The Inventory Pricing system in Evolution ERP allows the business to control item pricing using landed cost, minimum markup, and maximum discount. This ensures customer discounts can be applied while maintaining acceptable margins.
Pricing policies configured here affect pricing behaviour on:
- Quotes
- Invoices
- Projects
Where to Find It
Inventory → Items
Select an item and configure pricing fields on the item record.
Key Concepts
- Raw Cost – Supplier cost of the item
- On-Cost – Additional overhead applied to the item
- Landed Cost – True cost to the business
- Minimum Markup – Lowest acceptable margin
- Maximum Discount – Largest discount allowed
- Recommended Retail Price (RRP) – System-calculated selling price
Pricing Calculation Overview
1. Raw Cost
Raw cost represents the amount charged by the supplier for the item.
Example: Raw Cost = $35.31
2. On-Cost
An on-cost is applied to account for additional business expenses such as:
- Freight
- Storage
- Handling
- Warehousing
The on-cost can be either a percentage or a fixed amount.
Example:
On-Cost = 15%
Landed Cost = $40.61
3. Minimum Markup
Minimum markup defines the least amount of margin the business is willing to accept.
Example: Minimum Markup = 25%
This prevents the item from being sold below the defined minimum margin.
4. Maximum Discount
Maximum discount controls the highest discount that can be applied, even for preferred customers.
Adjusting this value impacts the calculated RRP:
- Higher allowed discounts require a higher RRP
- Lower discount caps allow a more competitive RRP
A maximum discount of 0% is a valid setting: the item has no discount headroom, so the calculated RRP is the minimum price. The pricing screens accept it and show an amber reminder when they do. Where you use it, set the minimum markup at your target margin rather than your tightest acceptable one — with a 0% discount there is nothing between the list price and the floor.
Why you should use Maximum Discount
The RRP is calculated so that giving the full permitted discount still lands exactly on the minimum markup. That makes Maximum Discount your pre-approved negotiating room: the list price carries a buffer, sales staff can offer a real discount without asking anyone, and no deal inside the cap can fall below the margin floor.
- Customers see a discount, the business keeps its margin. The headroom is priced in up front, so a negotiated price is a planned outcome rather than an erosion of the floor.
- Negotiation stops needing judgement calls. With a 0% maximum discount, every request for a better price is either a flat “no” or a below-floor override someone has to approve — the list price has to do all the work on its own.
- A small cap usually costs nothing. A pair like 35% markup / 7% discount works out to the same real margin as a higher markup with no headroom, while keeping the negotiation lever. The RRP / Pricing Integrity report’s Min/Max Settings tab shows the matching discount for each category and lets you test a pair against live pricing before applying it.
A 0% maximum discount is still the right choice for lines priced hard to market, where any discount really is cash given up below the intended price — just set the minimum markup at your target margin when you use it, because the RRP it generates is also the lowest price you are prepared to take.
5. Recommended Retail Price (RRP)
RRP is calculated automatically based on landed cost, minimum markup, and maximum discount.
This ensures:
- Discounted prices remain profitable
- Pricing is consistent across sales documents
Pricing Behaviour in Practice
- Discounts cannot exceed the maximum discount
- Prices cannot fall below the minimum markup
- Rules apply consistently across quotes, invoices, and projects
Example Pricing Scenario
| Raw Cost | $35.31 |
|---|---|
| On-Cost | 15% |
| Landed Cost | $40.61 |
| Minimum Markup | 25% |
| Maximum Discount | 25% |
| Suggested RRP | ~ $62.27 |
Values shown are examples used for demonstration purposes.
Common Pricing Adjustments
- Responding to competitive pricing
- Adjusting margins by product type
- Managing customer discount strategies
- Balancing market expectations with profitability
Training Video
The following video demonstrates how to configure inventory pricing policies in Evolution ERP.