Understanding Price Calculation Methods

With the 2020 Fall Release of Microsoft Dynamics 365 Business Central, Microsoft introduced the concept of Price Calculation Methods. This enhancement allows for more flexible and intelligent pricing logic.

The Advanced Price Management app extends this functionality by offering two distinct calculation methods:

  • Lowest Price
  • Closest Price

Lowest Price Calculation Method

The Lowest Price method enhances the standard Microsoft pricing engine. It aims to determine the lowest permissible unit price combined with the highest permissible line discount for a given sales line, based on the pricing agreements in place.

Advanced Price Managament evaluates the following conditions to determine the applicable price and discount:

Customer and Item Matching

  • Checks if the Sell-to or Bill-to customer has a direct price/discount agreement.
  • If not, checks if the customer belongs to a Customer Group or Customer Treeview Node with an agreement.
  • Verifies if the Item or Item Discount Group is included in the agreement.

Validity Period

  • Confirms that the Order Date, Shipping Date, or Posting Date falls within the Start and End Dates of the agreement.

Unit of Measure

  • If a Unit of Measure Code is specified, the system checks for:
    • Agreements with the same unit of measure
    • Agreements with no unit of measure (defaulting to base unit)

Quantity and Currency

  • Verifies if the Minimum Quantity condition is met.
  • Checks if the Currency Code matches:
    • If matched, the lowest price and highest discount in that currency are applied.
    • If unmatched, the system defaults to the local currency.

If no valid price/discount agreement is found:

  • The system uses the Last Direct Cost or Unit Price from the Item Card.
  • However, if a higher price is found through a valid agreement, that price is used—even if it exceeds the item card price.
Note that price for the item card is a fall back price in this context. This means that if any of the previous steps reported a price then (even if higher than the price of the item card) this is the price calculated from the previous steps that will be used.

Closest Price Calculation Method

Unlike the Lowest Price Calculation, which aims to find the most advantageous price and discount combination, the Closest Price method focuses on priority-based pricing. It selects the first applicable price or discount found in a predefined search hierarchy and stops once a match is located.

The system evaluates pricing sources in the following order:

  • 1. Customer-specific price/discount
  • 2. Customer Price Group or Customer Discount Group
  • 3. Customer Treeview Node
    • If multiple nodes apply, the search starts from the customer’s node and moves up the hierarchy to the root.
    • The first valid price/discount found terminates the search.
  • 4. All Customers
  • 5. Fallback: If no valid price/discount is found, the system uses:
    • Last Direct Cost, or
    • Unit Price from the Item Card

The search will start from priority 1 up to priority 5. Once a price/discount is found, then the search stops.

The Closest Price method is ideal when pricing logic is based on structured customer segmentation and hierarchical pricing rules, rather than always seeking the lowest possible price.
If the Advanced Price Management app is installed for testing purposes and is later uninstalled, it is important to Reset the default price calculation method to “Lowest Price” before uninstalling the app.
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Last updated on Jul 15, 2025