Managing Discounts and Special Prices in SAP Business One

Imagine that: Your company periodically gives discounts on the list price based on volume purchases or during sales events. Period and volume discounts on particular price lists are set up in advance for seasonal sales.

A basic price for the product may not be enough.

You may want to set up sale prices for a limited time period. You may want to give a discount when a customer buys a large quantity.

Period and volume discounts allow you to define discounts by dates and based on volume based on an existing price list.

The discounts entered here will override the basic price in the business partner's assigned price list as long as the unit of measure specified in the discount matches the unit of measure in the row.

The discounts will not apply if a blanket agreement price, a special price for the business partner or a discount group is applicable for the customer or item.

If a discount group is found, the discounts from the discount group apply, however a price from a period and volume discount pricelist may also be applied.

You can use period and volume discounts to define special prices for price lists. A special price can apply to a defined period or to a quantity scale.

For example, you decide to have a autumn sale on office furniture. You want to give a 5% discount off of the price of desks and chairs on the small accounts sales price list for the month of September. During that period you will also give an additional discount of 3% for anyone who buys a set of 4 chairs or more.

In SAP Business One, time-based discounts are set up first then the volume discounts are defined for those validity periods. Select the price list, then double-click to open the validity period window. After entering the validity, double-click again to open the window to set the quantity needed for the discount.

When a marketing document uses this price list, the business partner will be eligible for the period and volume discounts.

In the Periods and Volume Discounts window, you first select the pricelist for which you want to define discounts.

Then add the items individually or by ranges and groups.

Then select a source price for the discount. Since a pricelist price can be defined in a primary currency and two additional currencies, the dropdown box allows you to name which currency's price is used as a base for the special price in the Period Discount and Volume Discount windows.

In our scenario, we want to set up a discount for office chairs for the primary currency price in Small Accounts Sales Price List. So we choose the price list, select the item for office chairs and select the unit price in the primary currency.

Then double-click to open the Period Discounts window.

Enter the date range for the discount.

You can enter the discount by percentage or by changing the price after discount.

The Auto checkbox controls whether the discount will be automatically recalculated when the price list is updated.

In our example, we enter the dates for our autumn sale then add the 5% discount for the period.

If we wanted to make sure the price did not increase during the sale period, even if the price list changes, then we could uncheck the Auto checkbox.

To add further discounts based on volume, double-click on a row to open the Volume Discounts for Pricelist window.

Enter the quantity required to receive the discount. Then enter the total discount percentage or special price for each unit of quantity.

Here we can enter the additional 3% discount for the 4 chairs.

We enter 4 for the quantity and then, since our base discount is 5%, we enter 8% to give the additional 3% off of the price list price.

If you have multiple units of measure set up for an item, you can define volume based discounts and prices for each unit of measure in the item's Unit of Measurement Group.

In the same window (Volume Discounts for Price List), just add a new row to bring in each additional unit of measure.

You can add a volume discount for any of the item's units of measurement, even if the unit is not defined in the selected price list in the Period Discounts window for this item.

However, if the unit is deleted later on from the unit of measurement group for the item, then the discount will also be removed from this table.

Once you have some period and volume discounts set up for some items you may wish to copy these discounts to other items.

In the Period and Volume Discount transaction, begin by selecting a price list from the dropdown box.

Use the Add Items button to add all the items that will receive the copied discount. The default is to select all the items.

Then select the item whose definition of period or volume discount you wish to copy by double-clicking the row.

Choose the Copy Discounts button.

You have two additional options for defining how the copy is done:

The first option is: Select Items Without Period Discounts - This is used to copy the discounts only to items that do not yet have any period and volume discounts.

The second option is: Select Items of the Same UoM Group - This allows you to limit the copying of the discounts to items with the same unit of measurement group and only for the units defined for the target items.

For example, if we have a period discount on packs of one type of paper, we could decide to copy the same discount to other paper with the same units of measure.

