Order Management - Key Concepts

Table of Contents

Order Life Cycle

The 21st century provides sellers with numerous methods for making sales, either over the internet or in a warehouse/shop outlet. These methods include telephone sales (direct sales), POS/ePOS for entering direct sales, sales through web-selling channels, via web-site cart, etc.

Linnworks Order Management and Stock Control system is designed to handle all of these methods in one place and provides complete order life cycle management.

No matter which method the customer chooses to purchase from you, Linnworks system allows you to effectively receive orders across different selling venues and from points of sales, print invoices and labels for received orders, reduce order fulfilment time and mark orders as processed.

Once an order is processed, the system can be implemented further to deal with shipping management aspect by sending automated despatch notification e-mails to customers and by printing postage labels for all orders with customer delivery information included.

Last but not least important functionality available in Linnworks order life cycle management is the way the system deals with customer refunds, returns, resends and exchanges.

Order Tax Calculation

Linnworks Order Management and Stock Control system can automatically recalculate applicable order tax. The system is able to calculate tax as:

  • Calculate and record inclusive/exclusive tax for each order item based on Default Tax Settings
  • Calculate and record inclusive/exclusive tax for each order item based on tax rate set for individual stock item
  • Overwrite the Specific tax rate for each Region/Country
  • Recalculate inclusive postage cost and record the value in Postage Excluding Tax.

Inclusive tax is the tax which is already incorporated into the final advertising cost of a product. For example if you sell the product for 100 and the tax rate of 25% is already included in the price the actual cost of the product without tax is 80 for which you charge 25% (80 * 0.25 = 20) tax yielding final cost of the product 100.

Exclusive tax means your product selling prices do not include tax and you add the tax on top of the product cost at the point of sale.

All orders downloaded from a channel (eg: Amazon, eBay, Rakuten or a website) by default assume inclusive tax (meaning you already included tax at the point of sale). For some channels, we also have the option in the order section of the channel config to Use Channel Tax instead of Linnworks back calculating the tax on the order.

For direct orders it is possible to set the system to calculate tax as inclusive or exclusive.

How line tax is calculated

Channel/Website Orders

For channel/website orders each line is calculated presuming that the product prices are inclusive of tax.

Product A
Line Total = £5
Tax Rate = 20%
Line Tax = 5 - (5/1.2) = 0.83
Line Total (Ex Tax) =  5 - 0.83 = 4.17

Direct Orders

Direct Order unit costs can either be inclusive or exclusive of tax.
The option can be found in Settings -> Application Settings
"Direct Orders - tax is inclusive of the item price"
If ticked then the Line totals will be calculated in the same method as Channel/Website Orders, else it will be calculated in the following fashion.

Product A
Line Total = £5
Tax Rate = 20%
Line Tax = (5*1.2)-5 = 1
Line Total (Ex Tax) = 5

Linnworks retrieves the tax rate based on the location of the order (where it was placed), the items default tax rate and the country of the order.

Scenario 1
Current Location = United Kingdom
Customers Country = United Kingdom
UK tax rate = 20%
When Product A is added to the order the Tax rate will be 20%.

Scenario 2
Current Location = United Kingdom
Customer Country = United States
US tax rate = 10%
When Product A is added to the order the Tax Rate will be 10%

Scenario 3
Product B has a set tax rate instead of the taking the default one for each order.
Product B Tax Rate = 5%
When the product is added to the order the Tax Rate will be 5% regardless of Location or Customers country.

How postage tax is calculated

The tax on postage is calculated based on the customers country.
UK tax rate  = 20%
Postage cost (ex tax) = 2.99
Postage tax = 0.50

How Discount is calculated

The order discount is backwards calculated from the line total, removing the tax. This is the most accurate way of calculating accurate discount rates.
Discount = 5%
Line Total = £10
Tax Rate = 20%
10/1.2 = 8.33
8.33-(8.33*0.05) = 7.91
7.91*1.2 = 9.50

How Subtotal is calculated

Order subtotal is calculated based on all the Line costs (ex. tax) excluding the tax for postage.
How the orders total tax is calculated
The total tax for the order is calculated by the addition of each lines tax plus the tax for the postage.

How Order Total is calculated

The order total is a simple calculation of Subtotal Postage Cost (ex Vat) + Total Order Tax.