In one sentence
Price protection compensates a distributor or reseller for eligible inventory on hand when the supplier reduces an authorized price, limiting the partner’s loss on previously purchased stock.
What it is
Price protection compensates a distributor or reseller for eligible inventory on hand when the supplier reduces an authorized price, limiting the partner’s loss on previously purchased stock.
Who uses it
Manufacturers, distributors, resellers, channel operations, pricing teams, claims teams, and finance.
How the calculation works
The verified eligible inventory quantity is multiplied by the positive difference between the protected old price and new price, subject to contractual caps and exclusions.
Financial execution
The partner submits inventory evidence, the claim is validated, and the approved amount is settled through a credit memo or other agreed mechanism.
Accounting impact
Price-protection credits commonly reduce revenue and create a customer liability or credit-memo obligation.
Example
A product’s authorized price falls from $120 to $105. A distributor proves 400 eligible units on hand, producing a $6,000 price-protection claim.
Required inputs
- Old and new authorized prices
- Effective date and eligible products
- Partner inventory or recent purchase evidence
- Contract limits, lookback periods, and exclusions
Common rules
- Credit equals eligible quantity multiplied by price decrease
- Inventory ownership and age requirements
- Effective-date and submission windows
- Quantity caps, exclusions, and prior-credit checks
Common exceptions
- Inventory acquired after the price change
- Returned or consigned stock
- Duplicate serials or quantities
- Unsupported inventory
- Claims outside the window
How LicenseIQ supports it
- Stores protected pricing and effective windows
- Validates inventory evidence and claim eligibility
- Calculates credits and flags duplicates
- Connects approval, memo, settlement, and audit evidence
Related concepts