Windward System Five - POS Software | Inventory Control | Point of Sale | Accounting Software Solutions for Todays Independent Retailer - 1300 137 066
Price Schedules
There are several things to consider when looking at inventory
costs. The first is, what is the normal price you expect to pay
for the item versus what have you actually paid for the items.
These two are similar but quite different. In very simple systems,
you enter one cost price and that's it. If only it were so easy.
The price you expect to pay is stored with the main inventory record.
In addition to the raw inventory cost, you can also add frieght,
duty or other charges such as insurance. These numbers are added
together to give you your landed cost at your door step. When pricing
goods for resale, it's important to know the landed costs with
all the hidden charges included.
To add to complexity, if you normally buy the item(s) from a different
country, you can enter the cost in that foreign currency such as
German Marks or Japanese Yen. In the system setup, you can change
the currency conversion factors as often as needed, even daily.
Then, when you view an inventory item you'll see the foreign cost
you need to pay and then the real cost in Dollars.
If you can buy the same item from different suppliers, you can
enter the Alternate Supplier information including the cost from
each. Before you purchase from a different supplier, you'll be
able to view their cost that was charged the last time you purchased
from them.
On your actual costs, once you land the inventory at your doorstep
and add the items into inventory, the system will create a record
showing the actual cost in Dollars, not the foreign currency. This
is the cost that will be used when costing invoices as they are
entered into the system. The inventory is removed on a first in,
first out basis, which is the most accurate.
When you print an inventory report, you'll be able to view your
actual cost based on a wieghted average of what is actually left
in stock. So even though the system is costing on a first in, first
out basis, the inventory remaining on hand is properly calculated
for report and inventory valuation purposes.
The expection to costing on a first in, first out method is when
dealing with serial numbers. Each serial number is stored with
it's own unique cost and that is what is used on the invoices.
Markup Percentage
Industrial and Wholesale types of companies generally
like to mark their inventory up from cost, such as cost
plus 30% With Windward System Five you
can markup from either your cost price or your landed
cost.
Margin Percentage
Retail types of businesses generally prefer to use the
margin method, where the margin is based on the retail
price instead of the cost price. This margin can be based
on either the cost price or the actual landed price.
For example, if you have an item that cost you $100,
you would need to sell it for $150 to achieve a 33% margin.
This is based on the profit of $50 divided by the Retail
price of $150. Note that if you were dealing with the
markup method, the above would yield a 50% markup.
Fixed Price
If you produce a catalog and need to sell the items
at a fixed price during the year, regardless of minor
fluctuations in your cost price, you could price your
inventory as fixed. The system would then lock that price
in and sell it for that, regardless of the actual cost
price.
Price Protection
If you are using a percentage markup or margin,
there are several ways to calculate the retail price.
You can base it on one of the following methods.
Actual
Cost Method
The retail price is calculated by using the percentage
markup or margin from the price actually paid for the
item. As your cost price goes up and down, so will your
retail price, therefore your margins will always be protected.
Standard
Cost Method
The Standard Price is the price you have listed on the
inventory record as what you expect to have to pay for
the item from your supplier. It is not the actual price
that you paid, although it could be the same.
This method is often used for those printing price catalogs
for their customers and need to maintain a steady retail
price. You actual costs may fluctuate up and down based
on special deals from your suppliers, changes in the currency,
or other factors, but the retail price will be locked in.
The system will still cost your inventory on a first
in, first out basis, so the cost of sales will always
be accurate. And if you actual costs change enough, you
can manually change your standard retail price.
Highest
Cost Method
This is a combination of the above two methods. The
system will base the retail price on the higher of the
standard cost price or the actual cost price. This means
if you get a special deal from your supplier, you will
not have to pass the savings onto your customer, but
if your price increases unexpectantly, then the retail
price will automatically increase to protect your bottom
line.
Average
Cost Method
This method is sort of a happy medium. The system will
base the retail price on the average cost that you actually
paid for the items in stock.
Price Schedules
Windward System Five will allow you
to enter a list price and up to 12 separate price schedules.
You can decide which customers get which price by assigning
them a price schedule.
For example, new customers and walk-in traffic may pay
list price, regular customers may get a small discount
and be on price schedule 1, good high volume customers
may get a better discount at price level 2, and relatives
and staff may get price level 3. Twelve price schedules
are probably more than you'll ever need.
Remember, a price schedule is just a number. You can
decide for each inventory item what kind of discount
you want to give for each price schedule. Normally, you
will set a default for a sub category to make your data
input easy, but you then have the option of changing
the schedule on the inventory record.
You can also create exceptions to the rule, such as
a customer may be on price level one for all purchases,
except for paper products, which are sold at price schedule
two price. This is definable for each customer.
Volume Discounts
Another method of pricing is based on the volume purchased.
For example, if you buy one envelope, it's one price,
but if you buy a bundle, you'll get a better price. And
if you buy a whole box full, the price is even better.
These volume discounts can be programmed directly onto
the inventory record so the pricing happens automatically
during point of sale.
Sale Prices
You enter enter a Sale Start Date and a Sale End date.
Between these dates, the system will automatically charge
the Sale Prices (Right Columns) instead of the Standard
Prices (Left Column). This will allow you to enter your
sale prices well in advance of the sale date and have
them activate automatically on the give date. This saves
coming in early or staying late to price the system just
before the start or end of a sale.
Contract Prices
If you need to set contract prices for certain items
between two dates, the Windward System is for you. Some
of our customers bid for Government and School contracts
in which they guarantee to sell certain items for a set
price, regardless of the number purchased each time.
During the year, they may purchase 5000 pencils, but
one school may come in and buy just one pencil and will
receive the same price.
