Price Tracking: The Importance of Monitoring Supplier Invoices
We’ve talked before about how important it is to make sure that suppliers do not raise their costs without your knowledge. Most people think that they would notice a price change, however slowly increasing costs over time is a common supplier technique. If you produce multiple SKU’s in one order, or make products with material and style variations, the invoices that you receive may have lots of different line items, making it easier for a supplier to make small increases (as in just a few pennies) without you noticing. After all, busy entrepreneurs don’t have the luxury of paying attention to every detail! But regardless of how small these price increases are, it’s important to catch and address them right away. The reason being, if you overlook a pricing ‘mistake,’ it sends a message to the supplier that you are not paying attention and that you can afford the extra cost. This could embolden them to raise prices regularly, either to your face or behind your back.
An easy way to monitor this potential issue is to create a simple spreadsheet called a ‘Price Tracking Document.’ In the first column, list all of the goods and materials that you order on a regular basis. Across the top, create a new column each time you receive an invoice from a supplier. Include the date and invoice number, and then fill in the charges billed for each relevant item on your list. You should be able to easily scan from left to right and see if there has been an increase (or decrease) in your costs from invoice to invoice. This document also helps you to see what past invoice to reference in the event that you need to show a supplier ‘proof’ of the correct price.
It’s a good idea to get in the habit of doing this every time you are reviewing and paying supplier invoices. When it becomes part of your routine, suppliers are more likely to think you are a detail-oriented, no-nonsense buyer, and avoid any unsavory practices!