We conducted an audit for a supplier of their trading arrangements with a major UK Retailer and wholesaler, discovering a payment error under the joint business plan (JBP) terms. We were able to do this because we analysed the actual payments made to each individual wholesaler separately, not in aggregate, as had been the custom and practice historically. It’s an approach that takes more time, but provides an exact calculation of what is due, or not!
In this example all funding was paid through the JBP at year end against a set of execution criteria which included a revenue % guarantee; Growth Bonus thresholds and Cash Parity guarantees (which guaranteed prior year funding levels if current year funding fell below that level).
Our reconciliation method was to analyse the sales invoice and customer charges ledgers in order to create a ‘control matrix’ that enabled us to see precisely what had been paid/charged over the course of the trading period, and therefore reveal what was due to each individual wholesaler subject to the arrangement. When we compared this to the actual payments made it highlighted some differences and the identification of the cash parity payment paid in error.
Why had this happened and should the error have been identified at the time?
Two issues came to light from our analysis:
- Custom and practice calculations produced by the Retailer that were quick and easy to do (which is often what everyone wants), but inaccurate and were not being checked or validated
- Year end timing of the payments where there was an expectation that any monies due would be invoiced prior to January 1st and meant that there was a ‘rush’ to get stuff agreed and meet expectations, while attention was then immediately switched to the new year and future growth
Challenging these trading patterns can be extremely difficult for account managers who are trying to manage the relationship and grow their businesses. This often means that changing accepted practices is not easy to do within the immediate trading dialogue.
This is where Salitix really can add value to your bottom line, because we have not only the skills to identify the relevant trading data and make it accessible to review, but also the time and commercial experience to root out the potential errors that occur in busy, highly transactional trading environments, because we know where to look and what the red flags are where people are still responsible for making the deal, then agreeing what can be invoiced and when…
Get in touch if the above sounds familiar and you would like to make sure your profits are what they actually were!