#AcumaticaTnT Minimum Markup % vs. Minimum Gross Profit %

What's the difference between Minimum Markup % and Minimum Gross Profit %? Acumatica uses Minimum Markup %, but what if you want to use Minimum Gross Profit % instead?

Have you ever had a conversation where you went into the conversation thinking they were the same thing, only to realize that they aren't? Well, I have, just recently in fact. I felt pretty silly after that conversation.

But I couldn't help think "you must be able to calculate one if you know the other", so I dusted off my high school algebra skills to understand the relationship better and came up with the following.

Why does this matter for Acumatica?

Well, Acumatica has a Validate Min. Markup setting on the Sales Orders Preferences (SO101000) screen:

This setting kicks in for every line on a Sales Order when you press Save on that Sales Order. If you select No Validation, then nothing happens. If you select Warning, then you'll get a yellow warning icon on the Unit Price field if you don't meet the Minimum Markup %. If you select Error, then you'll get a red error icon on the Unit Price field if you don't meet the Minimum Markup % and the Sales Order won't save.

To determine what the Minimum Markup % should be for an item, Acumatica looks at the Min. Markup % field on the PRICE/COST INFO tab of the Stock Items (IN202500) screen for that item:

Where things get confusing, at least in my Acumatica 2019 R2 (19.203.0042) demo version, is the message that you get on the Sales Orders screen when the Minimum Markup % is not met.

The Unit Cost on this line is 251.04 so the Minimum Unit Price should be 251.04 * (1 + .2) = $301.25.

If I set Unit Price to $302, then Acumatica is happy:

If I set Unit Price to $300, then Acumatica is not happy (because I have the Warning setting selected above):

The reason why I think this is confusing is because the warning message says:
"Minimum Gross Profit requirement is not satisfied."

Shouldn't it say Markup instead of Gross Profit?

If you agree, please go vote on this feedback idea:

https://feedback.acumatica.com/ideas/ACU-I-2820

Let's do some math:

Gross Profit % = (Unit Price - Unit Cost) / Unit Price

Margin % = (Unit Price - Unit Cost) / Unit Cost

What if I know the Minimum Gross Profit % that I want, how do I calculate Minimum Markup % since that is what I need to enter into the Min. Markup % field on the PRICE/COST INFO tab of the Stock Items (IN202500) screen?

I tried Googling first, but wasn't finding what I was looking for. This is where I dusted off my high school algebra skills and had some fun 🙂

Let's say we know Gross Profit %, how do we calculate Markup %?

Taking the two formulas above, we just need to eliminate Unit Price and Unit Cost from the equations.

This was a lot more fun (and nostalgic) to do on paper so that's what I did.

I'm including a digital image of that paper here:

Thanks to that high school algebra, we now know the following valuable formulas:

1. Gross Profit % = Margin % / (1 + Margin %)

2. Margin % = Gross Profit % / (1 - Gross Profit %)

Note: The percentages above should be entered in decimals (eg. .25 for 25%).

Both of our new formulas are useful.

Formula #2 can be used to calculate the Minimum Markup % for Acumatica based on the Minimum Gross Profit % that we want. You might want to create a three column Excel spreadsheet: Inventory ID, Minimum Gross Profit %, Minimum Markup %. Populate Inventory ID and Minimum Gross Profit % with all of your existing data that you know. Then format the data as a Table in Excel and enter the following Excel formula in the Minimum Markup % column:

=[@[Minimum Gross Profit %]]/(1-[@[Minimum Gross Profit %]])

You can then use this Excel file in an Import Scenario to update the Min. Markup % field on the PRICE/COST INFO tab of the Stock Items (IN202500) screen for all of your Stock Items in Acumatica.

Formula #1 above can be used to add a Min. Gross Profit % field to the Stock Items (IN2025PL) generic inquiry so we can scan through our items to ensure that they are setup to require the Minimum Gross Profit % that we want.

Here's the formula in case you don't want to type it (even the DAC Field is called "GrossProfit" instead of "Markup", ugh):

=[InventoryItem.MinGrossProfitPct]/(1+[InventoryItem.MinGrossProfitPct]/100)

And here's the result (nice huh?):