Here are some key points:

• Period and volume discounts allow you to define discounts by validity dates and based on volume for an existing price list.
• The discounts entered here override the basic price in the business partner's assigned price list.
• Setting up a period and volume discount involves multiple windows. First you choose an item and its price from the price list, then set up a validity period before opening a third window to define volume discounts for the validity period.
• You can add a volume discount for any of the item's units of measurement, even if the unit is not defined in the selected price list in the Period Discounts window for this item. However, the unit of measure specified in the discount must match the unit of measure in the document row for the discount to apply.
• You can copy period and volume discounts to other items, either by selecting all items, specific items or by using the options to select items without period discounts or items of the same UoM group.

Imagine that your company wants to introduce some new discounts.

Some of these offers will be based on specific customer groups, other offers will be available to all business partners but based on specific items or manufacturers.

Some customers will be eligible for multiple discounts on the same product, but others will receive only one of the discounts.

One offer will be a "pay for 2 - get one free" deal for a range of products such as mobile phones, ink cartridge refills and discs.

To create these discount offers, you can use discount groups.

Discount groups are the most flexible type of pricing.

You can assign a discount group to a specific business partner, a business partner group or even to all business partners.

The discounts are defined for specific items or item groups, a combination of item properties or an item manufacturer.

Multiple discounts can be defined within the discount group. For example, within the same discount group you can have a discount on an item group as well as a discount for a specific manufacturer.

Discounts can be set at a percentage or be calculated by quantity purchased.

Let us go through the different combinations of discounts you can create using discount groups.

The first step in creating a discount group is to think of the kinds of discounts that would be appropriate to one or more business partners and group them together inside the discount group.

For example you may wish to give retail customers 5% off printers and an offer of 1 free case of recycled paper when they buy 2 cases. A different set of discounts may apply to the customer group for large customers. For them, you might offer 2% off products from the manufacturer Rainbow and 3% off any items that have the item property of business products.

Once you know the type of discounts you wish to group together, the first step in creating the discount group is to choose the business partners that the discounts will apply to.

Discount can be assigned not only to specific business partners, but to business partner groups (such as vendor or customer groups) or even be assigned to all business partners.

Because you can assign a discount for groups and for all business partners, SAP has provided the option to exclude specific business partners from discount groups. We will come back to that later on in this topic.

Now we will take a look at the specific types of discounts available in every discount group and how they are applied.

Four tabs are available in every discount group for defining discounts: Item Groups, Properties, Manufacturers and Items.

First we will look at item groups.

The item group tab displays all the item groups defined for the company.

You enter the discount you desire on the row for each item group.

The default form settings show only the option for percentage discounts, however, you can add the fields for giving free items based on quantity purchased in the Form Settings window.

Once you have set a discount based on an item group, all items belonging to that item group are automatically included in the discount.

This means that when a new item master is assigned to an item group, it will automatically be added to any discount group that is based on that item group.

Another option is to use item properties as way to indicate items that should be discounted.

A nice feature of discount groups at the item properties level is that SAP Business One allows you to define a discount for several properties at once.

Additionally, you can use a rule to decide which discount is used by the system for the calculation:

• The highest discount -The property with the highest discount will determine the overall discount calculated for the item.
• The lowest discount -The property with the lowest discount will determine the overall discount calculated for the item.
• The average discount -The system calculates the average of all the discounts for the properties. The average is used as the discount.
• Discount totals - The system adds together all discounts of the properties that apply to the item. The total (up to 100%) is used as the discount.
• Discount multiples - The system multiplies the discounts of the properties that apply to the item.

Another way to define a discount group is by manufacturer.

For example, imagine that you sell Rainbow-brand printers and accessories. The manufacturer, Rainbow, offers you a lower price as a distributor for all their products. You would like to pass on some of these savings by discounting all Rainbow products by 2% for large customers.

You can set up a discount group for the large accounts customer group which includes a 2% discount for all products manufactured by Rainbow.

