₹32Cr Fashion Brand Finds Supplier Stealing Margins

The Challenge

A fast-growing fashion D2C brand with ₹32 crore in annual revenue was experiencing a troubling pattern: despite steady revenue growth and consistent order volumes, their margins were slowly eroding quarter after quarter. The leadership team had attributed this decline to rising raw material costs and increased competition forcing lower prices.

What they didn't realize was that the real problem had been hiding in plain sight for 18 months—buried in thousands of supplier invoices that no one had the time or tools to properly audit. Their three primary fabric suppliers and two packaging vendors had been systematically overcharging them, confident that the brand's rapid growth meant less scrutiny on individual transactions.

The brand's finance team was stretched thin, processing hundreds of invoices monthly while also managing cash flow, payments, and financial reporting. Manual spot-checks of invoices happened occasionally, but there was no systematic process to compare agreed rates against actual billings, or to track cumulative overcharges across suppliers.

The Discovery

When TrueLens began our Margin Intelligence engagement, we implemented our comprehensive supplier invoice analysis protocol. This involved digitizing and analyzing 18 months of invoices—over 2,400 documents—and cross-referencing every line item against contracted rates and market benchmarks.

The primary fabric supplier was the worst offender. They had been incrementally raising prices on premium fabrics by 3-7% above contracted rates, assuming the brand wouldn't notice small per-unit differences across thousands of meters. Over 18 months, these "small" differences had accumulated to over ₹95 lakh in overcharges from this single supplier.

The packaging suppliers had taken a different approach: billing for 10-15% more cartons and poly bags than were actually delivered. When we cross-referenced shipping manifests with packaging invoices, the discrepancy was stark and undeniable.

Perhaps most concerning was the discovery of "adjustment invoices"—small billing documents for ₹15,000-25,000 each, appearing monthly, for vague services like "quality coordination" or "expedited processing" that had never been contractually agreed upon. These alone totaled ₹18 lakh over the analysis period.

The Solution

Armed with comprehensive documentation of the overcharges, we helped the brand take a structured approach to recovery and prevention:

• Formal documentation: We prepared detailed reports showing every discrepancy, organized by supplier, with supporting invoice copies and contract references.
• Supplier confrontation strategy: Rather than immediately threatening legal action, we recommended a commercial approach—presenting the findings and offering suppliers an opportunity to make things right through credit notes.
• Renegotiation leverage: The documented overcharges gave the brand significant leverage to renegotiate future contracts at more favorable rates.
• New vendor audit process: We implemented a monthly invoice verification system with automated flagging of rate deviations, quantity mismatches, and unauthorized charges.

The suppliers, faced with irrefutable evidence and the threat of losing a ₹32 crore account, agreed to issue credit notes covering the majority of identified overcharges. The primary fabric supplier also offered a 4% reduction on future rates as a gesture of goodwill.

The Results

The financial impact was immediate and substantial:

Beyond the immediate recovery, the ongoing vendor audit process we implemented has prevented an estimated ₹45 lakh in potential overcharges in the six months since implementation. The brand now has complete visibility into supplier billing patterns and automated alerts for any deviations from agreed terms.

"We always suspected something was off, but we never had the time or tools to investigate properly. TrueLens didn't just find the problem—they helped us build a system to ensure it never happens again."

— CFO, Fashion D2C Brand