ProblemStock
When a supplier's man offers you money off the bill
The company's salesman offers you cash off the bill for a bigger order. Here is what it really costs your shop, and how to move that value onto the bill.
Take it, and you are almost always paying yourself with your own money. The cash leaves the shop, the goods it bought sit on the shop's shelf, and your buying rate on paper stops being true. Ask for the same value on the bill instead. A lower rate, extra pieces, longer credit, freight paid.
The Thursday afternoon offer
Thursday, about three in the afternoon. The van is parked half on the footpath, a helper is stacking cartons by your door, and the salesman leans on your counter with his order book open. You have taken eight cartons of the same item every month for two years.
He says it easily, the way a man says something he has said a hundred times. "Take twenty this time and I will give you a thousand. Not on the bill. In your hand, right now."
Nothing about it feels like a decision. He is friendly, he is not asking for anything difficult, and the whole thing takes nine seconds.
That is why it deserves a minute of arithmetic. The offer is built to feel like a favour, and it is a price change that hides itself from your own records.
The three shapes it takes
The first shape is cash in hand for a bigger order. Take twenty instead of eight and Rs 1,000 comes across the counter. The bill shows the usual rate, and the money that made the deal happen exists nowhere in your book.
The second shape is the inflated bill. "Let me write it Rs 10 higher per piece and I will return Rs 6 to you." The shop pays more than the goods cost, you keep part of the difference, and your book says the item cost Rs 10 more than it did. That Rs 10 does the long damage, because it stays.
The third shape is free goods nobody writes down. Two cartons come off the van with the twenty and neither the invoice nor your stock register mentions them. You sell them, the money lands in the galla, and no purchase stands behind it. Later it looks like stock you cannot explain.
The first cost: your buying rate stops being true
Your buying rate is the number nearly every other number in your shop stands on.
Your selling price is set from it. Your margin is measured against it. At month end you subtract it from your sales to see what the shop earned, and you weigh it against sales to decide whether an item deserves its shelf space. The cut quietly moves that one figure.
Say the bill now reads Rs 1,180 for something that truly cost Rs 1,130. You price off Rs 1,180. Either your rate goes up fifteen rupees and the customer buys elsewhere, or your margin looks thinner than it is and you stop pushing the line. Neither is a decision you meant to make.
A wrong rate does not correct itself. You took Rs 1,000 once and then mispriced a line for a year to pay for it. Working out what your shop really earns is hard enough with honest costs, and the rate on the shelf is only as honest as the buying rate underneath it.
The second cost: the shop pays for what you keep
The money in your hand came out of the shop. The salesman did not pay it and his company did not make you a gift. The shop paid a higher price, or bought more than it needed, and a slice of that payment came back to you personally. The goods belong to the shop. The shop is poorer by exactly the amount you feel richer by.
Say the same twenty cartons are bought two ways
Twenty cartons at Rs 1,180 take Rs 23,600 out of the shop and hand you Rs 1,000. The same twenty at a straight Rs 1,130 take Rs 22,600 out and hand you nothing, and leave the cost per carton fifty rupees closer to true.
That Rs 1,000 is what pays your next supplier bill. A shop quietly a thousand short after every large order has less room to buy stock on credit without choking.
The shortage never announces itself either. You count the galla on a Saturday night and it is short again. Nothing was stolen and nothing miscounted. The shop simply spent money that never came back into it.
The third and fourth costs: dead stock, and what your helper sees
Ask the honest question about those twenty cartons. Would you have bought twenty if nobody had offered you anything?
If that item turns twice a year, eight cartons is about six months of selling and twenty is well over a year. You have locked your cash into a shelf for a year to collect your own discount. That is the exact shape of stock that sits and never sells: bought for a reason that had nothing to do with your customers. Whether bigger orders suit your shop at all is a separate question, worked through in buying in bulk or little and often.
A different afternoon, same counter. Your helper stands two feet away while the cartons come in. He watches the salesman count out notes and pass them across, and watches you fold them into your shirt pocket instead of the galla. Nobody says a word, and nobody has to.
You taught him something in four seconds that no rule you announce later will undo. A shop where the owner takes money off the bill cannot ask its staff to keep the bill straight. The next time a customer slides him fifty rupees to round a price down, he already knows this shop's real standard.
