Managing deductions is a critical aspect of vendor operations. Left unaddressed, deductions can reduce profit margins and cause cash flow problems. However, not all deductions are treated equally. Some may be easily resolved and recovered, while others may require extensive resources and time.
There are three main types of deduction: Shortages, pricing discrepancies, and compliance issues. Shortage deductions occur when there are quantity discrepancies between orders and received items. Pricing discrepancies are deductions related to discrepancies over pricing, discounts, or promotional deals. Compliance issues arise in any case where a vendor fails to comply with any of the terms and regulations of a retailer.
The difficulty of recovering money varies for each type of deduction. In this blog post, we will discuss how to prioritize deductions based on recovery rates and the difficulty of recovering money from each type.
Shortages:
Shortages have the highest recovery percentage. Vendors should always dispute them. A study shows that you are likely to recover 83% of your shortage claims. It means if you have disputed $100 of claims in Vendor Central, then you will recover $83. Vendors should prepare to submit PODs (proof of delivery) which clearly show that the retailer received your inventory.
Compliance Issues:
Compliance Issues have the second-highest recovery percentage and absolutely should be disputed. There is an extremely high likelihood of successfully disputing chargebacks and recovering 62% of charged-back dollars.
Compliance Issues are usually as follows:
- PO (purchase order) related issues
- Receipt related issues
- ASN (advance shipment notice) related issues
- Transportation-related issues
- Preparation related issues
Providing strong evidence will result in approval of the dispute. Prepare documentation showing fulfillment of the PO, accurate receipts, timely ASN, on-time transportation, and proper preparation. Submit this documentation separately for evaluation of each chargeback. With strong evidence, there is a high chance of positive resolution.
Pricing Discrepancies:
Pricing discrepancies have a very low recovery percentage. Retailers often adjust pricing after purchase order and invoice creation for the salability of the product. Retailer policies in contracts allow price adjustments for discounts or promotional deals. If the invoice cost and Purchase Order cost match, you have a higher chance of a successful dispute.
Final Thoughts:
Vendors should always dispute a deduction to recover revenue. If you have to prioritize a dispute then shortages and compliance issues first. Pricing should be your lowest priority. However, this manual deduction management is resource-intensive and costly.
iNymbus offers a comprehensive solution to address this issue through automation. Our platform is designed to eliminate the manual handling of retailer and shipper claims including Target deductions, Walmart deductions, Amazon deductions, and other 25+ retailers. iNymbus automates the entire claims processing workflow with cloud-based robotic process automation (RPA).
