How to Use Volume Discounts
Contents
Objective
Volume discounts allow sellers and manufactures to rewards those who purchase a huge quantity of goods.
This kind of companies are not only interested in making a sale but also getting rid of goods.
At the same time companies that can buy huge quantities of goods have large warehouses where to store the goods. The cost of buying is less for them therefore they can offer a lower price to end-customers.
Finally, volume discount for merchants inspires merchant loyalty. If a merchant buys X amount of an item, they may be offered incentives to purchase more or receive a lower purchasing price in the future.
Sellers and manufactures have to decide the minimum quantity sold up to which a discount will be applied. If a customer exceeds the minimum quantity required a credit invoice will be issued.
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Applying a volume discount to a customer requires a clear understanding on how to create a Volume discount.
Execution steps
First thing to notice is that Volume Discount is an Advanced Feature In Openbravo.
This feature is implemented through below listed application dictionary elements:
- a window named Volume discount
- and a tab named Volume Discount in the Business Partner window. This tab includes a process button named "Create Invoice".
Those elements are hidden by default, therefore they way to make this feature work is to unhide them as described here.
In Openbravo, the company in this example needs to apply a volume discount to a customer. For getting that working the company in this example will have to:
- create and properly configure a volume discount
- and generate a credit invoice whenever it applies
Volume discount creation
Volume discounts in Openbravo needs to contain information about the product/s, business partner/s and minimum quantity sold for each business partner to get that a volume discount is applied.
Therefore, the company in Openbravo will have to create and properly configure a volume discount in the Volume discount window.
For instance:
- the Name of the discount as "Volume discount example"
- the Currency as "USD"
- configured as "Included only the Products and the Products Category defined in here".
- the Product category tab can be empty as the volume discount is going to apply to a specific product in this example
- the Product tab has only one product which is ‘Lemonade’.
- the volume discount parameters tab including below setup:
- a % Discount equal to 30%
- and a Min. Amount: 10.000 units
- finally the Business partner tab has only one line, to get the discount applied just for a particular customer:
- Business partner as Moon Light Restaurants.
- Valid from date as 05/01/2012
- and the Sales transaction flag checked
 |
It is not mandatory to have data in both tabs, Product Category tab and Product tab. It is possible to define, for example, a volume discount for one or more products without including any product category and the other way around. |
Business partner configuration
It is also possible to assign a volume discount to a business partner in the volume discount tab of the Business Partner window.
Therefore, there are two ways to assign a volume discount to a business partner:
- in the Volume Discount window
- or in the Volume Discount tab of the Business Partner window
When one of the tabs above is filled in, the other one gets filled in automatically as there is a direct relation between them.
It is possible to assign as many volume discounts to a business partner as desired.
Regardless a volume discount makes more sense in Sales, it is also possible to configure volume discounts for Purchase. The way to get that is:
- by removing the "Sales Transactions" flag
- and by removing the filter "Customer" while selecting business partners in the business partner selector, therefore vendors are shown instead.
Crediting a customer
Openbravo can generate a credit invoice with an amount equal to the discount calculated by applying the volume discount configured to the business partner invoices which match the criteria required.
Those invoices must have been issued within a given period of time.
In other words, the invoice amount is calculated taking into account every business partner invoice that meet the conditions defined in the volume discount, invoices which do have a date between the 'valid from' date defined in the volume discount and the ‘Limit date’ which must be indicated in the process called "Create Invoice".
This process can be found in the Volume Discount tab of the Business Partner window.
Going back to the example, let's imagine that the Company has issued 4 invoices to the business partner ‘Moon Light Restaurants’, but only one of them contains the product ‘Lemonade’.
That invoice is dated on 23/05/2012 and it does contain a total invoiced amount equal to 43.773,60 USD.
Therefore there is at least one invoice which match the criteria required.
The company can navigate to the Volume Discount tab in the Business Partner window, find ‘Moon Light Restaurant’ customer, click on the volume discount tab and from there execute the Create Invoice process dated on 06/07/2012 (Limit date).
This process creates a new credit invoice (AR Credit Memo) for an amount equal to the 30% of the total invoiced amount, that means 13.132,08 USD.
The posting will look like:
| Account | Debit | Credit |
| Product Revenue | Line Net Amount | |
| Tax Due | Tax Amount | |
| Customer Receivable | Total Gross Amount |
Results
This completes the volume discount process for a customer. As a result:
- the Customer balance is reduce by the volume discount amount
- and a justification document is issued which Customer can record in its system.
