In FF&EZ's Design module, the intent is to create a design cost estimate (for internal clients) or a sales quote (for external clients) that reflects the final cost/price of the sales order or project, including markups (or gross margin) or purchasing fees, estimated taxes and estimated freight, as accurately as possible. Since this is the design phase prior to actual ordering, these cost-driven numbers are handled first by setting "default" percentages on the Project List form that can be overridden for individual specifications on the Specifications List form. There are a number of ways to use these percentages, discussed below. One important thing to keep in mind is that determining the percentage to use for each (if any) and setting it early in the project is the best approach.

Note: This section deals with FF&EZ-Design. If you have the Design/Purchasing system, taxes and freight charges for orders are eventually handled based on actual amounts (if applicable), so be sure to read that portion of the Help system for more information (all entered percentages can carry through to the order items except the freight percentage, which is only intended to be an estimate until actual freight charges are recorded).

Quick Access:

Default Percentages

Markup / Gross Margin

Since firms that do profit-based sales typically operate with only one or the other of these numbers, the use of markup vs. gross margin for input is controlled on the Setup Form with the "Profit % Entry" option. You only have to select this once (note that changing this option will not affect existing profit calculations — the displayed percentage on projects and specs will be adjusted to reflect the equivalent rate for the same profit amount).

You do not have to enter a markup or gross margin on the project screen, since the equivalent rate is back-calculated when you enter a price manually on a specification.  (You can't enter either for purchasing management projects.) However, even if you typically price each item individually (which is hardly uncommon), entering a percentage for the project at the beginning of the specification process gives you an automatically calculated "suggested profit" as you enter the vendor quotes. Since FF&EZ locks any price you enter yourself, this allows you to compare your desired price against the original target.

For billing type 1 projects (profit-based), you also have the Pricing Tool utility which offers much finer control over setting markups / gross margins without having to set them individually. If you plan to price all items individually or based on product type, source, etc., you can leave the project markup at zero and use a combination of manual pricing and this utility.

Taxes

As you might guess, this can be a very complex subject, based on whether the tax is a "retail" sales tax or a value-added tax (VAT) and on what base amounts the tax is calculated: FF&E, freight and/or purchasing fees. If you have the Design/Purchasing system, it is important to also read the complementary section under the Purchasing reference.

For Design projects, the default tax rate you enter on the project screen, as well as changes to it, work like the other percents described here. They can be overridden on individual specifications if needed, although that will be rare. Taxes are handled in the following way:

• On a for-profit project (billing type 1), the tax is applied to the sell price. This assumes that you are collecting the tax and reporting it to the appropriate government entity. For VAT (value-added tax) situations, see below.
• On purchasing management projects (billing types 2 and 3), the tax on FF&E is applied to the vendor net cost. This assumes that vendor is collecting and reporting the tax.

Purchasing management projects, especially large projects like hotels, tend to generate very different tax amounts, depending on the vendor. Purchasing management users have found that using the "Tax quote" field on the Orders screen is easier than having FF&EZ try to calculate the tax on any order. For this reason, you can elect to not transfer tax rates to the orders, using controls on the project screen. This means you can use the tax rate to add estimated taxes to a quote, but add more accurate tax quotes to the orders. For more information, see the the complementary section under the Purchasing reference.

• If the option to tax freight is selected on the project screen, tax is added to quotes based on the estimated freight percent, which must be non-zero to get this calculation. This applies to the Design module; the Purchasing module uses freight quotes and actual freight amounts from vendors.
• If the option to tax a purchasing fee is selected, the tax is applied to the amount generated by applying the fee percent to the net cost for purchasing management projects. This tax will appear on your own separate invoices to the client if it applies. Note: you must enter a tax rate on the project screen in order to apply a tax to a purchasing fee. 
• In countries where a VAT is charged, FF&EZ-Design does not change the way it handles taxes in the Design module (although you may wish to change the "Tax label" on the Setup Form). The assumption is that any VAT you pay will be credited against the VAT you charge and will not affect the project's net profit. However, see this section's equivalent under "Purchasing Module" for how this is handled for purchase orders. The system can handle vendors that are exempt from a VAT, as well as product purchases that are exempt from non-exempt vendors. 

When printing the quote/contract formats from the FF&E Worksheet, not only can you add or suppress the tax amount, you can have the report round it up to an even 10, 100 or 1000, depending on the size of the total. This is especially useful if the tax includes the typically variable estimated freight amount or you can't predict exact taxes due to other factors.

