Implementing Discount Authorization Rules: Control Pricing with Confidence
Introduction
Discount management is a critical control point for profitability. Uncontrolled discounting erodes margins, creates pricing inconsistency, damages brand value, and can lead to significant revenue loss. Yet salespeople need flexibility to close deals, respond to competitive pressure, and reward loyal customers.
The challenge: How do you empower salespeople with discount flexibility while maintaining pricing discipline and protecting profitability?
Traditional approaches rely on manual approval workflows, post-transaction review, or rigid percentage caps that don't account for context. These methods are slow (delay deals), inconsistent (different managers apply different standards), error-prone (approvals get missed), and frustrating for both sales teams and management.
Automated discount authorization rules provide a better solution: real-time validation based on salesperson authority, product category, customer type, and business context. Rules enforce policy consistently, provide immediate feedback, route exceptions for approval, and maintain complete audit trails—all without slowing down legitimate transactions.
This comprehensive guide covers discount authorization strategy, implementing authority-based rules, product and customer-specific controls, approval workflows, profit protection mechanisms, and practical patterns for balancing sales flexibility with financial discipline.
The Business Problem: Uncontrolled Discounting
Financial Impact of Excessive Discounts
Example: Margin erosion through unauthorized discounting
Common Discount Control Problems
1. Inconsistent pricing:
2. Lack of accountability:
3. Slow approval processes:
4. Below-cost sales:
Discount Authorization Strategy
Discount Authority Framework
Multi-dimensional authorization:
Discount Tiers
Example: Salesperson authority levels
Level | Title | Max Discount | Conditions |
|---|---|---|---|
1 | Junior Sales | 10% | All products |
2 | Sales Representative | 20% | Standard products, 15% premium |
3 | Senior Sales | 30% | Standard, 20% premium, 10% new products |
4 | Sales Manager | 40% | All products, can override below cost |
5 | Sales Director | 50% | All products, strategic accounts |
Example: Product category restrictions
Product Category | Max Discount | Reason |
|---|---|---|
Standard Products | 40% | High margin, competitive |
Premium Products | 20% | Brand positioning, lower margin |
New Products | 15% | Market development, protect positioning |
Clearance Items | 60% | Inventory reduction priority |
Custom/Build-to-Order | 10% | High cost, limited flexibility |
Authority Matrix
Combined salesperson × product authorization:
Standard Products | Premium Products | New Products | Clearance | |
|---|---|---|---|---|
Junior | 10% | 5% | 0% | 20% |
Standard | 20% | 15% | 10% | 30% |
Senior | 30% | 20% | 15% | 40% |
Manager | 40% | 30% | 20% | 60% |
Implementation: Basic Discount Authorization
Rule Set 1: Simple Discount Limit by Salesperson
Rule Set 2: Product Category-Based Limits
Placeholders Used in This Rule:
[37:1]- Sales Line (Table 37): Document Type (Field 1) - Type of sales document[37:11]- Sales Line (Table 37): Line Discount % (Field 11) - Discount percentage[27:3]- Item (Table 27): No. (Field 3) - Item number[27:Description]- Item (Table 27): Description - Item description[27:CustomProductCategory]- Item (Table 27): Custom field for product category{[37:11] - 20}- Calculated expression: Discount amount over limit
Rule 2: New Products Protected Pricing Scenario 1: [27:CustomProductCategory] is 'New Product' Scenario 2: [37:11] is >15 Action: Error - "New products have maximum discount of 15% during launch period.
Item: [27:3] ([27:Description]) Category: New Product (launched [27:CustomLaunchDate]) Current discount: [37:11]% Maximum allowed: 15%
New product pricing is protected for first 180 days to establish market value. Current age: [DaysSinceLaunch] days. Protection expires: [ExpirationDate].
Reduce discount to 15% or contact Product Manager for exception approval."
Rule 3: Clearance Items Higher Discount Allowed Scenario 1: [27:CustomProductCategory] is 'Clearance' Scenario 2: [37:11] is >60 Action: Warning - "Clearance item discount [37:11]% is very high.
Item: [27:3] ([27:Description]) Category: Clearance Current discount: [37:11]% Suggested maximum: 60%
Clearance items allow deep discounts for inventory reduction, but [37:11]% is exceptionally high. Verify pricing is correct and profitability is acceptable before proceeding."
