create defaults, or templates, that can be used over and over. You can have a master default part that is used whenever you add a new inventory item to stock. For special sub categories such as paper products in the above example, you can create a default for that sub category. When you add items into that sub category, the system uses the sub categories default (or template) instead of the standard default. The advantage is that anyone on staff can add new items to inventory and have the standard pricing rules be automatically applied.
Note 2: When entering any of the prices below, if you enter the percentage, the price is calculated and if you enter the price instead, the percentage is calculated. This can make life a little easier for you.
Note 3: For our Customers in Australia and New Zealand, were Tax is included in the selling prices, a special option is included. Located in the bottom left corner of the Retail Price tab, a check box, labeled 'Exclude Included Taxes' removes the Included Tax from the Selling Prices before calculating the Margin or Markup values.
In some cases, such as when you print a catalog that hang around for a year, you may want to lock in the selling prices to a fixed price. Use the code F to fix the price and then just enter in the retail price beside it. No matter what happens with the cost price, the item always sells for the same amount.
The danger with this method is that it requires a manual intervention to review the prices from time to time to ensure that you're still making a profit. There is an option in the Setup Wizard to allow setting the fixed price for all price levels at once. The [Set Fixed Regular Price] and [Set Fixed Sale Price] buttons, as shown in Figure 2, allow setting the fixed price for all price levels at once. The buttons are only available if the Allow setting the fixed price for all price levels at once option is selected in the Setup Wizard.
Figure 2: Set fixed price
Most walk-in traffic pay list price. For your special customers, you can place them on a price schedule so that they automatically get their discount without anyone having to remember. The customer price level matches up with the price levels on this inventory price window.
You can give customers price schedule discounts for just some sub categories instead of all the inventory in the store. When you sell an item, the system looks at the customer record, the list of price schedule exceptions and the sub category that the item belongs in, and based on all these factors, figure out which price to charge the customer.
Industrial companies and wholesalers generally price their inventory on a cost plus percentage basis. If you use the code L, the system markups from the landed price. If you want to ignore the freight and duty and markup from the raw cost price, you can use code W instead.
If an item costs $100.00 and you use a markup of 50%, the retail price is $150.00 because the system marks up, or adds 50% of the value to the landed cost. Half of $100.00 is $50.00, so the total is $150.00.
Figure 3: View wholesale amount
The these columns are hidden by default. If a user has security "View Wholesale Amounts" (34,2) they can show the columns by right clicking and choosing "customize". These columns are hidden if another user logs on without proper security.
Retailers generally like to use the Margin method. This tells them the percentage of profit that is expected to be made. If you use the code M, the margin is calculated on the landed cost (the normal way of doing it) and code H uses the margin against the raw cost only.
If an item costs $100.00 and you want a margin of 50%, then you must sell the item for $200.00. This is because when you sell an item for $200.00 and the cost is $100.00, the leftover profit is $100.00, or 50% of the selling price.
In both examples, we used 50%, but the Margin method sold it for $200.00 instead of the $150.00 using the Markup method. Guess why retailers prefer to use Margin?
See also: Margins
Once you have established the list price, you have the option of making the price schedules a percentage discount from the list price. Note that if you use a negative discount, the price actually goes up. We've seen companies create a special price schedule for problem customers.
They work the same as the regular prices but are only active between the start and ending sale dates as registered on the inventory item. This allows you to create your sale prices in advance of the sale dates and have them charged automatically at point of sale.
If you enter a number in the right hand column, that is to be used as the price break quantity (for example, on the price schedule 1 line, if you enter a quantity of 10, then if the customer buys 10 or more at one time) you get the level 1 pricing instead of list pricing. You can add multiple price breaks such as 20,30 and 100 in levels 2,3, and 4. Leave the Quantity Discount value at zero for no Price Break.
In a situation where a customer's Price Level is higher than the Quantity Discount price level, the customer's Price Level is used. For example, if a customer has a price level of 4 and the Quantity Discount for a purchased item works out to price level 3, the customer Price Level of 4 is used.
The system uses the last price level that matches the Quantity Discount. For example, given the following setup, a quantity of 10 would result in the selection of Price Level 4.
Figure 4: Quantity price breaks
To turn on this option, see the help section on Using Customer Price Levels with Quantity Discounts.
It is also possible to have the system work together with Customer Price Schedules to provide multiple quantity discounts. Given the following example, you could set up different customers with different Price Schedules. One customer could be set to a price schedule of Retail and another customer to a price schedule of Dealer. When the system looks for the Price Level to use, it starts at the customer's Price Level (i.e. Dealer), and works its way down until it finds the greatest matching Quantity Discount, without going over.
In the example below, imagine that a (Dealer) customer is purchasing 20 units. The system starts at the Dealer price level and keeps looking until it finds a matching Quantity Discount. Once the system has found a matching Quantity Discount, it continues to try and find other matching quantity discounts until it reaches a Quantity Discount of zero (0), where it stops searching. In this example, the system selects the "Dealer 10" price level.
If the user had purchased only 5 units, the system would look through the Price Level table (starting at the Dealer price level) without finding any Quantity Discount matches. The system would then use the price level of the customer, in this example it is "Dealer".
Figure 5: Quantity price breaks with customer price levels
Under the Customer Record, we can have separate price schedule exceptions based on a particular supplier or category.
Figure 6: Price schedule exceptions
Note: Price Schedule Exceptions only work if the Schedule Number of the exception is Greater Than the Price Schedule Number assigned to the Customer. See the Financial tab in Customer Details window for information on assigning a Price Schedule for a Customer.
See also: Inventory Details