The next screen shown
below depicts the item pricing screen where a variety of pricing options
are available.
Use this window to create and maintain price
lists for the items your company sells. You can also create price lists
in multiple currencies and enter different price lists for different
price levels, such as Retail and Wholesale.
In this screen (above)
we see some of the item pricing options supported by Great Plains. I am
particularly fond of markup and margin pricing options. With these
options, companies can price their inventory as a percentage of costs.
If the cost goes up, it chases up the sales price of the item. If costs
decline, the sales price drops in step to pass along the savings to the
customer. This pricing method allows the company to sell goods at the
lowest possible price which still covers their fixed costs, variable
costs, and desired profit margin. All a company needs to do is determine
it’s desired profit margin and they are “off to the races”. If you are
having trouble understanding what I am talking about, here is an
example:
Stephanie has owned and operated a furniture
store for the past 17 years. I ask her two questions as follows: How
much profit do you want to make next year and how much sales do you
anticipate next year? Stephanie responds – “that’s easy, we’ve been
growing at 8% a year for the past five years so we will probably hit $12
million in revenue next year. Also, I’d like to make a million dollars
profit – that’s a reasonable goal. With just this little bit of data, we
can work backwards based on Stephanie’s prior year financial statements
and advise her as follows: Your fixed costs are $2 million and you want
to make another $1 million in profit. $3 million is 25% of $12 million,
therefore you need to price your furniture with a 25% margin to achieve
the desired results. Stephanie complains that it is difficult to achieve
a set profit margin because her costs fluctuate widely from one month to
the next. Also, further analysis shows that the furniture is currently
priced at just 22% margin, which projects a potential profit of just
$640,000. At this point we tell Stephanie the story about the Georgia
boys who were selling onions. It goes like this:
These two Florida boys were running
up to Georgia and buying Vidalia onions at 4 for $1.00 which they then
sold for quarter a piece on the streets of Jacksonville. After six
months, one boy turned to the other and said – you know, I don’t think
we’re making any money – what do you think we need to do? The other boy
thought real hard and then blurted – I think we need a bigger truck.
OK, it’s an old story. Also, it’s an
exaggerated story as well. But there is a lesson to be learned here. If
you don’t price your products to make a profit, you will never make a
profit. And, if you don’t price your products to make your desired
profit, you will never make your desired profits. In our example above,
Stephanie should consider using margin pricing option to target a profit
margin of 25%. In this manner, if her costs go up or down, her price
will adjust accordingly to provide the desired profit margin. The result
is that Stephanie will then have the chance to achieve her goals. There
are of course, other factors at play that may prevent success, but
without adequate pricing, Stephanie will have no chance at all of
hitting her target - think about it.
You can also use this window to add quantity
breaks to price lists. You can create different quantity breaks for each
combination of currency, price level and unit of measure. For example,
customers purchasing your items in US dollars might see the first
quantity break at 50 units, while customers purchasing the item with
German marks might see the first quantity break at 100 units.
As an example, if you’re using quantity
breaks for a combination of currency, price level and unit of measure,
the ranges you define—such as 0-50 units, 51-100 units and so on—must
cover all possible quantities from 0 to 999,999,999,999. If you’re using
one or more decimals to track quantity information, the ranges must
cover the decimal quantities as well. For example, if you’re using two
decimals to track quantity information, the quantity ranges must cover
all possible quantities from 0.00 to 999,999,999,999.99.
You can define multiple currencies for each
company and then assign as many currencies as you like to each
inventoried item. If an item’s price method is Percent of List or
Currency Amount, you can define different pricing for different
currencies. The currencies you’ll work with can be divided into two
groups: functional currency—the main currency of your business—and
originating currency—the currency used for selling and purchasing
transactions in currencies other than your own.
While you can define different pricing for
different currencies, only sales transactions are stored in the
originating currencies. All history information is kept in the
functional currency. The Item Price List Maintenance window has two main
parts: the upper part of the window, where you complete tasks such as
selecting the default price level, and the lower part of the window,
where you define and view price list information. The lower part
includes a tree view and a scrolling window.
The tree view is a
graphic view of an item’s price list. The highest level in the tree view
is the item number. Subsequent levels depend on whether or not
Multicurrency Management is registered.The
tree view includes:
Item number
Currency
Price Level
Unit of measure
Item number
Price Level
Unit of measure
You can use the tree view to control the
information displayed in the scrolling window. If you highlight a
currency or price level, only the pricing information for that branch of
the overall pricing structure is displayed in the scrolling window. For
example, if you highlight the Retail price level in the tree view, only
the pricing information for that price level is displayed—no pricing
information for a Wholesale price level would be included. Any changes
you make in the scrolling window—such as adding a price level or
currency—automatically are reflected in the tree view.
You can use a price
list wizard to add price list information to several items at once. To
be able to do this, the items must be assigned the same price method.
You can end a price list wizard session at any time by choosing Cancel
and your records will be unchanged until you choose Finish in the last
price list wizard window.
You should use this procedure only if you’re using
standard pricing.
You can also update price list records for a
group of items that share a common price method. To be updated, the
combination of currency, price level, unit of measure, and quantity
breaks must already exist in each item’s price list.
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