Protecting Profit Margins: Net Price and Maximum Discount
DDMSoffers you a number of ways to monitor and control gross profit margins.
Each item has two options you can set to protect margins:
net price and maximum discount. You can use either of these options to protect
an item's margins. However, you do not use both options for the same item.
In this section, we discuss features you can use to protect
the margins for individual items.
The net price option prevents the item from being discounted. There are only
two discounts that apply to net price items: contracts and cost-plus
discounts. Aside from these, the suggested selling price for a net price
item will be list.
You may want to use this option to protect profits on items with very low
margins.
What the Maximum Discount Option Does
You can specify a maximum discount percentage for each item, to protect your
margins. Suppose you set a maximum discount of 10 percent on an item, for
example, and a customer has a standard discount of 20 percent. When you place
this item on an order for this customer, the suggested selling price will
reflect a 10 percent discount, not a 20 percent discount.
There are two exceptions: contracts and cost-plus discounts.
Remember
that the order-writer can override the suggested selling price in order entry.
If the order-writer exceeds the maximum discount, the system logs this in
the EXCEPTIONS file. You can print the Exceptions Report periodically to check
for this, and for other actions that may be contrary to company policy. For
more information on this report, see the online help topic Printing
the Reports.
Setting These Options for Individual Items
To specify net pricing or a maximum discount for an individual item, follow
these steps:
Open the Inventory window. (For instructions, click here.)
Retrieve the item record you want to assign a department to. (For instructions,
see the online help topic Selecting
an Item.)
Click the Item Settings tab.
If you want to make this a net price item, type Y in the Net Price
Flag box.
If you want to specify a maximum discount for this item, enter the percentage
in the Max Discount % box.
The figure below shows both boxes, with the net price set:
To save your changes, click .
Specifying the Maximum Discount for Groups of Items
You can set the maximum discount for groups of items. With this procedure,
you specify a stock class or department, and indicate the minimum gross profit
percentage you want for these items. The system uses the cost and list price
for an item to calculate the maximum discount that will give you the gross
profit you specified, and sets the maximum discount accordingly.
If an item's list price is already so low that it falls below the gross profit
you specified, the system sets the Net Price Flag box to Y instead
of setting a maximum discount.
You
should run this function each quarter, after you load your item file update.
To set maximum discounts, follow these steps:
Go to theDDMSwindow, and double-click the
icon.
In the Keyop Menu window, double-click the
icon.
From the (+) Special Programs screen, type E to select the (+E)
Special Item screen. The Special Programs screens are text-based, not graphical.
Press the Caps Lockkey. You always use capital letters in text-based
screens.
From the (+E) screen, select the [N] Set Maximum Discount function by
typing N
The This Program Will Set Max-Discount Enter Minimum GP With Decimal 33.00%
prompt appears. Specify the minimum gross profit percentage you want to
make on the items. (The default percentage is 33 percent.)
You
must type the decimal point.
The Which Department To Set prompt appears. To limit the maximum discount
you specified to a department, specify the department.
If you do not want to limit by department, press Tab.
You
can set departments in two places: the GL
Dept box in the Item Settings tab and the GL
Dept box in the Item Master tab. The department in the Item Settings
tab applies only to a specific location: if you have one set for a location,
the system uses this department instead of the one in the Item Master tab.
The Which Class to Set prompt appears. To limit the maximum discount you
specified to a stock class, specify the stock class. (If you specify both
department and stock class, an item must belong to both to be included.)
If you do not want to limit by stock class, press Tab.
You
can set stock classes in two places: the Class
box in the Item Settings tab and the Class
box in the Item Master tab. The stock class in the Item Settings tab applies
only to a specific location: if you have one set for a location, the system
uses this stock class instead of the one in the Item Master tab.
The Cost to Use prompt appears. Specify which cost to use when determining
the maximum discount. The system uses this cost and the gross profit percentage
you specified earlier to determine the maximum discount. Specify a cost
by entering the corresponding code:
M
manufacturer's cost, which is the replacement cost for
the manufacturer.
W
wholesaler's cost, which is the replacement cost for
the primary wholesaler
A
average cost, which the system calculates to give you
a more accurate figure. It is the average cost of an item at the time
of a sale, if the entire order were filled from on-hand stock.
P
purchasing vendor cost, which is the replacement cost
from the vendor that you specify as the purchasing vendor.
The Which Location to Set prompt appears. This prompt gives you the option
of limiting this change to a specific location. If you specify location
1, the maximum discount applies to all locations except those that
have a maximum discount set. (You can set pricing for specific locations
under the Settings tab.)
Accept location 1 by pressing Tab, or specify another location.
The Select Each Record prompt appears. Type Y to verify the maximum discount
setting for each item. Choose this option if there are some items that fit
your limits that you do not want to change. (If you are changing hundreds
of items, and have only a few exceptions, it may be faster to specify N
here, and then change the exceptions manually, instead of approving hundreds
of individual changes one by one.) Or type N if you do not want to verify
each maximum discount setting. Choose this option if you want to change
every item that meets your limits.
If you specified N at Select Each Record, the system displays a
running list of the items it changes.
If you specified Y at Select Each Record, the system displays each
item that meets the limits you set, along with the prompt Process This Record.
Type Y to change the maximum discount for this item. Type N if you do not
want to change the maximum discount for this item.
When the procedure is complete, the system displays the prompt Program
Completed — Do You Wish to Run Again. Type Y to run the program again,
so you can use different limits to change another group of items. Or type
N if you do not want to run the program again.
If you specify N, press Esc until you see the DDMS Master Menu.
Remember
that the order-writer can override the suggested selling price in order entry.
If the order-writer exceeds the maximum discount, the system logs this in
the EXCEPTIONS file. You can print the Exceptions Report periodically to check
for this, and for other actions that may be contrary to company policy. For
more information on this report, see the online help topic Printing
the Reports.
.
You
should run this function each quarter, after you load your item file update.
icon.
icon.
You
can set departments in two places: the GL
Dept box in the Item Settings tab and the GL
Dept box in the Item Master tab. The department in the Item Settings
tab applies only to a specific location: if you have one set for a location,
the system uses this department instead of the one in the Item Master tab.