The fourth tab is the Items tab.

Here you can list individual items that you want to discount. Unlike the other tabs, the list is empty until you add the items you wish to discount. This makes sense if you think about the large number of items that a company can have.

Here we see a discount group set up for schools to promote copy paper sales.

Companies often need to offer incentive pricing with free goods. Discounts can be based according to the quantity purchased.

Free goods discounts can be set on all four tabs.

There are 3 fields for setting a variable discount according to the quantity purchased.

The fields are hidden until you select them in Form Settings and then widen the window or scroll to view the additional fields.

To set up a variable discount according to the quantity purchased:

You specify the paid quantity in the first column. This is the quantity that a customer will pay or that you would purchase from a vendor. In this example the paid quantity is 2.

The second column specifies the quantity that is given for free when the paid quantity is purchased. In this example, the customer receives 1 free item for every two purchased.

The last field is optional, but specifies a limit for the free items. In the example this is set to 4. A customer will receive up to 4 free items with 8 paid items. If there are more than 8 paid items, the customer still receives only 4.

Note that purchased items and the free items must have the same item code. The functionality does not cover the purchase of items with a different item as the free item.

Let us explore how the discount is actually calculated.

In the example shown, the discount group is set up as follows:

• The paid quantity is set to 2
• The free quantity is set to 1
• The maximum number of free items is 4.

If the customer purchases a quantity of 2, no discount is applied.

If the customer purchases a quantity of 3, the discount is applied giving 33.33% off of the regular price. In other words, the customer buys 3 but gets 1 of the 3 for free.

If the customer purchases 4 items, they only get the discount based on a quantity of 3 purchased, therefore the discount percentage is reduced from a third to a quarter.

If the customer purchases a quantity of 6 items, the discount is 33.33%. The customer pays for 4 items and gets 2 items for free.

The customer essentially gets 1 free item with every 3 items purchased, up to the maximum limit of 4 free items.

So, if the if the customer purchases 12 items (4 * 3 items), they will get the maximum number of free goods.

We can see the effect of the multiple quantity discount in a sales order.

When the item quantity is entered in the row, the system automatically enters the calculated discount percentage in the row.

When the item quantity entered is 3, the system automatically enters a discount of 33.33% in the Discount field in the sales order row.

If the customer later returns one of the items, the customer will receive a refund based on the discounted purchase price.

In this example, the customer would receive one third of the total price paid for the three items.

For any given row, you define the discount either by a fixed discount percentage or a variable discount according to the purchased quantity.

In other words, the two types of discount are mutually exclusive.

In the example, we see the free goods columns are grayed out for the first row where the fixed discount percentage is defined.

In the next two rows, the discount percentage column is grayed out because we have defined discount according to purchased quantity for these items.

When the system searches for a price, it looks for the most specific type of price first.

First the system looks for a price in a valid blanket agreement. If none is found, the system checks for special prices for business partners.

If none exist, then the system searches for discount groups.

The system will look for discount groups that apply this business partner, the business partner groups associated with that business partner or a discount group that applies to all business partners.

Once discount groups are found, the system applies the discount(s) and then looks for a price in the Period and Volume Discounts or Price List for the discounts to apply to.

There are some factors controlling whether a discount group will be found when a marketing document is created.

When the system searches for a price, it looks for the most specific type of price first.

First the system looks for applicable blanket agreements or special prices for business partners. If none exist, then the system searches for discount groups.

The system will look for discount groups that apply this business partner, the business partner groups associated with that business partner or a discount group that applies to all business partners.

A discount group contains discounts, but a discount group does not contain a price. When a discount group is found, the applicate discount or discounts will be entered. The system will continue to look for a price in the price list assigned to the customer.

There are some factors controlling whether a discount group will be found when a marketing document is created.

One of the factors controlling whether a discount group is applied in a document is the validity settings.

