Accounts for wholesalers and distributors by a Chartered Management Accountant who ran the finance function of a pharmaceutical wholesaler from £3m to £10m. Rebates accrued against the goods, landed cost where it belongs, stock counted rather than estimated. From £95 + VAT a month on the Xero or Sage you already run.
Book a free 30-minute review →Retrospective volume rebates, buying-group income and settlement discounts all relate to purchases you already made. The credit note turns up a quarter later, lands in other income, and three things go wrong at once: the month it arrives looks unusually good, every other month carries a cost of sales that is too high, and the stock on your balance sheet is sitting at a price you never actually paid.
FRS 102 is unambiguous about where they belong. In determining the cost of inventories, trade discounts, rebates and other similar deductions come off the purchase price. A rebate is not income you earned by selling — it is a reduction in what the goods cost you, and it should be accrued as it is earned, against the lines that earned it.
Get this wrong and your monthly gross margin is not a number, it is noise. You cannot tell a good buying decision from a bad one, you cannot tell which supplier terms are actually worth having, and you certainly cannot tell which product lines make money. Most distributors I have seen running on year-end accounts alone discover at the audit that two or three lines have been losing money all year behind a healthy-looking blended margin.
The cost of inventories takes in the purchase price, import duties and other non-recoverable taxes, and the transport and handling directly attributable to getting the goods where they are. Carriage inwards posted to an overhead code instead overstates gross profit, understates cost of sales, and makes every product line look better than it is — consistently, in the same direction, all year.
On imports, most businesses now use postponed VAT accounting, declaring and recovering the import VAT on the same return rather than paying it at the border. The figures come from the monthly postponed import VAT statement, not from the supplier invoice, and a return built from the invoices alone will not agree with HMRC's record of what you imported.
Stock feeds cost of sales directly, so an estimate of stock is an estimate of profit. FRS 102 carries inventories at the lower of cost and estimated selling price less costs to complete and sell — which means a slow-moving line you will eventually discount is already worth less than the figure in your accounts, whether or not anyone has written it down.
Short-dated goods, discontinued lines, the pallet bought on a deal that never shifted: each one is a write-off waiting to be recognised, and each one is usually recognised a year late, in a single lump, in a month that then looks inexplicable. Counted properly and reviewed monthly, it is a series of small known costs instead of one large surprise.
Distribution concentrates. A handful of customers generally make up most of the sales ledger, which means your credit risk is not spread at all — it is sitting with four or five businesses whose own numbers you cannot see. Debtor days reported as one blended figure hides exactly the thing you need to know: which specific accounts are drifting, and how far.
The same concentration runs the other way. Supplier terms, settlement discounts and credit limits with your two largest suppliers determine whether a good month converts into cash or into more stock. That is a management accounts question, asked monthly. It is not something a set of year-end accounts filed nine months later will ever tell you.
If you hold a wholesale dealer's licence from the MHRA, the quality system around it is a real cost of trading: a Responsible Person, batch traceability, recall readiness, the records that have to stand up to inspection. Those hours disappear into one wages line and the operation looks cheaper to run than it is. Separated out, you can see what compliance actually costs you per order — and whether a licensed line still earns its place.
What each product actually earns once the goods carry their true cost, not a blended percentage.
Against the purchases that earned them, so the month stops lying to you.
Slow movers and short-dated lines recognised as they happen rather than at the year end.
Concentration and drift on the accounts that actually matter.
Built on when customers really pay and when suppliers really take it.
Small and micro-entity companies, from records already kept.
Peter Edwards here — ACMA CGMA, twenty-five years in finance, several of them as Head of Finance at a pharmaceutical wholesaler as it grew from £3m to £10m across roughly a thousand product lines. Rebates landing a quarter late, short-dated stock, supplier terms that decided whether a good month turned into cash: I have sat on the inside of all of it with the phone ringing.
You deal with me. I take on no statutory or external audit work and I give no specialist tax advice: a disposal, group structuring or personal tax planning belongs with a specialist firm. A distributor anywhere in Northamptonshire, Cambridgeshire or the counties around can be looked after in person or remotely.
Seven questions, answered from memory. No logins, no exports: you find out whether the numbers behind your margin stand up before anyone asks you for a login.
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