Rule 4: Standard Products Normal Rules // Standard products use salesperson authority limits (covered in Rule Set 1) // No additional product-specific restrictions
Rule Set: DISCOUNT-AUTHORITY-MATRIX Trigger Table: 37 (Sales Line) Trigger Event: Before Insert, Before Modify Linked Tables: Sales Header (36), Salesperson (13), Item (27)
Scenarios:
[37:1] is 'Order'
[37:11] is >0
Rule 1: Junior + Standard Product (10% max) Condition: [13:CustomLevel] is 'Junior' AND [27:CustomCategory] is 'Standard' AND [37:11] is >10 Action: Error - "Discount [37:11]% exceeds authorization. Authority: Junior salesperson on Standard products = 10% max Current discount: [37:11]%"
Rule 2: Junior + Premium Product (5% max) Condition: [13:CustomLevel] is 'Junior' AND [27:CustomCategory] is 'Premium' AND [37:11] is >5 Action: Error - "Discount [37:11]% exceeds authorization. Authority: Junior salesperson on Premium products = 5% max Current discount: [37:11]% Premium products require senior salesperson for higher discounts."
Rule 3: Standard + Premium Product (15% max) Condition: [13:CustomLevel] is 'Standard' AND [27:CustomCategory] is 'Premium' AND [37:11] is >15 Action: Error - "Discount [37:11]% exceeds authorization. Authority: Standard salesperson on Premium products = 15% max Current discount: [37:11]%"
Rule 4: Senior + Premium Product (20% max) Condition: [13:CustomLevel] is 'Senior' AND [27:CustomCategory] is 'Premium' AND [37:11] is >20 Action: Error - "Discount [37:11]% exceeds authorization. Authority: Senior salesperson on Premium products = 20% max Current discount: [37:11]% Discounts above 20% on Premium products require Sales Manager approval."
// Additional rules for all combinations...
Rule Set: DISCOUNT-CUSTOMER-ADJUSTMENTS Trigger Table: 37 (Sales Line) Trigger Event: Before Insert, Before Modify Linked Tables: Sales Header (36), Customer (18), Salesperson (13), Item (27)
Scenarios:
[37:1] is 'Order'
[37:11] is >0
Rule 1: VIP Customers Higher Authority Condition: [18:CustomCustomerTier] is 'VIP' AND [13:CustomLevel] is 'Standard' AND [37:11] is >25 // Standard salesperson can do 20% normally, but 25% for VIP customers Action: Error - "Discount [37:11]% exceeds VIP customer authorization.
Customer: [18:2] (VIP tier) Salesperson: [13:2] (Standard level) VIP customer authorization: 25% (vs. standard 20%) Current discount: [37:11]%
VIP customers receive 5% additional discount authority. Reduce discount to 25% or less, or request manager approval."
Rule 2: New Customers Limited Discount Scenario 1: [18:CustomCustomerAge] is <30 Scenario 2: [37:11] is >15 // New customers (less than 30 days) limited to 15% discount Action: Warning - "High discount for new customer.
Customer: [18:2] (account age: [18:CustomCustomerAge] days) Current discount: [37:11]% Recommended maximum for new customers: 15%
New customers typically receive limited discounts until relationship is established. Confirm this discount is appropriate."
Rule 3: Enterprise Customers Volume Discount Condition: [18:CustomCustomerTier] is 'Enterprise' AND [37:15] is >100 AND [37:11] is >30 // Enterprise customers get volume discounts, but still limit at 30% Action: Warning - "Enterprise customer volume discount [37:11]% is high.
Customer: [18:2] (Enterprise tier) Order quantity: [37:15] units Discount: [37:11]%
Enterprise volume orders allow higher discounts, but [37:11]% should be verified for profitability. Confirm margin is acceptable."
Rule 4: Government Customers Compliance Condition: [18:CustomCustomerType] is 'Government' AND [37:11] is >[18:CustomGSADiscount] // Government customers must receive consistent GSA schedule pricing Action: Error - "Government customer discount must match GSA schedule.
Customer: [18:2] (Government) GSA Schedule Discount: [18:CustomGSADiscount]% Current discount: [37:11]%
Government customers must receive consistent GSA contract pricing. Set discount to [18:CustomGSADiscount]% to comply with contract terms."
Rule Set: DISCOUNT-ORDER-VALUE-AUTHORITY Trigger Table: 37 (Sales Line) Trigger Event: Before Insert, Before Modify Linked Tables: Sales Header (36), Salesperson (13)
Scenarios:
[37:1] is 'Order'
[37:11] is >0
Rule 1: High-Value Orders Require Higher Authority Scenario 1: [36:109] is >50000 Scenario 2: [13:CustomLevel] is <>'Manager' Scenario 3: [37:11] is >20 // Orders over $50K with >20% discount require manager Action: Error - "High-value orders with significant discounts require manager authorization.
