Managing Receivable contracts and discount priorities.
Introduction - What are Receivable contracts...
A Receivable Contract is a set of pricing arrangements which can be assigned to a particular Account (client) or a Group that can belong to multiple clients.
The pricing can apply to a particular Stock item, a Discount group, a Stock group or Stock category.
You have the option to select a net price or a discount percentage. You can also chose to present it as a net price or a discounted price on an order.
You can also apply purchase restrictions such as a valid start and end date and a minimum order quantity in order for a discount to apply.
To learn how to set up a Receivable Contract, please refer to Creating and managing Receivable Contracts.
Receivable Contracts (Pricing Agreements)
Pricing agreements can be set up to be applied to a Receivable Account (Client) or Receiveble contract group, and one of the levels of the Stock hierarchy. This allows a comprehensive structure that you can apply to broad categories of your Accounts and Stock, and at the same time have the ability to customise specific areas for individual Accounts.
- Pricing discounts must specify one of:
- Receivable Accounts (Client) or
- Receivable Contract Groups
- ... and must also specify one of these levels in the Stock hierachy:
- Discount group or
- Stock category or
- Stock group or
- Stock item
- The Contract Reference can be used to name and then later easily locate your Receivable contract.
- Where special pricing (such as a promotion) is required, the Effective Date and Expiry Date may be used. This means you don't have to remember to turn them on and off when a promotion starts and ends.
- A Minimum purchase quantity maybe set in order for the discount to be applied. This will only apply if the quantity is greater than or equal to that on an individual line.
- Discounts for can also be set as a net price or as a percentage.
Receivable Contract Groups
A Receivable Contract Group, is a group of individual Receivable contracts that are saved together. This can then be linked to Accounts (your receivable customers) that are entitled to these discounts for these Stock items.
By setting up Receivable Contract Groups, you can provide controlled access to discounts based on revenues or type of product purchased. For example you might set up Receivable contract groups based on:
- Size of the client organisation - for your large, medium and small customers.
- Specialisation of the client organisation - for example lighting, commercial electrician, drain layer etc.
- A combination of size and specialisation.
Each Account can have up to eight Contract Groups assigned to it from the Receivables > Receivable Accounts > Contract Groups screen.
This allows you to efficiently manage discounts over many Accounts, so that updating the discount in a Contract Group will apply to all Accounts that are linked to the Contract Group.
Receivable Contracts - setting up
An Account will receive the discounts from the Receivable Contract Groups that it belongs to.
Additionally, you may add Receivable Contract lines for that Account to allow specific pricing discounts for that Account.
Receivable Contract lines can be added to an Account via:
Receivables > Receivable Account > Edit > New receivable contract. Please refer to Creating and managing Receivable contracts to learn how to do this.
Importing from a spreadsheet. Receivables > Receivable Contracts > Import / Export Contracts. Please refer to Import / Export of Receivable Contracts for a New Customer.
Price percent to add & Discount percent to apply
In Receivables > Receivable Account > Credit / financial details > Financial for an individual Account, you will find the Price % to add and Discount % to apply.
Price % to add: This is your additional margin that you wish to add.
Discount % to apply: This is the standard discount for this Account.
When goods are sold to this customer, the Selling Price is first increased by the Price % to add, then the Discount % is applied.
Lentune's rules for selecting which discount to use
A Stock Item can belong to a Discount Group and a Stock Group within a Stock Category.
When deciding what discount to be applied to a Stock item, the lines of all Contract Groups and those for the individual Receivable Contract are compared. Lentune then decides what price or discount to use based on how you have configured the system.
In the Receivable Manager there is a field called Receivable Contract Method.
- Go to Settings > Managers and Tasks > Receivable Manager > Receivable Contract Method.
Here you can choose which method you want to use.
- Receivable Contract or Best, or:
- Stock Contract or Best.
Receivable Account Or Best
Stock Or Best
A Receivable contract on a individual Stock item will always beat a Receivable contract on Stock Group or Discount Group. The lowest priced contract from the above winning criteria will be used. Therefore, the lowest individual stock contract regardless of where it is placed will always be used to price the item.
Managing discounts efficiently
Recommendations for managing your pricing discounts are:
Specify the lowest discount percentage (giving highest net price) in the most general Receivable Contract Groups (which are widely assigned to many Accounts).
Specify a higher discount percentage in the more specialised Receivable Contract Groups (which are assigned to fewer Accounts).
Try to avoid specifying lines at an individual Account level as this requires more maintenance when you need to alter discounts.
Specify the lowest discount percentage (giving highest net price) in the most general groups, e.g. Stock Category or Discount Group.
Specify a higher discount in the groups with fewer Stock items, e.g. Stock group.
Specify discounts for a Stock item level only in special cases, as this requires more maintenance when you need to make changes.
Other useful tips
- Effective date / Expiry date: For time-sensitive special offer discounts, you may specify the Effective date (start) and Expiry Date (end). When they expire, there is no need to edit the Receivable Contract.
- Net price: When specifying Receivable Contract lines for individual Stock items, specify the net price only if absolutely necessary. An option exists to use a Discount % and display it as a net price.
Reports located on the Receivables > Reports screen show the Receivable Contract Groups that Accounts are assigned to.
For best control, this strategy should be used in combination with reasonably tight Margin Approval thresholds, as specified in the Receivables > Tasks > Manager setup screen. This forces manual approval of exceptions and reduces the risk of unapproved low margin sales.
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Last updated: 28 April 2022.