Blog · Board and management reporting · Distributors
How a distributor computes gross margin per account from invoice lines and cost, adds the cost to serve from delivery and returns, ranks accounts by margin rather than revenue, and finds the large accounts whose price agreements, delivery frequency and returns leave less than the small ones, with the identity that ties the account margins to the ledger.
A distributor's top-ten accounts by revenue are on the wall. The top ten by margin after cost to serve are a different list, and two of the wall's names are near the bottom of it. The invoice export and the cost file say so. This guide sets out margin per account, cost to serve, the ranking, and the identity.
Per account, per period:
Gross margin = Σ invoice lines (revenue − cost) Cost to serve = drops × drop rate + returns value + returns × handling rate + lines × pick rate Contribution = gross margin − cost to serve Contribution rate = contribution ÷ revenue
Account identifiers only.
Σ accounts' gross margin = ledger gross margin for the period
A line with no cost fails it and is listed; the account's margin is marked incomplete until the cost is there.
| Account | Revenue rank | Revenue | Gross margin | Cost to serve | Contribution | Rate | Contribution rank |
|---|---|---|---|---|---|---|---|
| 2207 | 1 | $4.2m | $520,000 | $310,000 | $210,000 | 5.0% | 9 |
| 4471 | 2 | $3.8m | $610,000 | $140,000 | $470,000 | 12.4% | 1 |
| 9034 | 14 | $0.9m | $190,000 | $30,000 | $160,000 | 17.8% | 3 |
| 1187 | 3 | $3.1m | $290,000 | $260,000 | $30,000 | 1.0% | 41 |
Account 1187 is the third largest by revenue and the forty-first by contribution: daily drops to eleven sites and a returns rate three times the base. Account 9034 is a fifth the size and earns five times as much. Neither is visible on the revenue wall.
| Account 1187 | Amount | Lever |
|---|---|---|
| Drops: 2,800 at $60 | $168,000 | Move to three drops a week |
| Returns: $61,000 plus handling | $74,000 | Returns policy |
| Pick lines | $18,000 | Minimum line value |
The conversation is about three levers with values, not about the account.
Rates unstated. The ranking cannot be defended. Put the rates on the report.
Cost missing on lines. Margin overstated on those accounts. Fail the identity; list them.
Read as a drop list. Large low-contribution accounts are fixed, not dropped.
Cost to serve from averages. Every account gets the same cost and the ranking is the revenue ranking again. Use the account's own drops and returns.
Mapped once, the invoice lines, cost file, deliveries and credits produce margin, cost to serve, contribution and the components per account every quarter. Covirage builds this from the exports as they are. The distributors page describes the setup, and the route coverage guide covers the drop data this measure reuses.
The item cost at the invoice date, from the ERP's cost file or the invoice line itself where the system carries it. Average or standard cost is fine if stated; the method is the same for every account.
Delivery drops at a rate per drop, returns and credits at value plus a handling rate, and, where the distributor tracks it, order lines at a rate per line for picking. Each rate is stated on the report. Sales time is usually left out because it is hard to attribute; if included, it is a stated rate per visit.
Rarely. They are usually fixed by fewer drops, a minimum order, a returns policy or a price review. The report gives the account manager the components, so the conversation is about which lever, not whether to keep the account.