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Your Business May Not Be Getting The Pricing Your Suppliers Agreed To

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The recent news that Wells Fargo did not provide its foreign exchange customers with the pricing it had previously agreed to raises an important question for all businesses: does your company get the pricing that your suppliers promised? (Disclosure: I own Wells Fargo stock and occasionally provide services to the company.)

A routine speech on the economic outlook turned into an eye-opening exercise for me, as the audience were clients of APEX Analytix. They told tale after tale of overpayments identified by the auditing software company.

Here’s a typical situation: a buyer negotiates a discount from list price for a product or service. The invoice comes, a company employee identifies that the product was received and authorizes payment, but never checks that the negotiated discount was included in the invoice. It’s not necessarily dishonesty on the vendor’s part. Special terms are a nightmare at many companies, with haphazard procedures for applying a multitude of one-off discounts. It’s still the supplier’s fault for sending a bad invoice, but the fault may reflect negligence rather than intentional theft—or maybe not.

Overpayments may also be triggered by merchandise returns, cancelled orders, deposits not credited, etc.

The problem is not only that buyers pay too much, but that sellers lose respect. A client prepaid me for a speech, and then I sent an invoice after the speech—my usual procedure. The client responded to my invoice with a second payment. Fortunately, I discovered the mistake in my year-end tax reporting and sent a refund, but that’s obviously a headache for the client and an embarrassment for me.

Here is some advice for buyers. If your business is medium to large, look into an auditing service or software. It may not be the best solution for every company, but I’ve heard some good testimonials from clients. For smaller businesses, keep a record of all negotiated deals. Your bookkeeping software may enable you to have a reminder show up when paying a particular vendor’s invoices.

Suppliers can reduce their own errors by standardizing their pricing and their special deals. If standardizing a special deal sounds oxymoronic, consider having a set of deals coded into your invoicing system. Look at the array of special deals you have now, set up some standard deals that are close to what you’re currently providing and can be embedded in your software. Never let a salesperson offer a deal not on the standard list—that’s an error waiting to happen. Expand the list of standardized special deals if you must, but make sure every offering is part of a written deal.

Most commerce is based on trust. We trust another business to provide the products we order, and our suppliers trust us to pay up. Every inadvertent error nibbles away at trust, while intentional errors are highly destructive of trust. Our whole economic system is weakened by billing errors.

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