Flat Rate Pricing is a popular approach to invoicing. Rather than showing an itemized invoices with a break down for all items, the labor and other fees you may be charging, Flat Rate Pricing combines them all into a single item - and price - on the invoice.
ESC can handle Flat Rate Pricing two ways: it can be imported from a compatible Flat Rate Provider (see our article on importing from a third-party provider) or you can build your own Flat Rate system right in ESC. There's pros and cons to both methods. If you are importing from a third-party flat rate pricing provider, then you will be fronting money for your inventory list, but importing it takes minutes and may be less of a hassle to set up. On the other hand, setting up flat rate pricing directly from ESC has no additional costs and provides full control over how the prices are calculated. It may take a bit of time and effort to setup, but once it is done, updating it takes seconds and costs nothing.
Prior to entering and using your own Flat Rate Parts in Inventory, flat rate factors must be entered here for the calculation of flat rate pricing. These values are used only when creating your own Flat Rate Pricing in Inventory. If you are importing Flat Rate Pricing from another vendor (such as Callahan & Roach, Flat Rate Plus, etc.) then entering these values on the Flat Rate Setup tab is not necessary.
System Setup for Flat Rate
To get started with ESC's Flat Rate Pricing system, you'll go to Company → System Setup → Inventory → Flat Rate Setup and fill out the following settings:
- Trip Charge - Enter the amount of the trip charge or inspection fee that will be included in the flat rate price.
- Labor Per Hour - Enter the labor rate that should be used in the calculation of the flat rate price. This value will be multiplied by the number of labor hours associated with the task when the flat rate part is created.
Round to the Next Dollar Amount - Check this box to round the repair out to the next whole dollar.
Warning! Do not use the Round to the next dollar amount option if you are charging Sales Tax! The total figure is calculated with the Tax amount included and then the difference is added into the Labor Sale amount after rounding. This will skew your Sales Tax calculations.
- Additional Repairs - If more than one flat rate task is applied to a single invoice you can opt to give the customer a discount on the additional repairs. This discount can either be the removal of the Trip Charge or a straight percentage applied to labor, material or both. Leave it set to a Discount Percentage of 0.00 if you want to charge full price for additional tasks.
Material Adder - Use this field to set an additional percentage of the material cost or a fixed amount that will be included in the flat rate price.
Note: This is the perfect spot to get back the tax you paid your vendor when buying the parts initially. Simply enter the tax percentage you were charged here and it will be included in the price of the flat rate task.
- Sales Tax - Select the tax code you want to include in your Flat Rate Price Books. Note that ESC ignores this setting when the flat rate task is used on an invoice. ESC uses the tax code on the invoice to calculate the exact tax amount instead. Therefore you may want to set this to an exempt tax code and inform your customers that all prices are also subject to tax. You could also set it to your most common tax rate and let customers subject to different taxes know that the price may differ slightly as a result of tax. A third option is to set this to the highest tax rate in your service area and charge all customers this rate, even if it exceeds their normal tax rate. Please ask your accountant which solution is right for your company.
- Agreement Discount - A discount can also be incorporated in the flat rate price for customers that have a service agreement with your company. This can be set to a percentage off the labor, material or both.
Calculating Flat Rate Pricing on Inventory Items
Now that you have entered the numbers ESC will need to calculate Flat Rate Pricing for you, you'll need to tell it which items will be assigned Flat Rate Prices.
- Head to the Item List and recall an item that you wish to assign the Flat Rate setup to. You can also setup items with Flat Rate Pricing as they are created. To do so, you'll click the Add → Inventory Part option in the Item List and create the desired Type of item first.
- In the Inventory Entry screen, make sure the Price A field is filled in with your desired Material price.
- Switch to the Flat Rate tab and enter the number of hours that will be assigned to this part or task.
- Now click the Calculate Flat Rate Prices button. Six different rates will be generated:
- Primary Repair will be the full price of Material, Labor, Charges and Tax based on the Labor Hours entered.
- Additional Repair will be the Primary Repair rate, with the discount you assigned to it in the System Setup screen. This may be Less Trip Charge, a Percentage discount or no discount at all.
- After Hours Primary will be the full price of Materials and Charges, but the Labor charges will be multiplied by 1.5 (time and a half). Tax will be calculated after the Labor charges.
- After Hours Additional will be your Labor charges multiplied by 1.5, plus your Material Sale and Trip Charge, minus your Additional Repair discount from the System Setup screen.
- Agreement Primary will be the amount of your Primary Repair minus the Agreement Discount you elected to provide you Agreement customers in the System Setup screen.
- Agreement Additional will be the price of Agreement Primary minus the Additional Repair discount.