Order Total: $[36:109] Line Discount: [37:11]% Salesperson: [13:2] ([13:CustomLevel])
Orders over $50,000 with discounts exceeding 20% must be reviewed and approved by Sales Manager due to significant revenue impact.
Reduce discount to 20% or less, or request manager approval at ext. 5000."
Rule 2: Large Orders Enable Higher Discount Scenario 1: [36:109] is >100000 Scenario 2: [13:CustomLevel] is 'Senior' Scenario 3: [37:11] is >30 Scenario 4: [37:11] is <=35 // Senior salespeople can go to 35% (vs. normal 30%) on large orders Action: Message - "Large order volume discount applied.
Order Total: $[36:109] Salesperson: [13:2] (Senior) Standard authority: 30% Large order authority: 35% Current discount: [37:11]%
Senior salespeople have extended authority (up to 35%) for orders over $100,000 to enable volume discount negotiations."
Rule 3: Small Orders Limited Discount Scenario 1: {[37:15] * [37:22]} is <500 // Line value under $500 Scenario 2: [37:11] is >25 // Discount over 25% Action: Warning - "High discount on low-value line.
Line Value: ${[37:15] * [37:22]} Discount: [37:11]% Discounted Value: ${[37:15] * [37:22] * (100 - [37:11]) / 100}
Steep discounts on small orders create minimal revenue with high processing costs. Consider minimum order value or reduce discount."
Rule Set: DISCOUNT-PROFIT-PROTECTION Trigger Table: 37 (Sales Line) Trigger Event: Before Insert, Before Modify Linked Tables: Sales Header (36), Item (27), Salesperson (13)
Scenarios:
[37:1] is 'Order'
[37:11] is >0
Rule 1: Below Cost Hard Stop (Non-Managers) Scenario 1: {[37:22] * (100 - [37:11]) / 100} is <[27:22] Scenario 2: [13:CustomLevel] is <>'Manager' // Discounted price < unit cost, salesperson not manager Action: Error - "BELOW COST: Discount results in selling below cost.
Item: [27:3] ([27:Description]) Unit Price: $[37:22] Discount: [37:11]% Discounted Price: $([37:22] * (100 - [37:11]) / 100) Unit Cost: $[27:22] LOSS PER UNIT: $([ 27:22] - [37:22] * (100 - [37:11]) / 100)
Selling below cost is not authorized. Reduce discount or contact Sales Manager for strategic pricing exception approval.
Minimum discount to avoid loss: ([27:22] / [37:22] * 100 - 100)%"
Rule 2: Below Cost Manager Warning Scenario 1: {[37:22] * (100 - [37:11]) / 100} is <[27:22] Scenario 2: [13:CustomLevel] is 'Manager' // Managers CAN sell below cost but get warning Action: Warning - "WARNING: Below-cost pricing.
Item: [27:3] Discounted Price: $([37:22] * (100 - [37:11]) / 100) Unit Cost: $[27:22] Loss per unit: $([ 27:22] - [37:22] * (100 - [37:11]) / 100) Total line loss: $(([27:22] - [37:22] * (100 - [37:11]) / 100) * [37:15])
Managers can approve below-cost pricing for strategic reasons (competitive response, market entry, customer retention, bundled offers). Document business justification for this exception."
Rule 3: Minimum Margin Requirement Condition: ([37:22] * (100 - [37:11]) / 100 - [27:22]) / [37:22] is <0.15 // Margin less than 15% Action: Warning - "Low margin alert.
Item: [27:3] Unit Price: $[37:22] Discount: [37:11]% Unit Cost: $[27:22] Margin $: $([37:22] * (100 - [37:11]) / 100 - [27:22]) Margin %: (([37:22] * (100 - [37:11]) / 100 - [27:22]) / [37:22] * 100)%
Company target margin is 15% minimum. This line has ([...calculation...]% margin. Verify pricing is appropriate for business objectives."
Rule 4: Clearance Items Can Sell Below Cost Scenario 1: {[37:22] * (100 - [37:11]) / 100} is <[27:22] Scenario 2: [27:CustomCategory] is <>'Clearance' // Below cost but NOT clearance item Action: Error - "Below-cost pricing only allowed for Clearance items.
