“Energy and materials have moved since the budget was costed. What does each product cost now, where will the year land, and how much should we pass on?”

The budget was costed, and every price list and customer contract set, before energy and materials moved. The first questions are what each product costs now and what that does to the year. Then come how much of the increase to pass on, to which customers and categories, in what order, what it will cost in lost volume, and how much the business can carry itself. And the answers are needed before the next customer negotiation.

What usually goes wrong

One flat increase goes on every product, because that is all anyone can calculate in time, and it hits hardest the categories that can least take it
The volume you expect to lose is guessed once in a meeting and never checked against what actually happened
Rebates and off-invoice terms are forgotten, so part of a list-price increase is handed back before it reaches net sales
Increases are agreed customer by customer by email, so afterwards nobody has a list of which went in, when, and what each was expected to bring
There is no agreed plan to fall back on when the largest customer pushes back, so the first negotiation sets the terms for everyone

It suits any company that buys an input whose price can jump and sells at prices it sets: manufacturers, brand owners, and distributors or retailers facing a supplier's increase. The answer brings together your product costs, your sales and deductions, and your pricing and promotion plans.

How the software answers it

See what the input does to each product. What the input costs now against your standard, which products carry the most of it, and what each category and customer earns after every deduction.
Test the options before you choose. Where your sales history includes enough price changes, price elasticity is estimated for each product from it, as a guide to how much volume a price rise may cost. Sliders on volume and on each cost show how margin moves, and the software works out the price change that would hold profit at your target, before any loss of volume.
Record every price action. Each price increase, rebate change or change to trade terms is entered once, with an owner, an approval and its expected effect on net sales and margin, so there is one list of what was agreed, with whom and when.
Check what happened. Once the increases are in: what reached net sales, customer by customer; how much of a list-price change reached the shelf, from your store checks; and the price-pack ladder, showing any place where a bigger pack now costs more per kilo than a smaller one.

The figure that decides it is what reaches net sales. A list-price increase that goes back to the customer as a bigger rebate has recovered nothing, so every increase is followed through to net, and the next price round starts from what actually reached net sales.

What we build for it

Examples from software we have already built:

The input's cost by product and its share of each unit cost, against standard, month by month
Where the year will land once the new costs are in the forecast
Margin by category, customer and product after every deduction
Price elasticity and promotion lift for each product, estimated from its sales history where prices have moved
The price change that reaches a target profit, and which assumption moves profit most if it turns out wrong
A register of price moves, rebate changes and trade-term changes, each with an owner, an approval and its expected effect
The expected loss of volume entered on the demand plan with its reason, so it can be checked later
Price compliance after the change, customer by customer and market by market
The price-pack ladder, and every place a bigger pack costs more per kilo than a smaller one

All the sample screens

Try these analyses yourself on a demonstration company: Try the Analytics demo

Screens

Unit cost trend screen, on illustrative data — “Is unit cost drifting, and is that input prices or a change in what we make?” Illustrative data.

Cost-of-goods bridge screen, on illustrative data — “Cost of goods sold moved: how much was volume, how much was mix, how much was purchase prices, and how much was running the factories?” Illustrative data.

Portfolio unit cost screen, on illustrative data — “What does each part of the portfolio cost to make, and which cost component is carrying it?” Illustrative data.

Unit cost build-up screen, on illustrative data — “Component by component, what does each product cost, and what moved against last year?” Illustrative data.

Costed recipe screen, on illustrative data — “Where in the recipe does the cost sit, and which level would a change actually move?” Illustrative data.

Gross to net screen, on illustrative data — “Where does the money go between gross and net, and whose deduction rate moved?” Illustrative data.

Sales and profit by any dimension screen, on illustrative data — “Where did sales and profit grow, by category, brand, customer or market, and where did the margin slip?” Illustrative data.

Budget build screen, on illustrative data — “Which parts of the budget are ready, which assumption moves profit most, and what price rise would reach the profit we want?” Illustrative data.

Revenue actions screen, on illustrative data — “Which price moves, promotions, rebates, listings and trade-term changes are live, and who approved them?” Illustrative data.

Price and discount depth screen, on illustrative data — “Which brands raised their prices, and which customers get deep discounts for a thin margin?” Illustrative data.

Monthly trend screen, on illustrative data — “Which line between gross sales and gross profit is drifting, and since when?” Illustrative data.

Where to start

It starts with a paid pilot on one category, then a build at a fixed fee that covers as much of the above as you need, and an annual subscription.

Prices How an engagement runs

Write to us

Tell us your business need, or ask for a worked example on your figures — we want to hear it.

Or email support@mistlight.eu

Change one number.

Move the cost per case, and the budget from our worked example recalculates month by month, through all three statements. The balance sheet still balances.

EBIT 2,906 As budgeted

Cash at the year end 1,674 As budgeted

Balance sheet difference 0 Balances

Income statement
EUR thousand	Budget	Now
Net-net sales	52,792	52,792
Cost of goods	−41,321	−41,321
Gross margin	11,471	11,471
Operating costs	−7,415	−7,415
Depreciation	−1,150	−1,150
EBIT	2,906	2,906
Interest	−275	−275
Tax	−526	−526
Net profit	2,105	2,105

Cash flow
EUR thousand	Budget	Now
Net profit	2,105	2,105
Depreciation	1,150	1,150
Working capital	−381	−381
Cash from operations	2,874	2,874
Capital spending	−1,500	−1,500
Bank loan repaid	−1,000	−1,000
Dividend	−600	−600
Change in cash	−226	−226
Cash at the start	1,900	1,900
Cash at the end	1,674	1,674

Balance sheet
EUR thousand	Budget	Now
Fixed assets	8,850	8,850
Stock	5,122	5,122
Trade receivables	8,060	8,060
Cash	1,674	1,674
Total assets	23,706	23,706
Trade payables	3,612	3,612
Trade terms owed	2,710	2,710
Bank loan	5,000	5,000
Equity	12,384	12,384
Liabilities and equity	23,706	23,706
Difference	0	0

Net profit runs into the cash flowClosing cash runs into the balance sheet

Laundry capsules at Retailer A Cost per case 26.00, margin 17.5%. Lowest cash in the year: October, 1,499.

Worked example, illustrative data. See this worked example →