Pricing Structures

What is a Pricing Structure?

In FinancialForce Billing Central you can create pricing structures that enable you to specify different prices for different quantities of a product on contract line items. Each pricing structure consists of one or more quantity breaks. The same quantity breaks are used regardless of whether a contract line item has a positive or negative quantity or usage.

When you create a change request, pricing structures on active contract line items that have not yet been billed are copied to the change request line items. This ensures that any changes to the pricing structures on the change request line items do not affect the pricing structures on the active contract, and vice versa. Pricing structures on active contract line items that have been billed are not copied to the change request because you cannot change them.

Warning:

Permission to edit pricing structures ought to be restricted to a small number of users because changes to them can impact your organization's billing process.

Quantity Breaks

A quantity break determines the price of a product for a particular range of quantities. Quantity breaks make up a pricing structure that you can apply to a product on a contract line item.

For example, you can create a pricing structure for widgets and apply different unit prices depending on the quantity of the product that the customer buys or uses.

Quantity	Unit Price
0	$20
100	$10
200	$8.50
300	$7
400	$5.50

Each row in the table represents a quantity break in the pricing structure for the product. In this example, if the customer bought 431 widgets, the price for that contract line item is calculated using the formula: 431 x 5.50.

If the pricing structure is volume based, the price is applied to all units.

Notes:

The Unit Price is applied for quantities from this amount up to the next quantity break if there is one. Each pricing structure must contain a quantity break with a quantity of zero.

You cannot create quantity breaks with the same quantity in the same pricing structure.

Tiered Pricing Structure

If the pricing structure is tiered, each quantity break is only applied to the units that exceed its quantity. The price of each quantity break is used to calculate the Net Value Override for the contract line item. For instance, in the previous example, If a customer buys 431 widgets:

Widgets	Unit Price	Formula
1-100	$20	100 x 20
101-200	$10	100 x 10
201-300	$8.5	100 x 8.5
301-400	$7	100 x 7
401-431	$5.50	31 x 5.5

Billing for Usage

You can bill per usage or for the total usage:

• Total Usage – Unit prices for a billing period of a contract line item are based on the total quantity of usage from the usage records for that billing period of the contract line item.
• Per Usage – Unit prices for a billing period of a contract line item are based on the quantity used within each usage record for that billing period of the contract line item.

Example of Billing for Usage when Pricing Type is Volume

The pricing structure contains the following quantity breaks:

Quantity	Unit Price
0	$5
6	$4
11	$3

In this example there are three usage records of 5, 6 and 3 associated with a contract line item with a volume pricing type.

If Total Usage is selected for the Usage Billing Type on the contract line item, the bill for usage is calculated like this:

Usage Record Quantity	Price Calculation
5 + 6 + 3	14 x $3
Total Usage Bill: $42

If Per Usage is selected for the Usage Billing Type on the contract line item, the bill for usage is calculated like this:

Usage Record Quantity	Price Calculation
5	5 x $5
6	6 x $4
3	3 x $5
Total Usage Bill: $64

Example of Billing for Usage when Pricing Type is Tiered

In this example, the same pricing structure has been applied to a contract line item with a tiered pricing type and usage records of 5, 9 and 20.

If Total Usage is selected for the Usage Billing Type on the contract line item, the bill for usage is calculated like this:

Usage Record Quantity	Price Calculation
5 + 9 + 20	(6 x $5) + (5 x $4) + (23 x $3)
Total Usage Bill: $119

If Per Usage is selected for the Usage Billing Type on the contract line item, the bill for usage is calculated like this:

Usage Record Quantity	Price Calculation
5	5 x $5
9	(6 x $5) + (3 x $4)
20	(6 x $5) + (5 x $4) + (9 x $3)
Total Usage Bill: $144

Price Book Structure Entries

You can use price book structure entries to link products, price books and currencies to a pricing structure. This is similar to a Salesforce price book entry with the additional benefit that you can use it to derive a price based on quantity for recurring variable contract line items. You can create a price book structure entry from the Price Book Structure Entries related list on a product, pricing structure or price book. See Creating Price Book Structure Entries.