Growing sales, shrinking margins

Many pharmaceutical businesses in Tanzania show the same pattern: sales grow, but margins don’t. Stock counts don’t quite match. Write-offs creep up. Head office senses something is wrong, but can’t see where.

Pharmaceuticals are high-value, easy to move and in constant demand across a region with eight neighboring countries. That makes them a target, and losses rarely announce themselves. They hide inside normal-looking transactions: an expiry write-off, a credit note, a discount, a return.

The goal is simple: every pack you ship should end up as recorded revenue or an explained loss.

The real worry

Most finance leaders aren’t worried about one dramatic fraud. They’re worried about steady, quiet leakage they can’t see from head office, and about finding out from an auditor, a regulator or a whistleblower instead of their own reports.

Here’s where revenue usually disappears, and how to stop it.

Six places revenue disappears

1. Stock that “expires”

Expired and damaged stock is a normal cost of the business, which is exactly why it’s a common cover for theft. Stock is sold privately, then written off as expired.

Losses are also real and expensive. Disposing of condemned products is charged at 25% of their value under the regulator’s fee schedule, on top of the stock itself.

Warning signs: write-offs rising faster than sales; expiries concentrated in fast-moving products; disposals without proper witness and documentation.

2. Stock that leaves through the wrong channel

Products can be diverted into unauthorized channels, including across borders into neighboring markets, at different prices from those you set.

Warning signs: a distributor’s volumes growing faster than its market; your products appearing in markets you don’t supply; prices undercut by your own stock.

3. Sales that aren’t recorded

Cash sales, especially at branches and through agents, can be partly kept off the books.

Warning signs: cash sales falling as a share of total sales; branches with strong stock movement but weak revenue; gaps between stock issued and invoices raised.

4. Discounts, rebates and credit notes

Discounts given without approval, rebates paid to customers who don’t qualify, and credit notes for returns that never happened can all move money out quietly.

Warning signs: credit notes rising, especially at month-end; returns with no matching stock received; discounts concentrated with particular staff or customers.

5. Purchasing and suppliers

Inflated prices from favored suppliers, payments to suppliers that don’t exist, and kickbacks on transport, storage or services.

Warning signs: suppliers sharing bank details or addresses with staff; prices above market without explanation; urgent payments that bypass normal approval.

6. Improper payments to win business

Pressure to secure business through payments to buyers, prescribers or officials. It’s a legal risk as well as a financial one, and for international groups it can trigger consequences under home-country anti-bribery laws.

Warning signs: consultancy, “facilitation” or promotional costs that can’t be explained; agents paid more than the value of their work.

Why it’s hard to see from head office

  • Reports are summaries. Leakage hides in the detail that head office doesn’t see.
  • Distance limits oversight. Without regular, independent checks, local reports go unchallenged.
  • Distributors control the data. If you sell through a distributor, you often see only what it chooses to report.
  • Losses look like business costs. Expiry, damage and discounts all have legitimate explanations, which makes misuse harder to spot.

Controls that actually work

  1. Reconcile stock every month, from imports to warehouse to sales to write-offs. Every unit should be accounted for.
  2. Control write-offs. Disposals should be authorized, witnessed and documented, with expiry losses tracked by product and location.
  3. Separate duties. The person who handles stock shouldn’t record it, and the person who approves payments shouldn’t create suppliers.
  4. Approve discounts, rebates and credit notes under clear limits, and review them regularly.
  5. Check suppliers before paying them, and compare their prices with the market.
  6. Use data to find patterns: unusual write-offs, month-end credit notes, sales that don’t match stock.
  7. Build audit rights into distributor contracts, with sales, stock and customer data reported monthly.
  8. Test independently, with periodic reviews by people outside day-to-day operations.

Where businesses find out too late

  • The expiry pattern nobody questioned. Write-offs doubled over two years. A review found much of the “expired” stock had been sold.
  • The distributor’s growth was too good. Volumes rose sharply, until the manufacturer found its products being sold in neighboring markets below its prices.
  • The credit notes at month-end. Returns that never happened were reducing customer balances, and the cash was going elsewhere.
  • The supplier that didn’t exist. Regular payments for transport services went to a company linked to a staff member.

What protected revenue looks like

  • Every unit accounted for, from port to final sale.
  • Write-offs explained and within normal levels.
  • Distributors reporting sales, stock and customers every month.
  • Unusual patterns flagged early, before they become large losses.
  • Head office trusts the numbers, because they’re tested, not assumed.

That’s the goal: growth that shows up in your margins, and a business you can oversee clearly from anywhere.

How Glenrich helps

Protecting revenue means combining accounting, controls and investigation skills. Glenrich’s risk and forensic team, which includes Certified Fraud Examiners and CPAs, works with our accounting team in three steps:

  1. Find the leaks. We review stock, sales, write-offs, credit notes and suppliers to show where revenue is disappearing, and how much.
  2. Close the gaps. We design practical controls, set up monthly reconciliations and strengthen distributor reporting and audit rights.
  3. Keep watch. We provide ongoing independent oversight and investigate concerns when they arise, giving your head office numbers it can trust.

Concerned about leakage in your Tanzanian business? Let’s talk.

We work with international clients by video call, in English, around your time zone.

Book a free introductory call

Glenrich Consultants, Samora Tower, Dar es Salaam

Frequently asked questions

What are the most common revenue leaks in pharmaceutical distribution?
Stock written off as expired but actually sold, diversion to unauthorized channels, unrecorded cash sales, improper credit notes and discounts, and inflated or fictitious supplier payments.

How can head office spot leakage from abroad?
Through monthly stock reconciliations, tracking write-offs and credit notes, analyzing patterns in the data, and independent periodic reviews.

How do I protect myself when selling through a distributor?
Include monthly reporting of sales, stock and customers in the contract, with audit rights, and check for signs of diversion.

Is disposing of expired medicines costly?
Yes. Disposal of condemned products is charged at 25% of their value, on top of the lost stock.

Further reading

About Glenrich

Glenrich Consultants is a finance and risk partner for investors and businesses in Tanzania. Our team of accountants, tax consultants, investment advisors and risk specialists supports clients from market entry through to compliance, reporting and protection, across Tanzania Mainland and Zanzibar.