Pharmaceutical manufacture and distribution runs through distributors and stockists on terms that rarely fit neatly into an invoice. Bonus stock, credit periods, trade discounts and credit notes are ordinary in this trade, and they are where the ledger and the return most often stop agreeing with each other.
What we are usually called about
None of these is unusual, and none of them is a failing. They are what happens when a growing business runs on a system that was configured for the business it used to be.
A distributor ledger that agrees with the distributor is a different thing from one that agrees with the stock that left the warehouse. Where the two are reconciled only at year end, the difference has usually been accumulating for eleven months and nobody can say from which month.
Goods given as a trade bonus leave the warehouse, change the margin on the order and often appear on no invoice at all. Whether they are recorded as a supply, as a promotion or as nothing decides what the accounts show, and it is a decision that is usually made in the despatch bay rather than in the ledger.
Long credit periods are the norm in this trade. The question is whether the agreed terms, the terms recorded in the system and the terms actually being taken are the same three things, and what the ageing looks like once they are not.
Settlement discounts agreed on the phone, credit notes raised against a claim months later, deductions taken by a distributor without one at all. Each is a real change to what was earned, and each is easiest to reconstruct while somebody still remembers it.
Who may approve a credit note, who may release stock against an unpaid account, and whether the ERP can show afterwards who did. Growth tends to add volume to these decisions long before it adds any control around them.
What we do about it
The same three pillars as everywhere else on this site, narrowed to the work this sector actually needs. One practice handles all of it, so nobody is coordinating between a systems consultant, a tax adviser and a bookkeeper.
Systems & Assurance
Selection, implementation and migration
Systems & Assurance
Risk-based programmes and board-level reporting
Tax
Federal — FBR
Compliance & Outsourcing
Bookkeeping, payroll, returns and month-end close
The practice does not resell ERP or accounting software licences and takes no vendor commission, referral fee or paid placement. Implementation and migration work is paid for by the client, for the work done — so a recommendation against a system costs us nothing to make.
The other sector
Chains running an ERP and a point of sale, where stock, margin and every invoice are now reported in real time.
