About discount calculation

With the algorithms Visma Net uses to calculate discounts, you can give the customer the maximum discount available for the ordered goods.

When you enter a discount series in Visma Net by using the Discounts (AR209500) window, you can specify the same discount for all amounts or quantities, or you can create tiers by specifying break points, with each break point defining the minimum discountable quantity or amount for a new tier.
You can express the particular discounts for these tiers as well as for discounts without tiers as percentages, fixed amounts, or certain quantities of free items.

When you create discounts in the Discounts (AR209500) window and specify break points as the discountable quantities of the item, you should specify the quantities in the units of measure (UoMs) defined as base units of the item. Even if you do not specify UoMs, the system calculates discounts as if the quantities were specified in base units.

The sections below describe how, based on the discount type and the selected options, the system calculates the discount amounts or the quantities of free items.

For document-level discounts, the tiers can be created only by break points defined as amounts, while the discount can be defined as a fixed amount or a percentage of the document amount. When the system processes a sales order or an invoice and finds a matching discount (based on the application conditions), the system compares the discountable amount to the break points in the discount series as follows:

  1. The document amount is compared to the first break point.
    If the amount is less than the first break point in the series, the discount equals zero, and no further comparison is performed.
  2. The document amount is compared to the next break point.
    If the amount is greater than or equal to this break point but less than the next break point, the system calculates the discount as follows:
    • If the discount is a fixed amount, the fixed amount for this tier is deducted from the document amount.
    • If the discount is a percentage, the percent (specified for this tier) of the document amount is calculated and deducted from the document amount.
    • If the discount is a quantity of a free item, the quantity defined for this tier is used.
    • No further comparison is performed.
  3. Comparison continues similarly, with Step 2 repeated until a discount is found or the last break point is checked.

This topic covers examples of tiered discounts.

In these examples, amounts are in Euros.

If a series for a document-level discount has tiers defined by amounts with the discounts expressed as percentages, the discount amount corresponding to the appropriate tier is subtracted from the document total. Suppose that the series is specified with the following break points:

  • €1000: 5%
  • €2000: 7%
  • €5000: 10%

For a document with a €900 total, the discount is €0, while for a document with a €2500 total, the discount is €175 (7%).
For a document with total of €9000, the discount is €900 (10%).

Suppose that a series for a document-level discount is broken down by amount, with the discounts expressed as fixed amounts that are subtracted from the total amount.
Further suppose that the series is specified with the following break points:

  • €1000: €100
  • €2000: €225
  • €3000: €350

Customers receive a discount of €0 for orders with amounts less than €1000.
The discount for an order with a total between €1000 and €1999.99 is €100, the discount for an order between €2000 and €2999.99 is €225, and the discount for an order of €3000 or more is €350.

Tiers for line-level discounts can be defined by amounts or by quantities.
The method of calculation of line-level discounts depends on the option you select in the Apply line discount to field on the Price/discount settings tab of the Customer ledger preferences (AR101000) window. You can apply the discounts to prices of items or extended prices of items (line amounts before taxes), and the selected option affects the discount calculation. Both methods are described in this section.

If the system is configured to apply line discounts to extended prices of items and the tiers are defined by line amounts, the system performs discount calculation as follows:

  1. The line amount (that is, the extended price of the item) is compared to the first break point.
    If the amount is less than the first break point in the series, the discount equals zero, and no further comparison is performed.
  2. The line amount is compared to a next break point. If the amount is greater than or equal to this break point but less than the next break point, the system calculates the discount as follows:
    • If the discount is a fixed amount, the fixed amount for this tier is deducted from the line amount.
    • If the discount is a percentage, the percent (specified for this tier) of the line amount is calculated and deducted from the line amount.
    • No further comparison is performed.
  3. Comparison continues similarly, with Step 2 repeated until a discount is found or the last break point is checked.

A customer buys an item whose unit cost is €95. If the series for the line-level discount has tiers defined by the amounts, with the discounts expressed as percentages, the discount amount (calculated by using the percent defined for the appropriate tier) of the item's extended price is subtracted from the extended price.
Suppose that the series is specified with the following break points:

  • €1000: 5%
  • €2000: 10%
  • €5000: 20%

For a line with 10 items (which means that the extended price is €950), the discount is €0.
For a line with 20 items (for an extended price of €1900), the discount is €95 (5%). And for a line with 60 items (and an extended price of €5700), the discount is €1140 (20%).

If the system is configured to apply line discounts to item prices, for discounts with break points defined as amounts, you should specify the break points to be compared to prices.
The system performs this discount calculation as follows:

  1. The line item's price is compared to the first break point.
    If the item price is less than the first break point in the series, the discount equals zero, and no further comparison is performed.
  2. The item price is compared to a next break point.
    If the price is greater than or equal to this break point but less than the next break point, the system calculates the discount as follows:
    • If the discount is a fixed amount, the fixed amount for this tier is deducted from the item's unit price, and the extended price is recalculated.
    • If the discount is a percentage, the percent (specified for this tier) of the unit price is calculated and deducted from the item's unit price.
    • No further comparison is performed.
  3. Comparison continues similarly, with Step 2 repeated until a discount is found or the last break point is checked.

If the system is configured to apply line discounts to item prices and a series is broken down by the quantity of the item, the line quantity of the item is compared to the quantities selected as break points, and the discount is calculated as follows:

  • If the discount is defined as a percentage, the specified percent is deducted from the item price and then the discounted price is multiplied by the item quantity.
  • If the discount is defined as a fixed amount, the specified fixed amount is deducted from the item price and then the discounted price is multiplied by the item quantity.

A customer buys different items with prices of €95, €210, and €600.
If a series for a line-level discount has tiers defined by the amounts with the discounts expressed as percentages, the discount amount (calculated as the percent defined for the appropriate tier) of the item price is subtracted from the price. Suppose that the series is specified with the following break points:

  • €100: 5%
  • €200: 10%
  • €500: 20%

For a line with 10 units of the item priced at €95, the discount will be €0.
For a line with 20 units of the item priced at €210, the discount will be €21.10 per unit with the discount for the line at €21.0 multiplied by the quantity.
And for a line with one item prices at €600 the discount will be €120 per unit.

Discount series can be prorated if the Prorate discounts option is selected in the Discounts (AR209500) window. For prorated discount series, the discount amount (or the quantity of free items) is calculated so that the customer won't try to split a sales order to get greater discount amount or a larger quantity of free items. The Prorate discounts option is applicable to discount series with discountable quantities or discountable amounts. For instance, you can configure a discount described as “Get €5 off for every 10 units purchased."

Consider a prorated group-level discount with tiers based on quantity.
The series defines the discount with the following tiers:

  • 10 units: 1 unit of the free item
  • 20 units: 2 units of the free item
  • 40 units: 3 units of the free item

To determine the discount for a discountable quantity larger than one break point but less than the next break point, the system treats the discountable quantity as a combination of break point quantities and uses the largest possible break point quantities.
It then calculates the discount according to the break points used.

For this example, a sales order for 50 units would yield 4 units of the free item, computed as 3 (for 40 units) plus 1 (for 10 units). For an order of 70 units, the discount is calculated as 6 units of the free item: 3 as the discount for 40 units, plus 2 as the discount for 20 units, plus 1 as the discount for 10 units.

Related concepts

About discounts

About discount series

About discount application

Related windows

Customer ledger preferences (AR101000)

Discount codes (AR209000)

Discounts (AR209500)

Update discounts (AR502500)