Item [27:3] is category '[27:CustomCategory]' (not Clearance), but pricing is below cost. Change item category to Clearance if this is liquidation pricing, or increase price above cost."
Rule Set: DISCOUNT-VOLUME-VALIDATION Trigger Table: 37 (Sales Line) Trigger Event: Before Insert, Before Modify
Rule 1: Volume Discount Tiers Scenario 1: [37:15] is 21..50 // Quantity 21-50 (use range operator) Condition: [37:11] is >15 Action: Warning - "Discount [37:11]% exceeds volume tier 1 (15% for 21-50 units). Quantity: [37:15] units Suggested discount: 10-15% Confirm higher discount is justified."
Rule 2: High Volume Tier 2 Scenario 1: [37:15] is 51..100 // Quantity 51-100 (use range operator) Condition: [37:11] is >25 Action: Warning - "Discount [37:11]% exceeds volume tier 2 (25% for 51-100 units). Quantity: [37:15] units"
Rule 3: Enterprise Volume Scenario 1: [37:15] is >100 Condition: [37:11] is >35 Action: Warning - "Discount [37:11]% exceeds volume tier 3 (35% for 100+ units). Quantity: [37:15] units"
Rule 4: Small Quantity High Discount Scenario 1: [37:15] is <5 // Low quantity Condition: [37:11] is >20 Action: Warning - "High discount [37:11]% on small quantity ([37:15] units). Volume discounts typically apply to larger quantities. Confirm discount is appropriate for this order size."
Rule Set: DISCOUNT-APPROVAL-WORKFLOW Trigger Table: 37 (Sales Line) Trigger Event: Before Insert, Before Modify Linked Tables: Sales Header (36), Salesperson (13), Item (27)
Rule 1: Route to Manager for Approval Scenario 1: [37:11] is >[13:CustomMaxDiscount] Scenario 2: [37:11] is <=40 // Exceeds salesperson authority but within manager authority Action: Email to [13:CustomManagerEmail] Subject: "Discount Approval Request - Order [36:3]"
Body: "Discount approval request from [13:2]:
Order: [36:3] Customer: [Customer name] Item: [27:3] - [27:Description] Quantity: [37:15] Unit Price: $[37:22] Requested Discount: [37:11]% Discounted Price: $([37:22] * (100 - [37:11]) / 100)
Salesperson Authority: [13:CustomMaxDiscount]% Overage: ([37:11] - [13:CustomMaxDiscount])%
Cost: $[27:22] Margin at Requested Discount: (([37:22] * (100 - [37:11]) / 100 - [27:22]) / [37:22] * 100)%
Click here to approve: [Approval Link] Click here to reject: [Reject Link]"
Rule 2: Block and Require Director Approval Condition: [37:11] is >40 // Exceeds even manager authority Action: Error + Email
Error: "Discount [37:11]% requires Sales Director approval.
This discount exceeds manager authority (40% maximum). Order has been held pending director review.
Approval request sent to Sales Director. You will be notified when decision is made."
Email to sales.director@company.com: "Director-level discount approval required..."
Rule 3: Approval Granted (Custom Action) // This requires custom implementation or integration Condition: [37:CustomApprovalStatus] is 'Approved' Action: Message - "Discount approved by [37:CustomApprovedBy] on [37:CustomApprovalDate]. Proceeding with discount of [37:11]%."
Rule 4: Approval Denied Condition: [37:CustomApprovalStatus] is 'Rejected' Action: Error - "Discount request was rejected by [37:CustomRejectedBy]. Rejection reason: [37:CustomRejectionReason] Reduce discount to authorized level ([13:CustomMaxDiscount]%) or contact manager to discuss."
Rule Set: DISCOUNT-REASON-REQUIRED Trigger Table: 37 (Sales Line) Trigger Event: Before Insert, Before Modify
Rule 1: High Discount Requires Reason Scenario 1: [37:11] is >25 Scenario 2: [37:CustomDiscountReason] is '' Action: Error - "Discounts over 25% require documented justification.
Current discount: [37:11]% Discount reason: (blank)
Select discount reason from list:
Competitive match
Volume discount
Loyalty/retention
Promotional campaign
Clearance/liquidation
New customer acquisition
Strategic account
Other (specify)
Documenting discount reasons enables analysis of discount effectiveness and ensures accountability."
Rule 2: Competitive Match Requires Proof Condition: [37:CustomDiscountReason] is 'Competitive Match' AND [37:CustomCompetitorPrice] is 0 Action: Warning - "Competitive match discounts should document competitor pricing.