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The better answer: put it on the bill
The cut almost never comes out of the salesman's own pocket. It comes from a discount or scheme budget his company already allows him to spend on you. He is only choosing its form, and he chose the form that ties you to him personally instead of to his rates.
So do not refuse the value. Move it.
"Do not give it to me. Put it on the bill."
Then say what you want on it. A lower rate per piece, printed on the invoice. Extra pieces listed as items, not slipped in loose off the van. A longer credit period, thirty days instead of fifteen. Freight paid, or the delivery charge taken off. Each of those costs his company roughly what the cash would have, so he can usually agree on the spot.
The same Rs 1,000, given two ways
Say it lightly and nobody loses face. Keep it about your paperwork, never about his character. "I keep everything on the bill, otherwise my accounts do not add up. Give me the same value as a rate." Most salesmen simply write the order differently and carry on. A few will say flatly that only cash is possible, and that answer is worth having too.
When the offer is a warning, and what to check next
Some offers are only a habit in that trade. Others are telling you something about the supplier.
Pay attention when cash is pushed instead of a rate cut even after you ask, when the salesman insists the invoice must show one particular figure, when the man who collects payment is not the man who delivered, or when you are asked to sign a blank delivery slip. That is somebody managing his own company's records, and your bill is part of it.
So check the next three deliveries properly, before the van pulls away.
Before the van pulls away
- Count the cartons yourself, against the bill, item by item
- Check every rate against your last bill for the same item
- Make sure free or scheme pieces are written as items on the invoice
- Open one carton and look for damaged or short packed pieces
- Take a printed bill, never a slip torn off a notepad
- Never sign a blank or half filled delivery slip
- Add freight and labour, then write the landed cost per piece
If three bills in a row match the goods and the rates hold, the relationship is ordinary. If they do not, it becomes a real question whether that line belongs with one supplier or several.
Then make your buying rate a number you would defend to anybody. Record the landed cost, not the invoice line: add the freight and the labour that carried it up, then divide by the pieces. Twenty cartons at Rs 1,130 with Rs 400 of transport cost Rs 1,150 each.
Keep the rate history for every item you buy often. It turns "the rate has gone up" into a question you settle in five seconds, and a line that jumped fifty rupees for no reason stands out beside the last four purchases.
Wasoolo stores a buy rate against each product and supplier, and its profit view is built from those buy rates. A rate you agreed to write instead of the rate you paid comes back as profit, reported just as confidently, and wrong.
Your buying rate is the foundation the shop stands on. Take the cut, and you have sold that foundation for a thousand rupees.
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Common questions
The salesman says his company allows this and every shopkeeper takes it. Is he lying?
Usually not. The money is real, and it comes from a budget his company gave him to place stock in shops like yours. What he leaves out is that the same budget can be spent as a rate cut on your invoice, at the same cost to his company.
What if I take the cash and put it straight into the shop's galla?
That fixes half of it. The shop's money is back, but the recorded buying rate is still the inflated one, so your selling price and your profit view still stand on a false cost. The cash also has no purchase behind it, so the day's takings will not match your sales.
I have been taking it for years. What do I do now?
Nothing dramatic, and you owe nobody an announcement. Start with the next order. Ask for the value on the invoice, correct the buy rate you have recorded for that item, then check whether your selling price still makes sense against the true cost. One item at a time is fine.
Will the salesman be offended, and will I lose the relationship?
He will not be, as long as you keep it about your paperwork instead of his character. Bigger buyers ask him this regularly and it is a normal request in his day. Tell him you keep everything on the bill, ask for the same value as a rate, and go on ordering.
What about free goods and scheme pieces, which everybody gives?
Schemes are normal and there is nothing wrong with taking them, as long as they are written down. Ask for them on the invoice as items, even at zero value. Then your stock count is right, your real cost per piece across the lot is right, and two suppliers compare on paper.
How do I find out whether my recorded buying rates have already drifted?
Take five items you sell often. For each one, work out the cost per piece from the last bill including transport, then compare it with the rate you have on file. If any is out by more than a rupee or two, price that item again and find out why the numbers differ.