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How to control discounts without slowing your sales team

For owners and sales managers who see margin leaking through discounts but cannot afford a team that waits for approval on every order. By the end you will have a limit for each person, a quick route for exceptions and a monthly check on what discounts cost.

Sales and pricing4 min read

The short answer

Control discounts by deciding, person by person, who may discount, and giving each a small ceiling that still leaves an order profitable. Hold amount discounts to the same ceiling as percentages, and decide whether line discounts are allowed. Let a few named people enter prices away from the list themselves, so exceptions are fast and recorded, and review discounts by rep and customer every month.

Key takeaways

  • On goods sold at a 20% margin, a 5% discount takes a quarter of the profit on that sale.
  • New reps can sell on list prices only, while experienced reps get a small fixed percentage.
  • A discount on the whole invoice is one decision, easier to check than twelve separate line discounts.
  • Agree a reply time for exceptions, such as within the hour, so reps use the route instead of working around it.
  • If the same exception comes up every week for one customer, give that customer a price list of their own.

Know what a discount really costs

A discount comes straight out of your margin, not out of the price. On goods sold at a 20% margin, a 5% discount takes a quarter of the profit on that sale. Reps see 5% as a small courtesy; your accounts see it as a quarter of the reason you made the sale.

To earn back the SAR 500.00 below at the same 20% margin, you need SAR 2,500.00 of extra sales. That is why discount rules need numbers, not good intentions.

TipShow reps the profit on an order, not only its price, and the size of the discounts they offer changes.

Decide who may discount at all

Not every seller needs the right to discount. Many distributors give it to experienced reps and the sales office, and none to new reps. A rep with no right to discount sells on the price list, on service and on availability, which is what you hired them for.

Write the rule down person by person, not team by team. When the right comes with a name, giving it to someone new is a decision a manager makes, not something that happens because they joined a route.

  • New reps: no discount, list prices only
  • Experienced reps: up to a small fixed percentage
  • Sales office: up to the company maximum
  • Sales manager: prices away from the list
  • Owner or finance: anything beyond that

TipGive the right to discount per person, so promoting a rep is a decision and not an accident.

Set a ceiling, not a target

A ceiling is the most a person may give, but reps tend to treat it as the normal discount. Keep each ceiling small, and set it so that an order at the full ceiling still makes money. A ceiling you would not want every customer to receive is too high.

Hold discounts typed as an amount to the same ceiling as percentages. SAR 50.00 off a SAR 400.00 order is 12.5%, whatever the rep calls it.

Choose line discounts or one on the whole invoice

A line discount cuts the price of one item; a discount on the whole invoice cuts the total. Line discounts let a rep clear a slow item or match a competitor’s price on one product, but they multiply quickly: an order of twelve lines can carry twelve separate decisions.

A discount on the whole invoice is one decision and is easier to check afterwards. Many distributors allow only that kind for most staff and keep line discounts for the few who manage prices.

TipIf you switch line discounts off, tell the team before the first route, not after the first refusal.

Keep exceptions fast

There will always be a customer worth more than the ceiling: a large opening order, or a competitor’s offer on the table. The risk is not the exception but how it is granted: a phone call, a nod, and no record of who agreed.

Give the right to sell away from the list to a small number of people, and have them enter the price themselves. The decision then sits on the document, the rep keeps selling, and nobody waits until tomorrow. If the same exception comes up every week for one customer, it is not an exception: give that customer a price list of their own.

  1. The rep explains the limit and calls the office
  2. The manager checks the margin on the order
  3. The manager enters the price or discount
  4. The document carries the agreed price
  5. Repeated exceptions become a customer price list

TipAgree a reply time for exceptions, such as within the hour, so reps use the route instead of working around it.

Review discounts every month

Pull the month’s discounted orders and invoices by rep and by customer. Look for reps who always give their full ceiling, customers who get a discount on every order, and items discounted far more often than others. Each pattern has a different fix: coaching, a customer price list, or a price that is simply set too high.

Put a number on it, so the conversation with the team is about money and not about trust.

Checklist: Before you set the next discount limit

  • Work out what a discount costs in margin
  • Decide who may discount, person by person
  • Set a small ceiling for each person
  • Hold amount discounts to the same ceiling
  • Decide whether line discounts are allowed
  • Name who may sell away from the list
  • Agree a reply time for exceptions
  • Review discounts by rep and customer monthly

In Axon Suite

How Axon Suite handles it

In Axon Suite each rep’s profile says whether they may give a discount and their maximum percentage, and every order and invoice from the rep app is held to it on the server, on the line and on the whole document; a discount typed as an amount is held to the same maximum. In sales settings you set the maximum header discount and whether line discounts are allowed. A price away from the list, a header discount past the maximum or a line discount while line discounts are off needs the price-override permission, and without it the document is refused, on the preview and on save.

Feature

Who may change a price

A price typed away from the list, a header discount past your maximum, or a line discount while line discounts are switched off all need the price-override permission. Without it the document is refused, on the preview and on save alike, from the office or the rep app.

Open: Who may change a price
Feature

A discount ceiling for every rep

On each rep’s profile you decide whether they may give a discount and, if so, their maximum percentage. Every order and invoice from the rep app is held to it on the server, on the line and on the whole document.

Open: A discount ceiling for every rep
Feature

Price lists by customer and quantity

Build sales and purchase price lists in their own currency, with or without VAT in the price, valid between two dates. Give a customer or vendor a list of their own or let them trade on your default, and price each item by unit with lower prices from a quantity up.

Open: Price lists by customer and quantity

Before you go

Questions owners ask

Should reps be allowed to discount at all?

Only the reps you trust with margin, and only up to a small ceiling. In Axon Suite a rep who may not discount has every discount refused, however small.

How do we allow a one-off bigger discount?

Let someone who may sell away from the list enter it. In Axon Suite that is the price-override permission, given through the user’s role; from the rep app the rep’s own ceiling still holds, so raise it on their profile if the change should last.

Can a discount typed as an amount get round a percentage limit?

It should not. In Axon Suite a rep’s discount typed as an amount is turned into its share of the price and held to the same maximum.

Glossary

Terms in this guide

Open the glossary

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