It was a cleaning-supplies distributor for the hospitality trade, in Murcia. They sold to bars, restaurants, small hotels. They had a large catalogue and a price list with per-client discounts, by volume and seniority.
In spring they ran a campaign. Clients who ordered terrace supplies for the season got fifteen percent for two weeks. Marta, in admin, entered the discount client by client into the system. Two weeks later, the campaign ended. Marta removed the discount from almost all of them. Almost.
The one that stayed
For one coastal hotel it stayed on. Not out of carelessness: it was a client with several delivery addresses and tangled order lines, and in the rush of removing discounts, that one slipped through. The system, obedient, kept applying fifteen percent on every invoice for that hotel. Month after month. Across the whole catalogue, not just the campaign's terrace supplies.
Nobody noticed. The invoices went out, the hotel paid, the money came in. Fifteen percent less on one client's billing isn't something that jumps out when you look at the month's total. It's a thin, constant, silent leak. The kind that makes no noise.
How it was found
The manager caught it himself, by chance. He was preparing next year's terms and, going over margins by client, saw that this hotel's was odd. Too low for the volume it did. He pulled the thread. Eleven months of invoices with a fifteen percent that shouldn't have been there.
The sum sat badly with him, and not so much for the money —though that too—, as for the other thing: they'd spent nearly a year giving away margin and had found out by fluke, because someone happened to look. If that renewal hadn't come up, the discount would still be on today.
—What worries me —he said— isn't this one. It's how many more there are that I haven't looked at.
The problem wasn't the discount
The discount was the symptom. The underlying problem was that nothing watched prices. The invoices were issued correctly —the system did exactly what it was told— but there was nobody and nothing to raise a hand when a client paid well below their rate for months. The only defence was that someone, some day, felt like looking.
And looking by hand, client by client, across a big catalogue, doesn't get done. That's why the discount lasted eleven months: not because nobody cared, but because reviewing it was a job that fell to no one and didn't pay off by hand.
Putting a watchman in
What we set up was an alert. Each month, the system compares each client's real margin with what it should be according to their price list. When one strays out of the reasonable —a discount that doesn't add up, a price below cost, a client who suddenly yields half— it flags it and warns. It decides nothing; it just points to what deserves a human look.
The first month, the alert turned up three more things nobody knew: another forgotten discount, a product being sold below cost from a list error, and a big client whose margin had dropped without anyone linking it to a change in their order mix. None was a disaster. The three together, summed and multiplied by the months, were.
The manager put it plainly: “I don't want to find out about these things at the December renewal. I want to find out the month they happen.”
A system does what you tell it, not what suits you
Forgotten discounts, below-cost prices and margins that drift down bit by bit usually aren't fraud: they're boxes someone ticked and nobody unticked. The system bills obediently month after month, and a thin leak doesn't jump out when you look at the total. It lasts until, by chance, someone starts to look.
Reviewing price by price, client by client, across a big catalogue, doesn't get done by hand. The defence isn't more discipline: it's an alert that each month compares the real margin with what it should be and raises a hand when something strays. Finding out the month it happens costs far less than finding out eleven months later.
Could you say, right now, whether any client has been underpaying for months?
If nothing watches your prices and discounts, there's probably some thin leak you can't see. An alert can warn you the month it happens, not in December. Let's talk.
Let's talk about your margins