What Is a Pricing Audit? Performing a Pricing Audit to Maximize Profitability

Making a profit is the main principle of operation of all enterprises, companies, and firms. Determining the competitiveness, payback, and validity of a product or service are the main purposes of a price audit.
A price audit is an analysis that covers different areas of company activities, and takes into account many individual elements.

This article will be devoted to the price audit itself, stages of preparation for it and to its benefits. We hope that after reading this article you will be able to get the maximum profits from the price audit.

In the economic literature, the term "audit" is quite common. Many consider it synonymous with studying, but this is not quite the right way to think about an audit.

Unlike a tax audit, a pricing audit is not a mandatory procedure; it is a voluntary procedure. It is performed when the management of an enterprise (firm, company) desires to improve production performance, as well as identify and eliminate possible shortcomings.

An audit (independent verification) of a marketing pricing policy is a prerequisite for improving the efficiency of pricing processes.

That is, a price audit is a check of your prices and pricing strategy. Your prices must be justified (the product is worth the money) and competitive; in this way, an audit prevents monopolization of the market.

A price audit has many advantages: it helps not only to improve the situation for your particular brand, but also gives a general understanding of what is happening with your industry in the market.

Benefits of Pricing Audits:

- Identifies the strengths and weaknesses of the enterprise.
- Identifies shortcomings in pricing.
- Eliminates pricing errors.
- Prevents new errors.
- Increases sales.
- Maintains your brand image.
- Analyzes consumer price perception.
- Determines the ratio of price to quality of goods.
- Analyzes the company's ability to vary prices.

As we have already mentioned, a price audit is voluntary, but you need to prepare for it in order to increase the effectiveness of the audit.

Since an audit directly affects your pricing strategy, it is important that your strategy meets your corporate goals. Then the audit will bring maximum results.

You need to clearly formulate the goals of your company and convey them to any interested parties. Moreover, you yourself must constantly adhere to your goals.

Goals and objectives drive pricing strategies. Optimum pricing tactics flow from a clearly articulated strategy, and it’s also important to make sure they are communicated clearly to all concerned.

Study the current pricing process, all the transformations that occur with the price, and all the factors that affect the price: discounts, coupons, incentives, competition, and the financial situation of customers. You need to evaluate the entire system within your business (marketing, sales, finance, logistics, and so on); again, everything that affects pricing. This data will help you in the audit process and the formation of a further pricing strategy.

This process should include:

- Interviewing the management team;
- Interviewing the sales team;
- Reviewing pricing across distribution channels;
- Benchmarking your company against direct and indirect competitors;
- Analyzing historical data.

Once the pricing audit is complete and data have been analyzed, opportunities for improvement will be revealed. The number and extent of such opportunities will be directly related to where your company currently resides on the SPMG Pricing Pyramid (Strategic Pricing Management Group Pricing Pyramid: a tool for building a pricing strategy). The Pyramid can also serve as a useful reminder for unfortunate price concession decisions made under pressure.

Both buyers and sellers, as well as shareholders, benefit from a price audit. It becomes more convenient for customers to interact with you, as you pay special attention to their requirements and needs. They are satisfied and make more purchases from you. You get more profit, as well as a good reputation in the market. The development of your brand will arouse investors' interest, satisfaction with profits, and motivation to invest more.

Thus, a price audit is able to reflect the true value of your product or service, and everyone benefits from it.

A price audit is a procedure that helps you improve your business. Of course, it is voluntary, but like other tools for brand analysis, such as a price waterfall or price optimization, a price audit is needed first of all so that your business and your customers are all satisfied with the prices.

Moreover, a price audit serves to formulate a competent pricing policy, and this is the key to obtaining maximum profit. Therefore, this procedure should not be neglected; moreover, an audit can be carried out regularly, since the market is constantly changing, which means that your pricing strategy can be improved.

A price audit includes a set of various operations, and Priceva’s Competitor Price Monitoring service will be able to complement your audit.

The ultimate goal of a pricing audit is to ensure the competitiveness of a company's products in the market of goods and services.

A price audit takes three major steps: first, the pricing strategy and goals are laid down. Then, the relevant data to understand the current practices is analyzed. Lastly, areas for improvement are identified.

Price audits help to confirm the competitiveness of prices: the price/quality ratio.

There are three main types of audits: external audits, internal audits, and Internal Revenue Service (IRS) audits.

External audits are commonly performed by Certified Public Accounting (CPA) firms and result in an auditor's opinion which is included in the audit report.

An unqualified, or clean, audit opinion means that the auditor has not identified any material misstatement as a result of his or her review of the financial statements.

External audits can include a review of both financial statements and a company's internal controls.

Internal audits serve as a managerial tool to make improvements to processes and internal controls.