Purchasing Fee Percent

For projects in which the vendor bills your client (including "clients" who are within your own organization), you have the option of entering a purchasing fee percentage for your work, which is calculated based on the net cost of the specifications in the projects. The purchasing fee can appear on the "Quote / Contract" report formats (on the FF&E Worksheet). If you have the Design/Purchasing system, the fee will be the amount that is billed on any invoices you issue, based on the cost amount for each order item.

Using the purchasing fee approach ensures that your fees adjust correctly with any changes in the FF&E quantity or costs, especially if you are managing the resulting purchase orders. 

Important: To avoid unexpected results, you cannot use both a markup (gross margin) and a purchasing fee in the same project. A markup can only be used with the "Vendors are to invoice us" billing type 1, while a purchasing management fee can only be used with the two "Vendors are to invoice client" types. 

For this reason, you should make sure to choose the correct vendor billing type on the project screen so that the correct percentage is enabled. Although you can change a project billing type later, if you have used markups or entered purchasing fee percentages, the system will clear out any percentages that do not apply to the new billing type. 

Note that for internal projects in which you pay the vendors and no cost-recovery fee is charged to another department, the "invoice us" type is fine. If you are performing services for another part of your organization, we recommend the "invoice client" type for its more flexible use of billing addresses.

Estimated Freight Percentages

Freight amounts can be estimated with a percentage of either cost (purchasing management) or price (profit-based "bill to us" sales projects). This is because freight amounts may not be known until an actual order is issued. However, if you get actual freight quotes from vendors prior to issuing a project quote, there is a technique for incorporating individual quotes into the estimate for specific products (covered below).

When printing the quote/contract formats from the FF&E Worksheet, not only can you add or suppress the freight amount, you can have the report round it up to an even 10, 100 or 1000, depending on the size of the total.

Variations

As you work with the specifications in your project, you may run into several situations that depart from the simplicity of using a single percentage to calculate the amounts discussed in this section. We cover several below.

Setting Percentages Manually

You can override the percentage set on the project screen on any specification in the project. This gives you the ability to set a different percentage for any one item or for related groups (such as all equipment or all fabrics). When you set different values, these are normally protected from being changed if you change the default value on the project screen later (see next section).

Whenever you edit a specification and enter a price manually, FF&EZ recalculates the equivalent markup and then locks the price so that a change to the cost cannot affect the price you set (unless you also de-select the "Lock?" option for that spec). Note that you can manually change the price at any time. The "lock" option only prevents unintended automatic changes.

As you set prices, the markups for "locked" specs will be changed to be above or below the default markup on the project. The FF&E Summary and the "Projected Profit" reports on the FF&E Worksheet's report list can show you the cumulative affect of setting prices.

Changing a Default Percentage

There is more information about changing rates on the Rate Change Options page.

As mentioned at the beginning, for billing type 1 projects (profit-based), you also have the Pricing Tool utility which offers much finer control over setting markups / gross margins without having to set them individually. 

Entering a Freight Quote

Purchasing Management - Fixed Fees vs. True Percentage

However, if you have the Purchasing Module, you will want to change the method slightly, because the "Vendor is to bill client" project type normally only invoices fees to the client, along with creating "check requests" that are payable to the vendors.

In this situation, you will create a special purchase order manually. You can then issue a purchase order and "bill" your client for your fee as a check request in the same way that you might process any other vendor's invoice. Further, if you are billing the fee based on a percentage of completion, we recommend that you use this method: 

1. Create an order from this item as you normally would and issue it. Note that if you did not add the fee to the design project as described above, you can create this order manually on the Orders Screen. Putting it in the design project makes sure that the report totals from the FF&E Worksheet include the fee, but it is not required just to invoice a fixed fee. All that is needed is an order for "Purchasing Services" with the appropriate "% CPLT" type of unit price as described above.
2. Important: the "Purch'g Fee %" field on the order's fee "item" must be set to zero so the actual item amount (the fixed fee) is invoiced to your client. This should be the default if you did not enter a fee percent on the project screen, but you should verify this on the order item.
3. As the project work progresses, and you wish to invoice your fee, you will do so based on the quantity "shipped" that you enter on the Expediting List screen for this special order. The system will split out the uninvoiced fee as an "undelivered" quantity of "completion," allowing you to keep invoicing as needed from each remainder. So if your first billing is for 40% complete, you would enter a quantity of 40 shipped and allow the system to create a remaining split of 60. The next billing would be done by entering a "shipped" quantity on the split. So if it was now 75% complete, you would enter 75 - 40 (previous) = 35 on the new split. A new split of 25 would then remain. 
4. Optional: This order is the only order that you night invoice from a percent of completion project, since invoices are billings that your client pays to you.  All other amounts for FF&E can be handled normally by issuing check requests (see the Purchasing Module for a complete description of all of these functions).