In food and beverage wholesale, customer prices are usually right, but the price file holds the price, not the reason behind it. When an auditor, lender or buyer reads the terms for the first time, any price that can’t be traced back to an agreement is treated as uncertain. The business then pays, in time and in commercial terms, for something that was never wrong.
Why can a correct price still raise questions?
Most internal reports are read by people who already know the story behind the numbers.
A price below list on a hotel group’s core lines doesn’t raise a question at the monthly review. Everyone in the room knows it was matched to a competitor at the last renewal. An account on longer payment terms than standard doesn’t either. They were agreed in the customer’s first year, and nobody has had a reason to look at them since.
On paper, that’s a business that knows its customers. Prices sit in the ERP. Terms sit in agreements. Invoices go out at the price on the file, and the margin report ties out every month.
In practice, the file holds the price. It doesn’t hold the reason.
Inside the business, that rarely matters, because the people reading the report supply the reason without thinking about it.
Who reads your customer terms for the first time?
A first full audit, a refinancing or a buyer’s due diligence each brings in a reader with no history and no shared context. Each one tests the same thing: whether every price can be traced back to an agreement.
What an outside review looks like in practice
A foodservice wholesaler is preparing for a sale. The buyer’s advisers pull a sample of invoice lines from the largest accounts and ask to see the agreement behind each one.
The hotel group’s core lines go out below list. The price is correct. It was agreed at the last renewal and confirmed in an email thread. The signed terms letter on file is the one before, and it shows the old price.
An independent school group pays on 60 days against a standard of 30. The ERP holds the 60 days. No document records when that was agreed or why.
A coffee shop chain is invoiced at a price matched to a competitor’s quote. The price went into the file the week it was agreed. The quote it matched was never saved anywhere.
Nothing in the sample is wrong.
It’s unexplained.
What does unexplained pricing cost?
Inside the business, an unexplained price is a quick question for the account team. To an outside reader, it’s an uncertainty, and outside readers don’t give uncertainty the benefit of the doubt. A price that can’t be evidenced is treated as one that might not hold.
The work lands on finance, at the point when there’s least time for it. Weeks go into rebuilding the history from inboxes, old price files and what people remember. Some of it can’t be rebuilt at all.
The commercial cost follows. A buyer prices in what it can’t verify. A lender builds it into the terms. An auditor widens the sample and the audit runs longer.
In each case, the business pays for something that was never wrong.
Being right isn’t the test. Being able to show it is.
How do businesses keep the evidence behind their prices?
The businesses that find these reviews straightforward aren’t more careful with their prices. They keep the reason with the price.
When a price or term is agreed outside the standard list, it’s recorded against the customer at the time: what was agreed, from when, until when, and where the evidence sits. When terms are renewed, the old agreement is kept rather than replaced, so anyone can see what changed and when. The price file ends up describing the deal as well as the number.
Four checks to run before an outside reader does
If you want a quick test, run the exercise an outside reader would, before one does.
- Sample 20 invoice lines. Take 20 invoice lines at random from last quarter, spread across your largest accounts. For each one, find the document that shows the price was agreed. Note which lines you can evidence from paper and which only make sense once someone explains them.
- Compare the paperwork with the ERP. Compare the signed terms on file for those accounts with the prices and payment terms in your ERP. Note where the ERP is more recent than the paperwork.
- List open-ended prices below list. List every price held below your standard list with no end date. Mark which ones have a written reason.
- Check what happens at renewal. Look at what happens when terms are renewed. If the new price overwrites the old one, there’s no record of when it changed or why.
If most of the sample needs explaining, the evidence is held in conversation rather than on file. If the ERP is ahead of the paperwork, the system shows what’s charged, not what was agreed. If prices below list have no end date and no reason, an outside reader will treat them as open-ended discounts. If renewals overwrite history, nobody can show how an account’s pricing got to where it is.
A sale, a refinancing or a first full audit is often the first time anyone outside the business reads your customer terms line by line. Keeping the evidence as you go is far easier than rebuilding it against a deadline.
Frequently asked questions
Why do auditors and buyers question customer prices that are correct?
An outside reader has no history with the account, so they can only rely on what is on file. A price that can’t be traced back to a written agreement is treated as uncertain, even when it was agreed and is being charged correctly.
What evidence should sit behind a customer price?
For any price or term agreed outside the standard list, a record of what was agreed, from when, until when, and where the evidence sits, such as the signed terms letter, the renewal email or the competitor quote it matched. When terms are renewed, the old agreement should be kept so the change can be seen.
How can a food wholesaler test whether its pricing would stand up to due diligence?
Take 20 invoice lines at random from last quarter across the largest accounts and find the document that shows each price was agreed. Then compare the signed terms with the prices and payment terms in the ERP, and list any prices below standard that have no end date or written reason.
What happens when customer pricing can’t be evidenced in a sale or refinancing?
Finance spends weeks rebuilding the history from inboxes, old price files and memory, and some of it can’t be rebuilt. A buyer prices in what it can’t verify, a lender builds it into the terms, and an auditor widens the sample and the audit runs longer.
Where Allsop fits
At Allsop, we work with food and beverage businesses to keep customer pricing and terms accurate and easy to account for, through intelligent software for Customer Order Automation, Data Workbench and Customer Margin Management. That means agreed customer prices and terms held in one place, every order line checked against them as it comes in, and clearer margin visibility by customer account, so the agreement behind a price is as easy to find as the price itself. Sales colleagues can keep growing share of wallet, knowing the terms behind each account will stand up when someone outside the business looks closely.
If you’re moving ERP or have moved recently, our article on why prices change after an ERP migration is worth reading alongside this one.
Speak to Allsop, and we’ll look at how your customer prices and terms are recorded today, and how much of that record would stand up to an outside review.
