Margin leakage
Reviewed by Dasha ShakovVP Marketing, Proton
Updated
What is margin leakage?
Margin leakage is profit a distributor loses through many small, often unnoticed gaps between the price or cost it should have had and what it got. Common causes are unnecessary price overrides, expired contract prices still in use, freight that wasn’t charged, and rebate, ship-and-debit or chargeback claims that were never filed.
Margin leakage example
A pricing review finds a contract price that should have ended in March still being applied in September, and 40 ship-and-debit claims that were never submitted.
Related terms
- Price overrideA price override is a manual change to the price the ERP calculated for an order line, made to match a competitor, keep a promise or save a sale.
- Gross marginGross margin is the share of sales a distributor keeps after paying for the goods it sold: gross margin % = (revenue − COGS) ÷ revenue.
- RebateA rebate is money paid back to a buyer after a purchase, once the buyer reaches agreed volume or growth targets over a period.
- Ship and debitShip and debit is an arrangement in which a manufacturer lets a distributor sell to one customer or project below its normal cost, then repays the gap.
