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Design starts with the operating model
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Margin is made, and lost, between the purchase order and the sale.
Producers, processors, distributors and food service operators move inventory that changes as it moves: received, transformed, shipped, adjusted and sold. Finance design decides where each cost lands and which system owns the detail.
Purchase, Receive, Produce / Distribute, Adjust, Sell, Margin
Where margin leaks from the loop.
Inventory moves through six stages. Choose a leak to see where it enters the loop, where its detail usually lives and how it should reach margin.
- 01Purchase
- 02Receive
- 03Produce / Distribute
- 04Adjust
- 05Sell
- 06Margin
Freight
Enters atPurchase, Receive, Sell
- Detail usually lives in
- Logistics, receiving and order systems
- How it should reach margin
- Decide whether inbound freight is part of the landed cost of inventory, and assign outbound freight to the customer and channel it served.
Rebates
Enters atPurchase, Sell
- Detail usually lives in
- Supplier and customer agreements, often kept in spreadsheets
- How it should reach margin
- Accrue rebates as they are earned, by supplier or customer, so margin is not overstated until year end.
Wastage and shrink
Enters atProduce / Distribute, Adjust
- Detail usually lives in
- Production or warehouse systems
- How it should reach margin
- Record adjustments with reason codes, so wastage is visible by site and product rather than buried in cost of sales.
Returns and credits
Enters atAdjust, Sell
- Detail usually lives in
- Order management and customer service
- How it should reach margin
- Tie each credit to the original sale, product and customer, so returns are reported where they happened.
Price and promotions
Enters atSell, Margin
- Detail usually lives in
- Pricing and trade promotion
- How it should reach margin
- Record promotional allowances against the customer and product they supported, not as a general discount.
Which system owns the inventory?
Lots, recipes, yields and traceability belong in the production, warehouse or inventory system that runs the operation. Sage Intacct receives valuation, cost of sales and summarized movements. Specialized lot, traceability and production functions stay in the operational system unless a current, verified capability says otherwise.
Operational systems keep
- Lots and traceability
- Recipes, yields and production
- Stock by location and status
Finance receives
- Inventory valuation
- Cost of sales by product and customer
- Adjustments with reason codes
Production, distribution or service.
The loop is shared. The weight of each stage is not.
Producers and processors
Recipes, yields, co-products and by-products. Standard cost against actual, and variance by line and product.
Distributors
Landed cost, freight, supplier rebates and customer allowances. Margin by customer, product and route.
Food service
Purchasing across sites, menu cost, wastage and labour by location.
Questions that expose hidden margin.
- Which system is the source of truth for inventory quantities and lots?
- Is inbound freight part of inventory cost today?
- How are supplier rebates and customer allowances accrued?
- Can you report margin by customer, product and channel after freight and rebates?
- How are wastage and adjustments recorded, and with what reasons?
See your true margin, product by product.
Talk to a Sage Intacct specialist about your inventory, freight, rebates and operating systems.