Like all prices, you have the option to mark a discount group as inactive or set a range of validity dates for a discount group.

You can mark the discount group as active or inactive. Discount groups are active by default.

If a date range is set for an active discount group, the discount will apply to a marketing document if the document posting date falls in the active date range.

Another factor for applying a discount group in a marketing document may be that an a business partner or item is excluded from discount groups.

Even though you set up a discount group to apply to all business partners you have the option to exclude a business partner from all discount groups.

Perhaps this customer has some very specific contractual agreements or you perhaps choose not to apply any discount groups for new customers until they have purchased a certain amount.

Similarly you have the option to exclude an item from all discount groups even if that item would normally be included in a discount based on item group, item properties or manufacturer. Perhaps it is a seasonal item that you never discount during peak season sales.

In any of those cases you can choose to exclude the business partner or item in the master data record.

The checkbox is located on the Payment Terms tab of the business partner master data. The checkbox is unchecked by default.

If you select the Do Not Apply Discount Groups checkbox, any discount group that would apply normally will be ignored in marketing documents for this business partner.

This checkbox affects only discount groups and not other special prices.

Even if the checkbox is marked for a business partner, you can still set a discount manually in the header area or the row of a document.

This setting does not affect discounts copied from base documents. When copying a document to a target document, the discounts from the base document are still copied to the target document regardless of what is defined in the Do Not Apply Discount Groups checkbox.

For example, there could be a sales order created before the checkbox was marked for a business partner.

The same checkbox appears in the item master data to exclude a specific item from discount groups. This might be useful for a seasonal item which you do not want to discount during the prime season.

As with the business partner setting, you can still manually apply discounts for the item in marketing documents.

Discounts from a base document are copied to the target document even if the Do Not Apply Discount Groups checkbox is set.

After the system has eliminated a special price for the business partner and item in a sales document row, the system looks for a discount group.

However, since discount groups can apply to a specific business partner, a business partner group and to all business partners with overlapping validity periods, the system may find more than one discount group.

In fact, even within a discount group, multiple discounts could apply, for example if a discount group contains a 3% on an item group that contains items that are also eligible for a 5% discount by manufacturer.

In all those cases, the system must determine how to apply the multiple discounts found.

The way to handle the issue of multiple discounts is to set a rule for determining the effective discount.

You can set the rule for effective discount for a business partner or for a business partner group You can select one of five settings for the effective discount - Lowest, Highest, Average, Total or Multiplied:

• Lowest Discount - The lowest available discount is taken (This is the default).
• Highest Discount - The highest available discount is taken.
• Average - The average of all available discounts is taken.
• Total - The sum of all available discounts is taken
• Multiplied - The system multiplies all available discounts and uses the result as the discount.

When you create a new business partner record, the system will ask if you want to bring in the effective discount from the business partner group. If you say "no", the new business partner will default to the lowest effective discount. You can change this at any time in the business partner master data.

Note: effective discount is obviously disabled if you have checked the Do Not Apply Discount Groups checkbox.

You can also change the effective discount in the business partner groups setup windows. If you select a new effective discount value, you will be asked whether to update all existing business partner records for the group.

Discount groups are very flexible

• New items automatically included in applicable discount groups
• Can include or exclude items
• Can include or exclude business partners
• Can set up pricing for free goods
• Reporting for discount groups

A big advantage in using discount groups is when you create new items, they are automatically included any discount groups that apply.

For example, let us say you have a discount group for products assigned to the item group for scanners. Anytime you create a new item and assign it to the item group for scanners, it will automatically belong to the discount group for scanners.

You can include or exclude items and business partners

You can set up free pricing for goods based on quantities purchased as well as fixed percentage discounts.

Additionally, reporting is available for discount groups.

