Rounding (cost of goods sold and VAT)

(ideal.shop has updated the way rounding is handled on 4 August 2022. This means that skewed item amounts and VAT amounts (especially for high item quantities) are now more accurate)

Rounding up skewed prices and VAT amounts is a bigger challenge than most people ever expect or experience. As a regular user of an online shop or accounting programme, you probably don't notice the problems that can potentially arise from skewed amounts and rounding. But IF you do, it's important to understand what's going on behind the scenes.

In ideal.shop, for example, it is possible to enter the price of an item (in the administration) both with and without VAT. But when the price is saved, only the price WITHOUT VAT is saved. This does not cause any problems in most cases. Most often, a (relatively) nice round number is entered, for example DKK 199 incl. VAT, and the system saves the price as DKK 159.20 ex VAT.

Like virtually all other systems, ideal.shop operates with two decimal places. At least in all cases where a number is displayed to you as a shop owner or to your customers.

Furthermore, it is important to understand that when working with prices, the amount ex VAT is the "applicable amount".

When challenges arise

If you specify the price of an item to be 100.10 DKK ex VAT, the system will calculate the price including VAT to be 125.125 DKK. However, since we only show two decimals, the price will appear as 125.13 DKK in the webshop and on order documents.

So there is a difference of 0.005 DKK between the displayed price and the correct price.

That doesn't sound like much, and it shouldn't be a problem. The only problem this type of rounding should cause is if you or your customers are wondering how the rounding works (hence this article).

If a customer bought this item for 100.10 DKK ex VAT (125.125 DKK incl. VAT), the customer would pay 125.13 DKK to the shop.

However, if the customer bought 100 of the same item, the total price would be 125.125*100 = 12,512.50 DKK incl. VAT. On the order confirmation it would look like this:

125.13 x 100 pieces = 12,512.50 DKK

This is still correct, at least when working with two decimal places.

Challenges with skewed discounts and transfer to external systems

In rare cases, some form of incompatibility can occur between ideal.shop and external systems such as accounting programmes or Analytics. This can happen when (skewed) discounts are applied.

ideal.shop operates with discount calculation per product line. Many other systems use a dedicated product line per discount.

Example: You give a 7% discount on an item that costs 17.20 DKK. The new amount is therefore 15.996 DKK, which ideal.shop will use in the calculations (but not in printouts, where 2 decimal places are always shown). External accounting programmes and other systems will use a product price of 16.00 DKK (two decimals).

A difference of a few pennies is rarely a problem. Especially when it comes to statistics or tracking (Pixel, Analytics, etc.).

If it is still unacceptable, the solution is to adjust product prices and/or discounts so that they add up to a maximum of 2 decimal places (ex VAT).