The margin on the quote is not the margin you made
The sales report says the deal made a healthy margin. It was calculated on the quote: sell price minus distributor cost. It does not include the back-end rebate the vendor pays next quarter, if the deal qualified. It does not include the credit note for ten seats the customer cancelled inside the window. It does not include the extra you paid because the distributor invoiced at a higher cost than quoted, or the services days you threw in to win it.
The finance director asks which vendors actually make money for the business. The honest answer is a week of spreadsheet work and a lot of assumptions.
Why deal margin stays invisible
A software deal is not one transaction. It is a chain of documents spread across time. The customer invoice and distributor invoice usually arrive close together, but everything else trickles in later and lands in the ledger with no link to the deal it relates to. A rebate payment covers dozens of deals in one lump. A credit note references a distributor order number, not your opportunity.
Commission plans make it worse, because account managers are often paid on quoted margin, so nobody has a reason to chase what happened afterwards.
| Margin element | When it arrives | Linked to the deal? |
|---|---|---|
| Customer invoice | At order | Usually |
| Distributor invoice | At order or shortly after | By order number, if typed |
| Vendor back-end rebate | Months later, in bulk | Rarely |
| Credits and cancellations | Any time in the term | By distributor reference only |
| Bundled services cost | When delivered | Almost never |
What not knowing margin costs
Decisions get made on the wrong numbers. A vendor that looks profitable on quotes may be thin once you count the credits and the pre-sales time. Another that looks thin may carry rebates that nobody attributes to it. Discounting decisions are made by instinct. Commission may be paid on margin that never materialised, which leads to awkward conversations later.
At year end, finance reconstructs margin by hand, which is slow and is usually done once, too late to change anything.
The deal ledger we build
- Deal key: every opportunity gets a deal key that is carried onto the quote, the distributor order, your sales invoice and, where possible, the vendor's own reference.
- Cost and income capture: customer invoices, distributor invoices and credit notes are read from your accounts package, such as Xero or Sage, and matched to the deal by that key or by order reference.
- Rebate allocation: when a vendor rebate or incentive statement arrives, its lines are matched to the deals it covers, or allocated by the rule your finance team agrees where the statement is not itemised.
- Adjustments: cancellations, seat reductions and price differences between quote and distributor invoice are recorded against the deal as they happen.
- Services and pre-sales time: optional inputs let you add bundled services or pre-sales effort, from your timesheet or PSA tool, so the fuller cost of winning a deal is visible.
- Reporting: margin by deal, account manager, vendor and customer, showing quoted, actual and still expected, in a dashboard or a Google Sheet your finance team already uses.
How margin should be defined, and whether commission is paid on quoted or actual margin, is your decision. The ledger shows both.
What the finance and sales teams get
Finance can answer the vendor question from a report rather than a project. Sales managers see deals where actual margin is falling below quoted margin, and why: a cost increase, a cancellation, a rebate that was not paid. Account managers can see rebates that are expected but have not arrived, which is often money nobody is chasing.
Monthly reviews shift from arguing about numbers to talking about what to do about them.
Is this your margin picture?
- Margin reports are based on quotes, not on what was invoiced and credited.
- Vendor rebates land in the bank with no link to the deals that earned them.
- Nobody can say which vendor is most profitable once everything is counted.
- Commission is paid on margin that later shrinks.
- Finance rebuilds deal margin by hand at year end.