Here are some key points that show the advantages and flexibility of discount groups:

• Discount Groups can be set up for specific BPs, BP groups or all BPs.
• Within a discount group you can set discounts on item groups, properties, manufacturers or items.
• If multiple discounts for properties are set in a discount group, a rule is used to determine how to apply the discounts.
• Discounts can be based on a fixed percentage or on a variable quantity purchased. The latter is used for giving free goods.
• New items are automatically added to any applicable discount groups based on item groups, properties or manufacturers.
• Items and business partners can be excluded from discount groups.
• Discount groups can have validity periods or be marked as inactive.
• Effective discount rules resolve situations where multiple discount groups apply in a marketing document.
• Discount Groups contain only discounts, not unit prices. Once a discount group is applied a document row, the system will continue to look for a unit price on a pricelist.

• Imagine that some customers receive special prices because of their relationship with your company.
• Sometimes these prices are set up in relation to a particular price list, such as the price list assigned to that business partner.
• Other times, the prices are set up specifically for this business partner without referring to any price list.
• This is done using special prices for business partners.

Special prices for business partners enable you to give a discount (or surcharge) on items for a specific business partner.

The special prices are very flexible. You can create a special price with or without reference to a price list, and it does not even have to be the price list associated with the business partner

You can set a standard percentage discount or surcharge for the business partner that will default into the rows as you add items for special pricing. You can change this percentage after adding the item.

You can even set the special price to be updated and recalculated when the price list it references is updated.

Just like period and volume discounts for price lists, special prices for business partners can have period and volume discounts.

You double-click on the special price to open up fields to enter dates for when the price is valid.

When you double-click a second time, you can then define a volume discount based on a quantity scale for the validity period you just defined.

Just as with period and volume discounts, any item belonging to a unit of measure group will allow you to set prices by units belonging to that UoM group.

Once you have defined a special price for one item, you can choose copy discounts to copy the date range and percentages for other items selected for that business partner.

Special prices defined for a business partner override all other prices in a marketing document, except for prices set in a specific blanket agreement with this business partner. This is because they are the most specific price that can be defined in SAP Business One.

It is the first price the system searches for.

If a special price for this business partner is not found then the system will search next for discount group, then period and volume discounts for the price list assigned to the document, and finally for a price in the price list.

For a special price to apply to an item in a document, the date must be within the validity period and the unit of measure in the row must match the unit of measure in the definition of the special price.

One nice feature of special prices is that once you set up a special price, you can copy that price to other business partners

For copying special prices from one business partner to other ones the following copy rules exist:

• Replace All Items: The system copies all the special prices and possibly overwrites existing ones.
• Replace Only Existing Items:The system overwrites all the special prices that exist in the source business partner (BP) and target BP records. It does not add any new special prices.
• Do Not Replace Items:The system adds new special prices but does not change existing ones.

In the transaction you choose the business partner who currently has the special prices you wish to copy, then choose the target business partners by code, business partner group or business partner properties.

There is a transaction to update all the special prices globally inside SAP Business One.

The transaction contains four tabs each with a different choice on how to update the prices. You select the relevant tab to: change the discount by increasing or decreasing the discount percentage, change the item prices by a percentage, refresh special prices from their linked price list or delete existing special prices.

On all these tabs you have selection criteria to choose prices by business partners, customer or vendor group, or business partner properties.

Here are some key points:

• You can use special prices for business partners to set a discount or surcharge on items for a specific business partner.
• The system searches first for special prices for business partners before looking for any other price type. If it finds a special price for the business partner, then that price will be used in the marketing document row.
• The price can be with or without reference to any price list. The price list referenced does not have to be the price list associated with the business partner.
• You can set a standard percentage for the business partner that will default into the rows as you add items for special pricing. You can change this percentage after adding the item.
• You can set the special price to be automatically recalibrated when the price list it references is updated.
• The same options available in period and volume discounts are available for special prices. You can set a validity period and/or prices based on a quantity scale. If an item belongs to a UoM group, you can set quantity discounts by unit of measure; however the unit of measure in the row must match the unit of measure specified in the discount in order to apply.