Accounting Best Practices, Fifth Edition

7–10. Simplify Pricing Structure

A common problem for the collections staff is when it tries to collect on an invoice containing a pricing error. This problem most commonly arises when the order entry staff has a complicated set of rules to follow when deriving pricing. For example, rather than using a single price for each product, there may be a different price for various volume levels a customer orders—perhaps $1 per unit if 1,000 units are ordered and $2 if only 500 units are ordered. The situation can become even more complicated if there are special deals in place, such as an extra 10 percent discount if an order is placed within a special time period, such as the last week of the month. When all of these variations are included in the pricing structure (and some companies have even more complicated systems), it is a wonder that the order entry staff ever manages to issue a correct product price! A special circumstance under which pricing becomes nearly impossible to calculate is when the order entry department of an acquired company is merged with that of the buying company, leaving the order entry people with the pricing systems of the purchased company, as well as that of their own. The inevitable result is that customers will frequently disagree with the pricing on the invoices they receive and will not pay for them without a long period of dissension regarding the correct price. Alternatively, they will pay the price they think is the correct one, resulting in arguments ...