FF&EZ structures finished items as objects containing products, giving you four different ways that you can deal with costs (what a vendor charges) and set prices (what you charge to your client). Please remember that in FF&EZ, "price" always refers to a sell price that you charge your client.

1. Purchasing fees
2. Markups added to vendor costs (resulting in sell prices) entered on all components with the price calculated automatically and manually overridden if desired.
3. Costs entered on all components, with a manually entered price only on the primary component.
4. (Design/Purchasing) Costs entered on all components, with an option set on the Project screen that automatically rolls the sell prices to the primary item when the order for it is created (other components will have a cost, but no sell price).

Options #2, #3 and #4 can also be done using the Pricing Tool to set prices on groups of specs instead of individual ones. Each of these approaches fit specific situations, so understanding how they work gives you more flexibility in how you deal with pricing items. This includes using different approaches on different projects or even from one object to the next, with these important limitations:

• You cannot mix the use of purchasing fee % and markups in the same project, since it would create confusing results and be difficult to invoice correctly.
• Do not use mix approaches #2 and #3 when a secondary component (such as drapery sheer material) is used in more than one object, since this will muddy the price calculation. This is just a warning, since it is likely that you would use just one of these approaches for pricing objects with more than one component anyway.

Another issue that may come up is how to create a quote to a client when you do not know the exact cost yet. This is covered at the end of this section.

1 - Purchasing fees

This is the simplest approach, because only costs need to be entered.  If the same purchasing fee applies to all items, then you simply enter the purchasing percentage on the Project Screen.  This is best done at the beginning of the project, but if you change it later, FF&EZ will simply ask how you want to apply the new fee (usually to all specifications, but you can also apply it only to new specifications (preserving an existing fee) or only to those that had the old fee %. If you have the Design/Purchasing system, the fee will be billed based on the cost of items that have been either ordered, shipped or delivered, depending on how you set up the invoicing options when you create invoices.

Although the purchasing fee can be changed at any time, we strongly recommend that the final fee be entered on the project and applied to the specs before you create any orders and issue any invoices for your fees.

The prerequisite for setting up a purchasing fee project is to select one of the two "Vendor is to invoice client directly" options on the Project Screen.  The "client" can either be an outside client or another part of your organization (for internal projects). Selecting one of these invoicing options will enable the purchasing fee % field on the Project Screen.

Fixed fees

An exception to using a fee % in purchasing management projects occurs when you have agreed to a fixed fee for purchasing management (that is, which is not actively linked to the total cost of the FF&E).  In this case, you would not use a percent at all. Instead, you can set up a fixed fee as an "object" in a special area and room.  Use square brackets around the area name and it will sort to the bottom of the project, like this:

Area: [Fees and Other Expenses]

Room: Items

Then, create an object called "Purchasing Fee" and create a specification with a price that is 1/100 of the total fee, with a unit of "%".  Add the object to the "Items" room with a quantity of 100.  For instance, if you have negotiated a $21,500 fee for purchasing services, set up the specification like this:

Spec ID: FEE

Vendor: Your company (create this vendor)

Type/Product: Project Purchasing Fee

Unit: %

Cost: $215 (per %)

Set up the corresponding object in a similar way with this specification attached to it. When you place this object in the special "Items" room at a quantity of 100, it will create a line item for the total purchasing fee of 100 x $2,15 = $21,500.

If you then create a purchase order from this object, it will create an order to you for the purchasing fee, which can be "shipped and delivered" in any quantity between 1 and 100. Each quantity that is "delivered" can then be billed, resulting in a way to create progress billings. E.g., if you want to bill 25% of your fee, you enter 25 as both shipped and delivered on the Expediting Screen for your fee "order." This will create a split for the remaining 75 "percents" of the fee.

This approach can be used to create other lump sum expenses that are not FF&E.

2 - Costs and markups on all components

This approach is normally used when you want to let FF&EZ calculate the total price for an object based on the markups (or gross profit margin) applied to each component in the object. This is easiest when you follow these points:

• Although we use the term "Markup" here, if you have used FF&EZ's Setup function to use a "Gross Profit Margin" approach, this is the term that you will see on the screens. Note that switching between these options will not affect current prices. It only changes the percent used in calculating a price, which will change to the equivalent for the currently active method.
• When you create a project, enter the most common markup that you plan to use in the "Markup %" on the project screen. This will be copied to each product spec as you create them.
• On each specification, override the project markup as needed for product types that you wish to mark up differently. You can do this individually or with the Pricing Tool, which allows you to mark up whole groups of specifications at a time, with a number of options to control how this happens.

Once you have all the markups set and have entered the vendors' quoted costs, you can run "Pricing" or "Quote" reports and the price for each object will be the sum of all the marked up costs, using your markups to calculate the price.

