Often we hear a representative and a factory dispute the allocation and invoicing of overage. This document describes how overage lines on quotes should be “spread” before the order is created thereby helping the manufacturer bill the customer overage as expected.
Lot Overage Example
This is an example of relying on the manufacturer to decide how to bill the customer:
In this example, the manufacturer appears to have a number of options depending upon how the product ships. The overage could be billed on the first item that ships, the last item that ships or as a pro-rate as each item ships. Then what happens if items are canceled? The only scenario where the sales agency and the manufacturer will consistently agree is if the order ships complete on the first shipment. All other scenarios have the potential for the manufacturer billing the customer "wrong" and either exposing the profit on the job or not billing properly resulting in a loss of profit (overage) overage for the sales agency.
The better option is to spread the overage across each line of the order. Then the factory and the agency will know what would happen in most scenarios. (Less assuming.)
Most overage scenarios begin in the quote (or OASIS project):
When the project is sold and before breakouts are made, use the spread profit feature to add the $1000 of overage to the three lines for this manufacturer. To do this, select Tools then "Spread Profit":
To spread the overage over one manufacturer (or a group of manufacturers), click on the "..." button:
Select the manufacturer(s) and press Ok:
Then key in the profit (overage) and press "Ok":
Notice the sell price of each item was marked up just enough to cover the overage. At this time, make sure the "OBase" column contains the price where the manufacturer will pay overage. OASIS will match the calculation of the manufacturer by applying the "% Over" value (75% in this example) to the overage on each item when the order is created.
Next - Remove the OVERAGE line, it is no longer needed:
Now, convert the quote to an order normally:
Using this method, the overage is spread across the items on the order. This will communicate to the manufacturer how you would like the order billed and take away the assumptions about how the factory MIGHT bill the customer.
(Obviously if the order is lot billed, unit prices should not be billed by the factory.)