Leak 05 · Pricing & Margin - Price overrides without adequate controls
Anyone with order-entry access can change a price, and nothing records why. The override rate is the leak, and it is usually unmeasured.
Diagnostic note. Symptoms, required records, an initial check, and possible fixes. This shorter note does not include a full worked example.
What is it?
Overrides at order entry are different from quote discounting. They happen at the counter, on the phone, and during order processing, often by CSRs rather than salespeople, and often to match a verbal promise or a competitor’s price. Without a reason code and a review, the same override becomes permanent the next time the customer orders.
- Family
- Pricing & Margin
- Primary owner
- Pricing Manager
- Secondary owners
- CFO, Branch Managers, IT
- Primary impact
- Gross margin
- Typical data source
- ERP order lines with override flags, user audit log
- Detection difficulty
- 30-day measurability
Ask yourself
Can you list every order line where the system price was overridden last month, who did it, and why?
Yes, partially, no, or don’t know. “Don’t know” is the most useful answer, because it points at the test below.
What does it look like?
Warning signs. None of these proves the leak exists. They tell you where to look.
- A high share of order lines flagged as manually priced.
- Override rates that vary sharply by user or branch.
- No reason code field, or a reason code that is almost always “other.”
- Overrides that match the previous override rather than the current price.
What data do I need?
The minimum viable set. Most of it is already in your ERP.
| Field |
|---|
| Order line: item, quantity, system price, entered price |
| Override flag and reason code |
| User, branch, and timestamp |
| Cost |
The initial check
Start with a small sample. Gathering the exports, agreements, or observations is separate from running the check; agree that work with the person who owns the records.
- 1Export last month’s order lines with the override flag set.
- 2Count overrides as a share of all lines, then by user and branch.
- 3Sum the difference between system price and entered price, times quantity.
Override cost = Σ (system price − entered price) × quantity, for downward overrides
Then ask one question: What share of overrides have a reason someone would defend in a meeting?
How much could it be costing us?
A conservative range, not a headline. The goal is a number management can trust enough to investigate.
Annual downward override value × share judged unnecessary × realistic recovery rate
Common root causes
Fixes fall into three layers. Not every problem needs software, and almost none needs AI first.
- Process
- No override authority levels and no review of overrides after the fact.
- Data
- Reason codes are missing, optional, or meaningless.
- Technology
- The ERP permits overrides for every user and does not require or capture a reason.
What should we do?
Start with the simplest intervention that could solve it. Move down the list only if the one above is not enough.
Level 1
Visibility
A weekly override report by user with dollar impact.
Level 2
Guardrails
Mandatory reason codes, override limits by role, and manager approval above a threshold.
Level 3
Workflow
Route large or repeated overrides to the pricing manager for review, with the customer’s price history attached.
Where AI helps
- Spotting override patterns that a simple threshold misses, such as one user repeatedly overriding one customer.
Where AI probably doesn’t
This is almost entirely a controls problem. Configure the ERP and review the report before building anything.
Before you call it a leak
- Overrides to correct a wrong system price are good overrides. They point to a data problem, not a discipline problem.
Think this might be happening in your business?
Turn the finding into a next step.
If the numbers say there is something there, send us what you found and we will help you decide whether it is worth a full investigation. No transaction files needed for that conversation.
Related leaks
- Leak 01 · PricingUncontrolled quote discountingSalespeople discount quotes without the discount buying enough extra win probability to justify the margin given away. Thousands of individually reasonable decisions add up.
- Leak 04 · PricingInconsistent pricing across similar customersTwo customers of the same size, buying the same item in the same quantity, pay prices that differ by 20%. Not by design. By accumulation.
- Leak 37 · OperationsInvoice disputes caused by pricing and order errorsThe invoice price does not match the quote. The customer short-pays. AR chases, CSR investigates, pricing corrects, a credit is issued. Sixty days later the cash arrives.
Let’s start with one thing.
What would better performance look like?
Bring a result you want to improve, a symptom, or a workflow you already understand. You do not need to know the bottleneck yet. We’ll help choose what to investigate first.
No transaction files needed for the first conversation.