If you wish to override the calculated prices to force them to a specific pricing pattern (e.g., changing 345.67 to 345.99 or 1,267.65 to 1,295.00), simply type the desired price into the "Price" field.  FF&EZ will back-calculate a new markup and lock the price again automatic recalculations. You can also do this adjustment for all your prices or groups of them using the Pricing Tool.

Note: If you have the Design/Purchasing system, this will produce invoices to your clients for each component of multi-component objects. If you only want to invoice the total sell price for the finished objects, use method #3 or #4.

3 - Costs on all components, price on primary component

This method is used when you want to specify a single price for an object with multiple components instead of setting a price for each component (of course, objects with just a single component just have one cost and one price to set). The approach is very simple, using :

1. As you enter vendor quotes for the cost, enter a zero for the price for all products used as secondary components. This will set a markup of -100% and lock the price at zero.  This has the effect of retaining the cost of each item (to see where the object's costs came from and to preserve the ordering cost) but removes the price, since the price will be set on the primary component spec.
2. Display the Object Screen. Go to each object with multiple components. (component #1) and enter the desired price for the entire object.  FF&EZ will lock this price for you.
3. Go to each secondary component of the object, and enter a price of zero.  Again, FF&EZ will lock this price, which will protect these particular price entries if you run the Pricing Tool on other specs.

As in the previous approach, you can then run "Pricing" or "Quote" reports that will show the total price for each object, while any ordering reports will show the separate costs.

4 - Costs on all components, price auto-summed on order

This final method is available in the Design/Purchasing system. It is the same as method #2, except that the total per unit price for an object is automatically summed and moved to the sell price for the primary component when the purchase order is created. The secondary components for the object are also used to create orders to the vendors, but the sell price for these is set to zero. The net effect is to preserve the total costs paid to the vendors while your clients only see the totaled unit sell price on the primary specification, which is what is invoiced to them. This is the easiest method for cost/sell projects where the client does not need to see individual component sell prices.

Unverified Costs vs. Estimated Price

As of Version 3.2.25, FF&EZ allows you to record vendor quote information on each product specification (e.g., quote #, date, etc.). This allows you to quickly see which products have not had their costs either quoted or verified by a vendor. However, what if you need to quote a price to your client before you know the exact cost you will pay for that product?

One technique used in earlier versions of FF&EZ was to enter a dummy cost, often one cent or $1.00 and then enter the price you wanted to quote to your client. Although this seemed to work, it could actually cause problems if the project was ever exported or if you ran the File Cleanup utility. Here is why:

FF&EZ allows you to let it calculate a price for you but also allows you to enter any price you want and let it "back-calculate" the equivalent markup or profit margin. This makes it extremely flexible, but does create one limitation: you cannot enter a zero or relatively tiny cost when you have a price entered. Entering a zero cost with a non-zero price creates what is called a "division by zero" error when the resulting markup is calculated—the markup becomes "infinite" and cannot be saved.

A similar result occurs where a $1.00 cost is entered to "mark" a spec as "unpriced" but a much larger sell price is entered, since the resulting markup may still be too big to save into the data field, which can hold markups up to 9,999.99999%.

Recommended alternative #1:

1. Use the vendor quote tracking fields to mark each product spec that has a confirmed cost quote. This puts a checkmark in the Specification List's "Quote" column for easy verification. If you plan to create a project by cloning an old or prototype project, be sure to clear the vendor pricing status fields when that option appears during the cloning process.
2. For specs without a quote yet, but for which you need to quote a sell price, enter the sell price into the "Cost" field first.
3. Then enter the same price into the "Price" field. This will lock that price and calculate a temporary zero markup.
4. When you get the actual cost, enter it into the "Cost" field as you normally would. The locked price will cause the system to calculate the equivalent markup based on the updated cost.

To manage items without a quoted cost, you can create a query on "empty" Vendor Quote IDs as well as on specs where the profit is zero, something which you can do easily with the Utilities> Status Check command on the Specifications screen. One other advantage of this approach is that it prevents the accidental underestimating of project costs and therefore, overestimation of profit, when costs have not been determined.

Recommended alternative #2:

If you are cloning an existing project or a base project that already has previous costs and prices entered, you can also set up a quote based on object budgets instead of specification prices.

1. Clone the project as you normally would, making sure to clear the vendor status fields as recommended in the procedure above.
2. Open the project and display the Objects screen.
3. Use Utilities> Set budgets to update the budgets for the project objects. This is based on the prices found in the current set of specs, but can be adjusted with a percentage for the new project. This assumes that the prices on the existing specs are complete.
4. Any specs without prices will not change the object budget, so you can manually enter a budget for these.
5. Once all budgets have been entered, you can use the FF&E Worksheet's "Budget Estimate" report (changing the title if needed) to create a quote.

If you wish to learn more about setting prices in groups and options like "psychological pricing," be sure to read the reference section for the Pricing Tool as well as the "How to" section "Using the Pricing Tool."