During the course of trade, your suppliers may offer an incentive discount when purchasing stock from them. As a one-off purchase, you may be able to buy stock at a lower Cost Price than usual, improving your margins.
It's important to reflect this in Purchase Orders to ensure your Average Weighted Cost considers this, and thus your margins are as accurate to reality as possible.
To make this easier, retailers can use the Purchase Order Discounting functionality in the Cloud POS Back Office.
How do I use this functionality?
- Open the Purchase Order you want to apply the discount to in the Back Office. Click on Actions.
- Click on Apply Discount.
- You can then choose the type of discount you want to apply, and the amount (see below).
What are my options for discounting?
There are two options which can be used when applying a discount.
- Percentage Discount
- Fixed Amount Discount
Percentage Discount
Discounting the Purchase Order by Percentage will reduce the Cost Price of all included items by 10% each.
For example, the below Purchase Order contains four items, with Cost Prices ranging from £10 to £100.
We can apply a 10% discount to these items by choosing a Discount Type or ‘Percentage’, and Discount Percentage to Apply of 10.0%:
Doing so will reduce each line by 10% of the original Cost Price:
£100 becomes £90 (-£10), £10 becomes £9 (-£1), and £50 becomes £45 (-£5), and so on.
Fixed Amount Discount
A fixed amount discount allows you to remove a specific amount from the total cost of the Purchase Order. This covers scenarios such as when a supplier offers a certain discount for orders over a certain price (e.g., £100 off for all orders over £3,000) or similar.
The amount removed from each line will be weighted according to the Cost Price of that item. If the items are equally weighted, then the same value would be deducted from each. In a Purchase Order with items of varying cost, more valuable items will have a greater amount removed, as they make up a greater portion of the total cost.
Let's take a look at a couple of examples to help understand this in practice.
In the below example, all four items have a Cost Price of £1,000. They are equally weighted.
We can apply a discount of £100 to the Purchase Order by choosing a Discount Type of ‘Fixed Total Amount’ and a Total Discount to Apply of ‘£100.’
When applied, this will remove £25 from each of the four lines, as they are weighted equally:
In our next example, the Cost Prices of the four items are not equal to one another. Some items are a high value, whilst others are low.
This time, if we apply a fixed amount discount of £100 to the Purchase Order, each line has a different value removed as the lines are given proportionate weighting when looking at the value of the Purchase Order as a whole. The weighted discounts look more like this:
Once your chosen discount is applied and any required adjustments made, you can then proceed with the remaining stages of the Purchase Order.
Frequently Asked Questions
Will the Average Weighted Cost of the item be updated if I use the Apply Discount option?
Yes – just like with any other Purchase Order, changes to an item's cost will affect the Average Weighted Cost for that item.
Can I discount the same Purchase Order multiple times, sometimes known as stacking discounts?
Yes – you can add multiple discounts to a Purchase Order, both before and after it has been Marked as Placed, until the stock is committed at the Goods In stage.
Can I reset the cost of my items if I made a mistake with the discount?
There's no “Reset” button that would put all of your costs back to their original amount, but you can always type over the figure(s) in the Cost column, or you can delete an item from the Purchase Order using the red bin icon on the left, and add it again at the original cost.
