The most important part of any business is the numbers, and, in particular, the difference between what a Product costs the merchant and the price they sell it for. Accurate costing and pricing information is essential, as are the tools to set them quickly. This article outlines the different places where Costs and Prices are used in LightSpeed, and how to change them easily.
| Term | Definition |
| Cost | The amount that you pay when you order a Product from your Supplier |
| Default Cost | The amount that you pay when you order a Product from your default Supplier |
| Raw Cost | The cost of a Product in the currency of the Supplier you buy it from. |
| Cost Average | The average cost of the entire quantity of a Product you have in stock. |
| Pricing Level Cost | The unique cost you set that is associated to a particular Pricing Level. |
The Cost of your Product is set in the Product card in the Supplier Costs Grid, and is set for each Supplier you map to the Product.
To add a cost to your Product, click the “+” icon in the Info tab of the Product card. Choose the Supplier that you’re mapping from the pop-up menu, enter the Supplier Code (the code/sku that your Supplier uses to identify the Product in their system), and the Raw Cost. The Raw Cost you enter should be the amount you pay in the Supplier’s currency. In most cases, this will be the same currency as the one you use, and therefore, the Raw Cost will equal the Cost. If your Supplier’s currency is different than your default currency, the Raw Cost will not equal the Cost.
You cannot enter the Cost directly – it must be an automatic calculation from Raw Cost. Click Save.
It is the Cost, and not the Raw Cost, that is used in sales reports and appears as the cost in sales documents. It is the Raw Cost that appears as the cost on Purchase Orders and Supplier Invoices. Remember, if your Supplier uses the same currency as you do, this number should be the same.
While the cost entered on a Purchase Order will be the Raw Cost of the Product, the value of that Product when it is received will be the Cost in your default currency, and will affect the Cost Average. The Cost Average is the value of your existing inventory, and is found in the Inventory tab of the Product card.
For example, if you receive 10 widgets at a cost of $10, and then another 10 at a cost of $20, you will have 20 widgets with a Cost Average of $15. It is the Cost Average that is used when you sell a Product on an Invoice.
When you add a Product to a Quote, Order, or SRO, the Cost that is used is the cost of your default Supplier. However, once you save an Invoice that has been created from one of these documents, the Cost automatically is replaced with the Cost Average.
Each Product can have up to ten alternate prices, called Pricing Levels, and each of these Pricing Levels can have their own unique Cost. To allow entry of a unique Pricing Level Cost, go to Tools > Setup > Pricing Levels, and select both checkboxes. The Pricing Levels can be selected per Line Item checkbox allows your users to access alternate prices and costs for Products (provided they have been set in the Product card), and the Pricing Levels set the Cost in addition to the Selling Price checkbox enables the option to set the unique Pricing Level Cost for a particular Pricing Level.
When you add a Product that has at least one Pricing Level entered to any sales document, an indicator arrow will appear beside the regular Selling Price. Clicking this arrow displays the Pricing Levels and any costs associated with these levels. Choosing a Pricing Level that has a unique Cost will use this cost as the Cost for the document, even if it is an Invoice. In other words, accessing a Pricing Level Cost on an Invoice precludes the substitution of the Cost Average when the Invoice is saved.
Costing is an essential factor in sales, commission, and inventory valuation reports. Depending on the report, however, different costs are used, and are outlined in the table here.
| Category | Report | Costing |
| Sales | Gross Profit | Cost Average at time of sale |
| Inventory | All Reports except Inventory History Reports | Current Cost Average |
| Inventory History | All Reports | Cost and Cost Average at time of entry |
| Product | General By Default Supplier | Default Cost |
| Commission by Profit | All Reports | Cost Average at time of sale |
Similarly, the reports in Intelligence use various costs as well. See the adjoining table.
| Category | Costing |
| Products | Cost Average at the time of sale |
| Quotes | Cost |
| Invoices | Cost Average at the time of sale |
| Sales | Cost Average at time of sale |
| Inventory | Current Cost Average |
To understand costing on your reports and accounting exports, you must understand what costs are used on the various documents created in LightSpeed, including Quotes, Orders, Invoices, Purchase Orders, and Supplier Invoices.
| Document | Cost Used |
| Quote | Default Cost (Pricing Level Cost will override) |
| Order | Default Cost (Pricing Level Cost will override) |
| SRO | Default Cost (Pricing Level Cost will override) |
| Invoice | Default Cost will appear when Product is added, but will be replaced by Cost Average when Invoice is saved. However, Pricing Level Cost will override if a Pricing Level is chosen. |
| Purchase Order | Cost of the Supplier attached to the PO |
| Supplier Invoice | The cost from the original Purchase Order |
LightSpeed’s Set Selling Prices feature allows you to make batch changes to the prices or costs of subsets of your Products based on criteria you set.
The Default Cost, Default Raw Cost, and Pricing Level Costs can be used to set your criteria – methods you can use to isolate subsections of your Products in order to apply “Actions” to them.
In the Actions section, you can set the Cost of any Supplier by selecting Cost in the first pop-up menu. However, doing this requires you to choose which Supplier’s cost you are affecting.
When setting an action in Set Selling Prices, you have many choices as to which cost on which to base your calculation – regular Cost, Pricing Levels Costs, or the Cost Average.
