Unlocking £300k of Margin Through Better Cost Insight

Situation
A specialist distributor of branded stationery products was operating in a highly competitive, price-sensitive retail market, supplying major retail customers.

The South African business, with turnover of approximately £10m, was under pressure from both sides:

• Large retail customers demanding competitive pricing during critical annual “back to school” negotiations
• Head Office pushing for improved margin performance following a period of underperformance

At first glance, margins appeared acceptable. However, there was limited confidence in the underlying data, and key commercial decisions were being made without full visibility of true product-level profitability.

Role
Kerry Everett joined as part of a new leadership team tasked with stabilising performance, improving margins, and rebuilding market position.

Challenge
The issue was not immediately obvious.

The costing model was built using blended averages:

• Freight and duty costs were applied as standard percentages across all products
• Rebates and discounts were not modelled at product or customer level

This approach masked significant variation in true costs.

As a result:

• Some products were materially less profitable than reported
• Others were being under-valued
• Pricing, sourcing, and product mix decisions were based on distorted data

In some cases, correcting the assumptions revealed cost variances of up to 20% at product level.

Approach
The priority was to understand the true economics of the business.

Kerry led a detailed review of the costing model, working closely with a small cross-functional team.

Key actions included:

• Rebuilding the costing model to reflect actual freight and duty rates by product and origin
• Integrating rebate and discount structures at a more granular level
• Validating assumptions through manual review of historical import documentation
• Aligning financial data more closely with real commercial activity
• Supporting the commercial team during live customer negotiations with improved data

This work was completed within a matter of weeks, enabling immediate application to the upcoming sales cycle.

Results
The business achieved a 3% improvement in overall margin within the first year, equivalent to approximately £300,000.

This was driven by:

• Better product mix decisions
• Improved sourcing strategies
• More informed and targeted pricing

Importantly, the improvement did not come from tougher negotiation alone.
It came from identifying where margin was being lost earlier in the process.

The business also:

• Regained market competitiveness during key retail negotiations
• Improved confidence across the leadership team and Head Office
• Strengthened customer relationships by offering the right products at the right price

FD4 Insight
In many businesses, financial reporting may be technically accurate, but still misleading. When underlying cost assumptions do not reflect operational reality, decision-making is compromised.

By getting closer to how the business actually operates, and aligning financial data with that reality, the Finance Team can move from reporting performance to actively improving it.