Price Agreements

Other types of agreements will be possibly implemented in the future. For example per-agreement rate cards, sell price operators, etc.

Add a Price Agreement

• Price Agreements can only be added to the “Final / Invoice” or “Quote” views. The reason for this is that adding them to any other Project View is typically only done by mistake. Since the “Final / Invoice” view is the one that generates the Invoice in the end and the “Quote” view is often used for quoting, it makes sense to only have Price Agreements in them.
  
  
• Price Agreements currently cannot be used in conjunction with the old “Fixed Price” feature on the same Project View. They are rather considered to replace that feature. So right now for every Project and View you can use either or. The reason for this limitation is that it’s too easy to make the mistake of thinking that the two types of fixed prices are linked to each other. It’s also hard to imagine a situation where you would want to mix the two.
• Price Agreements created in Budgets can be forwarded to the "Final/Invoice" view and the "Actuals" view for correct reporting/invoicing.

Open a Project, go to the “Final / Invoice” or the “Quote/Virtual Bookings” view, click on the “eye icon” and select “Show List Of Price Agreements”:

At the bottom of the Edit Project window an empty list will appear, with a “New” button under it. Click the “New” button to add a Price Agreement:



After Entering the Name, amount of the Fixed Price for the Price Agreement, a Note, a Color and committing it you now have created a new Price Agreement, which is the basis for dividing Sell prices per line item within the Edit Project window. But it still says that it’s “Not Yet Applied”. This is because Price Agreements work by affecting the rates and discount of the lines they contain. And since no lines have yet been associated to this Price Agreement, it doesn't affect any rates or discounts, i.e. so far it doesn’t apply yet:

Attaching financial lines to Price Agreements Lines (a.k.a. line items) in the Edit Project window are attached to a Price Agreement by clicking on the new little drop down icon next to the Sell price. This reveals the menu where you select the Price Agreement:

When you’ve added this item to the “Fixed Price” agreement, the Discount and Sell cells on that row will have the same color as the “Fixed Price” agreement and different values:

Since the agreement only contains one item so far, that item now has a negative discount of -900%. That is essentially a markup, turning €500 into €5000. But you may want to add more items to the agreement. In this case, just like the Price Agreement note says, add “Only the rooms and machines are included, no operators or extras.”, as shown in the following example:

As you add more items to the “Fixed Price” agreement, the “Sell” values of the lines become smaller and the Discount values become higher. For more information about how these calculations work, see the section “Details about the algorithm” at the end of this document.

Now, what if you don’t want to discount the grading suite? Simply click on the Price Agreement drop down menu again and click “Non-Discountable”:

This means that the grading suite will be part of the “Fixed Price”, but won’t get any discount. All the discount will be pushed on to the other items in the “Fixed Price”.

The fact that you can make items Non-Discountable makes it possible to reach negative Sell prices in the Project. For example let’s change our “Fixed Price” agreement from €5000 to €1000:

Since Flame 1 has a value of €4.950 and Avid 1 has a value of €500 the total discount is more than a 100% therefore it results in negative sell values, proportional to the sell price of the rooms.

* Getting negative sell lines is something that can easily happen if you have a big project with Non-Discountable items and keep adding things to a Price Agreement. To make sure this doesn’t go by unnoticed, Farmerswife shows a warning at the top of the Edit Project window:

Financial Report Designer support

Below is an example with two Price Agreements. Open the Financial Report from the Edit Project Report icon:


In the Financial Report Designer a grouping called “Price Agreement Name” is available:

When creating the report, the result will look as below:

* If you name your Price Agreements exactly in the same way in all Projects, you can use this grouping when reporting on multiple Projects. This is for example a good way to find out how much you are discounting in Fixed Prices on average.

Details about the algorithm

Here is a description of how the algorithm behind a Price Agreement works:

1. Set the discount for all the items in the Price Agreement to 0 and calculate their list prices.
   
   
2. Sum up the list prices of all the Non-Discountable items. Subtract that value from the PriceAgreement total, to see how much should be divided onto the Discountable items.
   
   
3. Divide that amount on the Discountable items by weighing their Sell prices against each other. For example, if item A has a list price of €100 and item B has a list price of €300, then item A will only get 25% of the amount.
   * Note that this means that lines with a zero list price will still have a zero list price when added to a Price Agreement.
   
   
4. If all the items in the Price Agreement are Non-Discountable, they are all forced Discountable, because there must be some items to divide the discount/ markup on to.
   
   
5. When all items have new sell prices, decimal rounding takes place. Any decimals that need to be added or removed are done so to the first Discountable item in the Price Agreement. In this case, “first” means the top line in the Edit Project window.
   
   
6. After decimal rounding, it’s time to calculate the Effective Discount for each line. Of course this value can be negative, implying that it’s a markup.
   * Note that the Effective Discount can have up to 17 decimals internally, but only one or two are displayed.