Discount reason: Competitive Match Competitor price: (not documented)
Enter competitor's price in Competitor Price field to support competitive match justification and enable price analysis."
Rule 3: Volume Discount Minimum Quantity Scenario 1: [37:CustomDiscountReason] is 'Volume Discount' Scenario 2: [37:15] is <20 Action: Warning - "Volume discount reason selected but quantity is only [37:15] units.
Volume discounts typically apply to orders of 20+ units. Verify discount reason is correct."
Average Discount by Salesperson
Identifies outliers (too high or too low)
Training opportunities
Discount by Product Category
Margin protection effectiveness
Product positioning insights
Discount Authorization Override Rate
How often rules are bypassed
Policy adjustment needs
Below-Cost Sales Frequency
Strategic pricing analysis
Margin protection effectiveness
Approval Request Response Time
Workflow efficiency
Bottleneck identification
Discount Reason Distribution
Most common justifications
Competitive pressure indicators
Report 1: Unauthorized Discounts
Discounts exceeding authority (should be zero with rules in place)
Manual overrides and approvals
Compliance rate
Report 2: Margin Analysis by Salesperson
Average margin %
Below-cost transaction count
Profit contribution
Report 3: Discount Trends
Average discount % over time
By product category
By customer segment
Seasonal patterns
Report 4: Approval Workflow Performance
Average approval time
Approval vs. rejection rate
Escalation frequency
Test 1: Within Authority Salesperson: Junior (10% max) Discount: 10% Expected: Allow, no error
Test 2: Exceed Authority by 1% Salesperson: Junior (10% max) Discount: 11% Expected: Error, block transaction
Test 3: Premium Product Restriction Salesperson: Standard (20% standard, 15% premium) Product: Premium Discount: 18% Expected: Error (exceeds 15% premium limit)
Test 4: VIP Customer Higher Authority Salesperson: Standard (20% standard, 25% VIP) Customer: VIP Discount: 22% Expected: Allow for VIP (within 25%)
Test 5: Below Cost (Non-Manager) Salesperson: Senior (not manager) Price: $100, Cost: $70, Discount: 35% Discounted Price: $65 (below $70 cost) Expected: Error, block transaction
Test 6: Below Cost (Manager) Salesperson: Manager Price: $100, Cost: $70, Discount: 35% Discounted Price: $65 Expected: Warning (allowed but warned)
Test 7: High-Value Order Escalation Order Total: $75,000 Salesperson: Standard Discount: 25% Expected: Error + Email to manager for approval
Test 8: Volume Discount Tier Quantity: 60 units (tier 2: 25% max) Discount: 23% Expected: Allow within tier
Test 9: Discount Reason Required Discount: 30% Reason: (blank) Expected: Error, require reason
Test 10: Multiple Lines, Mixed Authority Line 1: Standard product, 20% (within authority) Line 2: Premium product, 18% (exceeds 15% premium limit) Expected: Line 1 OK, Line 2 error
Phase 1: Basic salesperson authority limits Phase 2: Add product category restrictions
Phase 3: Add customer-based adjustments Phase 4: Add profit protection rules Phase 5: Fine-tune based on 90 days of data
Too strict: Sales team frustrated, deals delayed, competitive disadvantage Too loose: Margin erosion, inconsistent pricing, profitability issues Right balance: Clear limits with documented exception process
Document authority levels for each role
Explain the business rationale (not arbitrary)
Provide clear escalation process
Offer training on policy and system
Celebrate compliant behavior
Monthly review:
Which rules trigger most often?
Are triggers legitimate or policy too strict?
Are there patterns in exceptions?
What's the approval rate?
Adjust rules based on findings
Poor: "Discount not authorized" Better: "Discount 25% exceeds your 20% authority" Best: "Discount 25% exceeds your 20% authority. Reduce to 20% or request approval from Sales Manager Jane Smith at ext. 5000. Current item: Widget Pro, Qty 10, Price $100."
Before Rules:
Average discount: 28%
Margin: 22%
Below-cost sales: 45/month
Approval time: 24 hours
Pricing disputes: 12/month
After Rules:
Average discount: 23% (more disciplined)
Margin: 28% (6 points improvement)
Below-cost sales: 2/month (strategic only)
Approval time: 2 hours (automated routing)
Pricing disputes: 1/month (consistency)
Annual impact: $450K additional profit on $10M revenue
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