For example, you could set the Cost of a Product you purchase from Ferris Ltd. based on 15% less than the Selling Price (ie. discount from MSRP).
For example, using the criteria “Cost Price Level A is greater than 350” will result in all your Products that have a Pricing Level A Cost of more than $350 ready to have an action applied to them.
It is necessary to set a Supplier when changing the Cost (as above), or you will create a second cost line in the Product card that has no Supplier.
The costs that are included with the files that are exported in LightSpeed’s accounting exports files (Tools > Export to MYOB or Tools > Export to QuickBooks) are the costs on the relevant documents.
| File | Cost Used |
| Invoices | The cost saved in the invoice (see Documents table above) |
| Purchasees | The cost saved in the Supplier invoice (see Documents table, above) |
| Inventory Adjustements | Cost Average or the cost edited during the adjustment |
You can find a powerful costing tool at Tools > Utilities > Troubleshooting > Inventory at Zero Cost displays a list of Products that were received or adjusted at a cost of zero, and give you the opportunity to “fix” those transactions by replacing the current Cost Average.
The Supplier Costs Grid is where you set up the Cost records that show the Supplier where the Product is purchased, in what currency and at what cost. Each Product can be purchased from multiple Suppliers, with the Default Supplier listed at the top of the Costs list. The Default Supplier is where you most often buy the Product.
Adding a New Cost
Click the “+” icon beside the Costs grid to open a new Cost drawer. Here you can choose a Supplier and enter the Supplier Code for the Product - the code that this Supplier uses to identify the Product in its own system. In some cases it will be the same as the manufacturer’s part number that you may have used as the main Product Code for the Product.
Important: You should only use the same number for both the Product Code and the Supplier Code if you only have, and only will ever have, one Supplier for the Product.
If the Supplier is set up with a currency other than your default currency, the currency and the conversion rate will be shown. Entering a Raw Cost (the cost in the Supplier’s currency) will calculate the converted Cost.
Check the Default checkbox if this is the Default Supplier for this Product.
Editing a Cost
To edit a Cost, double-click the Cost in the Supplier Costs Grid and the Edit Cost drawer will open.
Removing a Cost
To remove a Cost, select the Cost in the Costs list and click the “-” icon.
Entering every cost using the Costs drawer could be a very time-consuming process if you have many Products. Consider using the Import Tools to import and update Costs in a batch fashion. More details can be found in the LightSpeed Importing article in the Getting Started section of the User Guide.
The Supplier Costs Grid is where you set up the Cost records that show the Supplier where the Product is purchased, in what currency and at what cost. Each Product can be purchased from multiple Suppliers, with the Default Supplier listed at the top of the Costs list. The Default Supplier is where you most often buy the Product.
Use the Update Products or Update Costs functions of the Import Products tool to update Product properties, selling prices and costs using tab-delimited price lists or files. More details can be found in the Import Tools chapter of the manual.
Selling Price
Selling Price is the price at which you are selling the Product. When you enter the Selling Price, the margin is calculated based on the Default Cost in a field beside the Selling Price field.
Quantity Discounts
LightSpeed will automatically modify the price of a Product when it is sold in a quantity pre-defined in the Product card, up to five levels. For instance, you may sell a 10-pack of dvd’s at $14.99, but offer a $1 reduction when a customer buys a quantity of 10 10-packs.
Click the “ellipsis” icon beside the Selling Price to call up the Quantity Discounts grid. Along the top row, enter the quantity values which will automatically trigger the corresponding price when the quantity of the Product sold is modified. In the example above, you would enter a value of 10 as in the figure shown, and below that, enter a price of 13.99.
Quantity Discounts also work in tandem with Pricing Levels. Entering values in each “quantity” column beside each “Pricing Level” row will allow you to access up to 66 various prices according to how many the customer is buying, and what Pricing Levels are set.
For example, if you have a Pricing Level set for “Education” of $12.99, you could set a price of $10.99 when the customer bought a quantity of 10.
When the Product is sold, the Selling Price will automatically adjust as the quantity is modified.
Minimum Margin
Minimum Margin allows you to specify the lowest profit margin (in percentage) at which a particular product can be sold, quoted, or ordered. The minimum margin calculation on sales documents is based on the product's current cost average, not its default cost. You can prevent users from selling a Product for below the minimum margin by setting the "Sell Below Minimum Margin" privilege to Not Allowed (Tools > Setup > Basics > Privileges). This privilege can help prevent against over-discouting or accidental loss of profit.
You could create a Date Custom Field called “Introductory Date” to record when the Manufacturer introduced the Product.
Pricing Levels
You can configure up to ten alternate prices for your Product, known as Pricing Levels, in the Pricing Levels setup panel. These Pricing Levels can then be accessed in a Browser document or the POS screen for a manual, pre-defined discount, or assigned to Customer Categories and automatically applied when the Customer is added to a sales document. Each Pricing Level may also have a unique cost associated with it. The Selling Prices and Costs for each of the Pricing Levels can be set in the Pricing Levels setup panel. For more info, please see the Configuration II article in the Getting Started section.
Value
In the event you need to change the Cost Average of a particular Product – a freight charge you want to embed into the Cost, or price protection you want to apply across that Product’s quantity – you can adjust the overall value of a sku by clicking the Value tab in the Adjust Inventory feature. Enter a value in the Change Value by for the amount you wish to change for the entire value of this Product, including all quantities.
