Net Price Calculation Method

This document explains the two possible ways in M3 to calculate net price per unit on a customer order line.

Outcome

The net price per unit – which is stored in several transaction files – will be calculated in one of two ways.

In some industries it is very important to be able to present the unit net price both when communicating with the customer during order entry as well as on external documents such as order confirmations and invoices.

Under these circumstances, rounding problems can arise when you compare the unit net price multiplied by the quantity to the net line amount. There are two methods for calculating net price so you can choose the one that best suits your business and thereby avoid these problems.

The net price can be displayed in several panels in M3 using views. It can also be printed on quotations, order confirmations, proforma invoices and invoices.

Before you start

There are no prerequisites. This general parameter at company level that sets out how the unit net price is to be calculated.

To print the unit net price on quotations, order confirmations, proforma invoices and invoices the price printout code must be set correctly in 'Customer. Open' (CRS610/H).

Description

In 'Settings. Customer Order Entry' (CRS720) you are able to select a unit net price calculation method. This parameter affects line order entry and price simulation. Two methods are available:

Method 1 Unit net sales price

a = (Net amount / ordered quantity) * sales price quantity

a is then rounded off to the nearest two decimal points.

Unit net sales price = a / sales price quantity

Method 2 Unit net sales price

Calculation of net amount for ordered quantity 1

Net line amount = Net amount * (ordered quantity / sales price quantity)

Unit net sales price = Net amount / sales price quantity

In cases where discounts are entered as an amount and are not related to the quantity ordered, method 1 will always be applied.

Example

Unit gross price entered or from agreement = 129.5

Sales price quantity = 2 (if it is 0 then set it to 1)

Unit gross price sent to OIRTVNLA = 64.75 (that is, 129.5 / 2)

Ordered quantity = 1,044

Line discount = 13.5%

Method 1

Base amount = 64.75 * 1,044 = 67,599
Discount amount = 67,599 * (13.5 / 100) = 9,125.865 = 9,125.86
Net amount = 67,599 – 9,125.86 = 58,473.14
Net price = (58,473.14 / 1,044)*2 = 112.0175 = 112.02
Unit net price = 112.02 / 2 = 56.01
Note: The net amount recalculated from unit net price = 56.01*1,044 = 58,474.44 is different from the net amount 58,473.14.

Method 2

Base amount = 64.75 *2 * 1 = 129.5 (unit gross price)
Discount amount = 129.5 * (13.5 / 100) = 17.4825 = 17.48
Net price = 129.5 – 17.48 = 112.02
Net amount = 112.02 * (1,044 / 2) = 58,474.44
Unit net price = 112.02 / 2 = 56.01
Note: The net amount equals 58,474.44.
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