A distributor billing ₹50 lakh a month at 6% gross margin believes he earns ₹3 lakh. Ask him to show where that ₹3 lakh went at the end of the quarter, and the conversation gets uncomfortable. Across the FMCG distributors we work with, the real retained margin is routinely 2–4 percentage points lower than the headline number — and almost none of the difference appears in any report the business produces.
That gap is not one big hole. It is five small leaks, each individually tolerable, each invisible in day-to-day operations, compounding month after month. Here they are, in the order they usually hurt.
Leak 1: Scheme money that never comes back
This is the biggest one, and the least visible.
A brand announces a scheme — ₹10 off per case, a 5+1 offer, a quarterly target incentive. The distributor passes the benefit to retailers immediately, out of his own pocket, because that is how trade works. The brand reimburses later, through a claim.
Later is the problem. Claim settlement cycles run 60–90 days when they run well. Claims get rejected for missing documentation, mismatched invoice references, or a scheme-period technicality. Partial settlements arrive and nobody reconciles the shortfall against what was actually passed on. After two or three quarters, nobody can say with confidence what is still owed.
Distributors who audit this for the first time typically find 0.5–1.5% of turnover sitting in dead or dying claims. On ₹50 lakh a month, that is up to ₹75,000 — every month — earned, spent, and never recovered.
The discipline that fixes it: treat claims exactly like receivables. Every rupee of scheme benefit passed on is an entry; every settlement is matched against it; an ageing report shows what the brand owes you, by scheme, by month. If you track retailer outstanding daily but brand claims "whenever," you have the priorities backwards — the brand usually owes you more.
Leak 2: Dead and dying stock
Walk into any distributor godown and you will find them: cases bought to hit a monthly target that did not move, near-expiry batches nobody flagged until a retailer refused them, slow movers the salesman stopped showing.
The damage comes in three forms. Write-offs on expired stock are the visible part. The invisible parts are bigger: working capital locked in stock that turns over in 90 days instead of 21, and distressed liquidation — selling at or below cost to clear space before expiry.
The pattern repeats because purchase decisions chase targets while the stock register lives in a different book — or in memory. Batch-level and expiry-level visibility at the moment of purchase ("you already hold 40 cases of this SKU expiring in 6 weeks") prevents most of it. Counting the loss after expiry is accounting; seeing it six weeks before expiry is margin.
Leak 3: Credit that quietly becomes your cost
The agreed credit period with retailers is 14 days. The actual average, measured, is usually 24–35. Nobody decided this; it drifted, one accommodating week at a time.
That drift is a loan you are giving the market, funded by your own working capital — which for most distributors means bank limits with real interest. Ten extra days of float on ₹50 lakh of monthly sales is roughly ₹16 lakh permanently lent out interest-free. At 11% borrowing cost, that is ₹15,000 a month of pure leak, before counting the occasional account that turns from "slow" to "gone."
The fix is not aggression with retailers — it is knowing the number. A live outstanding ageing, per retailer, visible to the salesman standing in that retailer's shop, changes collection behaviour without a single difficult conversation. What gets measured at the counter gets collected at the counter.
Leak 4: The field day you cannot see
A salesman covers a beat of 35 outlets. How many did he actually visit today? How many orders were taken at the shelf versus reconstructed from memory at 7 PM? How many cases of returns next week trace back to orders that were guessed rather than taken?
Field leakage is rarely dishonesty. It is the compound cost of missed outlets (lost sales the brand's data will eventually notice), end-of-day order entry (errors, then returns, then credit notes), and zero connection between what the company planned for the day and what happened.
When the visit is captured at the shelf — the order spoken, the shelf photographed, the timestamp automatic — the evening data-entry session disappears, and with it most of the error-driven returns. The salesman's day becomes visible without a single phone call asking "எங்க இருக்க?"
Leak 5: The operational tax
Add up the hours: the evening order-entry session, the morning reconciliation of yesterday's collections, the monthly scramble assembling claim documentation, the GST-time hunt through purchase bills. For a typical distributor operation this is one full-time person's labour spread across everyone, including the owner's own evenings.
This leak does not show up as money lost — it shows up as growth not taken. The owner who spends two hours a day on reconciliation is the same owner who does not have two hours for the new brand conversation, the second godown, the next town.
What plugging the leaks actually requires
None of this requires heroics. It requires four disciplines running continuously:
- Claims tracked like receivables — with ageing, matching, and a number you can quote to the brand's ASM from memory.
- Stock visible by batch and expiry — at purchase time, not post-mortem.
- Outstanding measured daily — and visible in the field, where collection actually happens.
- Field activity captured at the source — the shelf, not the evening desk.
Most distributors know these disciplines. Almost none can run them on registers and memory, because each one demands daily, granular, boring record-keeping — exactly the work that gets skipped on a busy Tuesday. This is the problem we built Stockflow to remove: the records keep themselves, from a spoken order, a shelf photo, a bill — and the leaks become numbers on a screen instead of a quarter-end surprise.
If you trade in FMCG — as a distributor, supplier, manufacturer or retailer — join the Stockflow network free. You get market information for your trade, and tools like these as they roll out. If you want to see the full platform on your own numbers, book a demo.
This is the first piece in our FMCG operations series. Next: how scheme design looks from the brand's side — and why your claims get rejected.