A missed rebate tier and lines billed above contract

The situation

The distributor buys about $38M a year from contract suppliers and expects about $900,000 a year from four manufacturer rebate programmes, tracked in spreadsheets.

What was uploaded

• 12 months of invoice lines from the purchasing system
• Contract price lists and volume breaks for the main suppliers
• Terms of the four rebate programmes, and the rebate statements received

What the engine found

• Rebate earned at a higher tier

  $71,500

  Volume crossed a programme's third tier in the third quarter, but the rebate was credited at the second-tier rate.

  Rule: rebate_not_received

• Lines above contract price

  $58,400

  Items billed above the agreed price list after a supplier system change.

  Rule: price_above_contract

• Volume price breaks not applied

  $21,600

  Order quantities that qualified for a lower price break.

  Rule: price_break_missed

• Freight on prepaid terms

  $12,800

  Freight charged on orders above the free-freight threshold.

  Rule: freight_on_prepaid

The numbers

Found

$164,300

Expected

$106,800

Recovered within 8 months

$97,300

What it would cost, three ways

Over the same 8 months, in USD.

Time spent

About 16 hours: loading contract terms, reviewing findings with purchasing and meeting two suppliers.

The lesson

The rebate shortfall only showed up against the supplier's own tier report, so asking for that report was the first step. Price variances were smaller per line but recurred every month.