An auto components maker recovers price escalations it never billed
Raw material clauses in customer contracts allowed quarterly price changes. Many were never invoiced. Matching two years of contracts, commodity indices and invoices found the gap, customer by customer.
An illustrative scenario. The company is fictional and the figures show how the method works; they are not a client result.
The situation
A mid-sized maker of engine and chassis components supplies several vehicle manufacturers. Most customer contracts include a raw material clause: when steel and aluminium indices move beyond a band, the part price is revised every quarter.
In practice, revisions depended on the sales team raising a claim. Some were raised late, some partly and some not at all. Nobody could say how much had been missed.
What we looked at
- Customer contracts and their price revision clauses
- Published commodity indices for each quarter
- Two years of invoice lines, by part number and customer
- Price change requests sent to customers, and their status
What we found
| Finding | Share of the gap |
|---|---|
| Quarters where an upward revision was due but never claimed | About half |
| Revisions claimed at a lower rate than the clause allowed | About a quarter |
| Revisions agreed but not updated in the billing system | The rest |
Each finding came with the clause, the index movement, the invoices affected and the value. The total was large enough to go to the CFO in the first month.
What changed
- Recovery. The sales team raised supplementary invoices for the agreed revisions, and claims for the rest, backed by the evidence pack.
- A standing control. Every quarter, the system calculates the revision each contract allows and compares it with what is billed.
- Ownership. Each customer has a named owner for price revisions, with a deadline.
How it ran
| Week | Step |
|---|---|
| 1 to 2 | Data extracted, contracts digitised, clauses mapped |
| 3 to 4 | Tests run, first findings reviewed with sales |
| 5 to 6 | Findings valued and approved; control handed to the team |
See how this works for your business in revenue leakage, or start with Where revenue leaks: 12 places to look this quarter.