Where distributors lose money quietly.
WHAT LOSSES OCCUR
Stock theft from the warehouse Stock loss in transit Unrecorded sales in the field Unauthorised credit and discounts Fictitious customers False returns Payment collected and not remitted
WHY DISTRIBUTION IS EXPOSED
Stock and cash move through many hands, frequently unsupervised.
WHAT CONTROLS REDUCE WAREHOUSE LOSS
Controlled access Recorded receipts and issues Separation of receiving and despatch Regular counting Investigation of discrepancies
WHAT CONTROLS REDUCE FIELD LOSS
Daily reconciliation of stock and cash Receipts issued for every sale Prices fixed centrally Credit approved centrally Customer confirmation of deliveries and payments
WHY CUSTOMER CONFIRMATION
It is the check that detects collected payment not remitted.
HOW TO DO IT
Contact a sample of customers and confirm balances.
WHY A SAMPLE
It is sufficient to detect a pattern, and it is practical.
WHAT TO WATCH FOR
Customers whose balance never reduces Credits issued frequently to the same accounts New customers with no verifiable premises Discrepancies concentrated on one route or person
WHAT TO VERIFY FOR NEW CUSTOMERS
That they exist, at the stated address.
WHY
Fictitious customers are created to divert stock.
WHAT TO ESTABLISH
That someone independent verifies new accounts.
WHAT TO DO ABOUT SUSPICION
Establish facts before acting.
WHAT TO MEASURE
Shrinkage, bad debt and unexplained credits.
