Distributor bonus schemes like 10+1 and how they change your real profit

Every week a distributor's salesman offers something new: 10+1 on a fast antibiotic, 5% off a cough syrup, a bigger scheme if you take a full carton. A pharmacy bonus scheme is real money, but it changes your cost in a way a paper register rarely shows. This post works through the arithmetic, shows why profit goes wrong when free units are handled carelessly, and gives a simple test for whether a scheme is worth taking.

What a 10+1 scheme actually means

In a 10+1 scheme you pay for ten units and receive eleven. The eleventh is not really free. You paid for it inside the price of the other ten, so each of the eleven costs less than the trade price (TP) on the bill.

Any scheme can be turned into a discount you can compare:

The working is bonus ÷ (paid + bonus). For 10+1 that is 1 ÷ 11. Do this sum before you argue with a salesman about whether 20+3 beats 10+1 with a trade discount.

A worked example of landed cost

Here is one purchase line. The figures are made up to keep the sums easy. They are an example only, not real prices for any product.

• A box of 10 strips × 10 tablets, so 100 tablets a box
• TP Rs 1,000 a box, retail price (RP) Rs 1,100 a box
• 10+1 scheme: 10 boxes paid, 1 bonus box
• 5% trade discount on the line
• Sales tax taken as 2% only for the example (use the rate on your own bill)
• Rs 210 freight or cartage on the bill

So a box with a TP of Rs 1,000 really costs you Rs 900. Divide by 10 boxes instead of 11 and you would think it cost Rs 990. Neither the TP nor the bill total gives the real figure. The landed cost does.

Why profit looks wrong when bonus is handled badly

At Rs 900 landed and Rs 1,100 RP, each box earns Rs 200. Sell all eleven and the line earns Rs 2,200: Rs 12,100 in sales less the Rs 9,900 you paid. Here is what the common shortcuts do to that figure.

Bonus entered at zero cost

Some shops put the ten paid boxes into stock at Rs 990 each and the free box at nothing. The total is right, but it lands in the wrong places:

• Each paid box shows Rs 110 profit, a thin 10% margin.
• The free box shows Rs 1,100 profit, a 100% margin.
• The month the free box sells looks better than it was, and other months look worse.
• Margin by product becomes unreliable, so you may drop a medicine that actually earns well.

Bonus not entered at all

Other shops receive eleven boxes but enter only ten. The cost is overstated at Rs 990 a box, so every sale shows less profit than it made. The stock record is also one box short, so the shelf and the system never agree.

Bonus hidden inside a lower TP

A third habit is entering 11 boxes at a reduced TP so the total matches. The cost comes out right, but the record of what was paid and what was free is lost, so you can never check which schemes helped you.

The fix is the same for all three. Record paid and bonus quantities separately, at the TP on the bill, and spread the landed cost over every unit received.

When a scheme is worth taking

A scheme only saves money on units you sell before they expire. In the example, 10+1 saves about Rs 90 a box against buying one box at a time, roughly Rs 990 across the eleven. That saving can vanish quickly.

How fast does it sell?

Divide the units you would receive by your normal monthly sale. At three boxes a month, eleven boxes last under four months. At one box a month, they last almost a year.

What is the expiry on the packs delivered?

Check the expiry on the packs that actually arrive. In the one-box-a-month case, a batch expiring in nine months leaves at least two boxes unsold. That is Rs 1,800 lost, nearly twice what the scheme saved. Some distributors take near-expiry stock back, sometimes for less than you paid and only before their own cut-off date, so check their terms first.

How long is your cash tied up?

With 30 days' credit and eleven months to sell, you pay for most of the stock long before you sell it. That money could have cleared another bill or bought a fast mover.

Would you stock it anyway?

A scheme on a medicine you sell every day is usually a good deal. A scheme used to push a new brand is a different decision. Judge it as a new product first and a discount second.

A simple rule: take the scheme when the stock will sell well before expiry and before the cash is needed elsewhere. Otherwise, ask for a smaller quantity with a trade discount.

How MediPOS spreads schemes into cost

Doing this sum by hand for every line of every bill is not realistic on a busy day. A register, or generic billing software that only stores the bill total, cannot carry the scheme through to each tablet sold. MediPOS does it for you.

You enter the distributor bill line by line: Qty for paid units, Bonus for free ones, T.P. (per unit), Disc % and Tax %, with the batch, expiry and MRP from the pack. Bill discount and Freight / other go at the bottom.

When you post the bill, MediPOS works each line in the same order as the example: gross, less discount, plus tax on what is left. It shares the bill discount and freight across the lines in proportion to their value, then divides the landed total by paid plus bonus units in the smallest unit. The posted bill shows this in a Cost / base unit column, so the example line would show Rs 9.00 a tablet.

That cost follows the stock. Each sale is costed from the actual batch that went out, so the profit and loss shows real margin, not a guess based on TP. The Purchases by product report shows paid and bonus quantities side by side with the real cost per unit. The Expiry dashboard values short-dated batches at the same landed cost, so you can see what a slow scheme has put at risk.

That is the kind of profit figure pharmacy accounting software should give an owner. Purchases and suppliers is a module, so check which plans include it on the pricing page.

Common questions

Should I enter 11 in quantity for a 10+1 scheme?

No. Enter 10 as the paid quantity and 1 as bonus, at the TP on the bill. Stock goes up by 11, and each unit carries one eleventh of the line's landed cost.

Is a 10+1 scheme better than a 10% trade discount?

On cost alone, the 10% discount is slightly better, because 10+1 lowers the cost per unit by about 9.1%. The scheme wins only if something is added on top, such as a trade discount, and you can sell every unit in date.

What if expired scheme stock goes back to the distributor?

If the distributor credits less than your landed cost, the difference is a loss. In MediPOS, a return to supplier books that shortfall to Stock loss, damage & expiry, so it shows in the profit and loss instead of hiding in your stock value.

Does the bonus change my selling price?

No. The customer pays the retail price on the pack either way. The scheme changes your cost, and so your margin.

Related reading

• Purchases, bonus schemes and landed cost
• Profit and loss
• Expiry management
• Managing udhaar in a pharmacy without losing money or customers