In certain cases, you may want to give clients fixed amount discounts (e.g. $500). This article focuses on the issues that can come up and gives you some best practices to circle around these issues.
Take a look at the example below.
There are 3 services in this budget.
If we were to subtract $500 from the entire budget, which Service do we take that amount from? How do we split it up accurately?
When you think about it, that's exactly why fixed amount discounts are tricky if applied to the entire budget. There's no real way of spreading out discount the right way and making sure the reports are accurate.
Fixed amount discounts do make sense, but only if you're applying them per individual service.
In all of these examples, we want to give our client a $500 discount for the service of Project management.
#1 Edit the number of billable hours to reduce the total price
In this example, we have reduced the Project management hours quantity from 20 to 15, thus effectively creating a discount of $500.
However, this way it's not clearly visible to the client that he has in fact received a discount. If you want to communicate that discount clearly, use one of the examples below.
#2 Negative line item for the same Service Type
We have created a fixed discount by adding another Project management service, and pricing it at -$500 per piece.
This way the client will see that he has received a discount.
Also, from the profitability reporting perspective, these -$500 will be reported under the Project management Service Type.
#3 Create a "Fixed discount" Service type
As you can see, in this example, we have applied the same logic as in example #2. But, in this case, we have created a new Service Type called "Discount".
Nothing has changed for the client here, since the description of that service is the same. He can still see that he's getting a discount for Project Management.
However, if you apply this method across all your budgets, later you will be able to report on the Discount Service Type and see just how many discounts you've been giving across the board.
#4 Add a description
To further specify the discount type and give some more context if needed, you can add a description to the Service.
Here's an example of a Profitability report, grouped by Service type, where Discount, expressed as fixed is a separate Service type.
Hope this helps you understand how fixed amount discounts work, and why they are trickier to handle than % discounts.
These best practices should help you handle fixed amount discounts easier, but we still recommend focusing on % discounts whenever possible.