Trading and distribution
Margin visibility where the margin is thin
In distribution the gross margin is small enough that mix, schemes and stock ageing decide the result. We make those visible at the level the decision is taken — by SKU, by dealer, after every deduction.
Margin after every deduction.
Invoice → schemes, credit notes, returns → what is left
At a glance
Margin is measured at invoice value, before schemes, credit notes and price protection.
Margin after everything
Net margin by SKU, brand and dealer.
The economics
Why the numbers are harder here
A distribution business buys and sells the same goods, so the margin is a thin band that the cost of holding stock and funding receivables eats into. What looks like a profitable line at list price is frequently unprofitable after schemes, credit notes, price protection and the interest cost of the stock it sat on.
That reckoning rarely happens, because the deductions live in different places from the sales. Schemes are agreed verbally, credit notes are issued later, and stock ageing is a warehouse concern. Bringing them onto the same page as the invoice is most of the work.
The problem
Where visibility breaks down
- Margin is measured at invoice value, before schemes, credit notes and price protection.
- Dealer schemes are agreed informally and reconstructed at settlement, usually in the dealer's favour.
- Stock ageing is known to the warehouse and not to finance, so obsolescence arrives as a surprise.
- Receivables are concentrated in a few dealers and nobody has quantified the exposure.
- Stock transferred between states is recorded at dispatch and not at receipt.
Where we concentrate
How we focus the engagement
Margin after everything
- Net margin by SKU, brand and dealer, after schemes, credit notes and returns.
- Scheme accrual recorded when the scheme is agreed, not when it is claimed.
- Landed cost built up properly, including freight, handling and holding.
- Price-protection exposure quantified before a price change, not after.
- Loss-making lines identified, with the reason attached.
Stock and receivables
- Stock ageing reported to finance on the same cycle as the ledger.
- Slow-moving and obsolete stock provisioned on a stated basis.
- Dealer credit limits set against a documented assessment and enforced.
- Receivable concentration measured, so the largest exposures are known.
- Branch and depot stock reconciled to the books rather than trusted.
Reporting
Reports worth receiving
- Net margin by SKU, brand and dealer.
- Stock ageing with a provisioning view.
- Dealer receivable ageing and concentration.
- Scheme and credit-note accrual against claims settled.
- Cash cycle: days of stock, days of receivable, days of payable.
Common questions
Questions we hear in this sector
We know our overall margin. Why break it down further?
An overall margin is an average, and averages hide the lines that lose money. In distribution it is common to find a handful of SKUs or dealers consuming the margin the rest of the business earns, and nothing in the aggregate figure reveals it.
How do you handle schemes that are agreed verbally?
The first step is usually to write them down. Until the scheme exists as a record, the accrual cannot be right and the settlement conversation has no anchor. That is a process fix rather than an accounting one.
Can you reconcile depot and branch stock?
Yes, and it is regular work. Physical-to-book reconciliation at each location on a fixed cycle, with differences traced to a cause rather than adjusted to agreement.
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