Some of us have returned or exchanged our holiday gifts. If you’re a CPG manufacturer, you’ve already started getting unexpected gifts from last year’s trade promotions…. deductions.
At the risk of stating the obvious, here are some helpful hints and insights:
- Believe it or not, most deductions are valid. With so many deductions every month, it just feels as if they aren’t valid. The realities of cash flow, and the simplicity of deducting for amounts due have lead most retailers in the US to forgo payment by check.
- While these estimates vary by industry, invalid deductions can still represent a significant opportunity at 2% to 5% of your deductions.
- The chances of getting an invalid deduction repaid improves the faster a manufacturer does the research and communicates the short-pay dispute to the retailer.
- If you have a ‘problem’ customer that has historically double dipped, consider a no-check, deduction-only policy for that customer. You can’t prevent the deduction, but you can choose to avoid this situation; while your check is in the mail, your customer also deducts for the same promotion. You’ve now paid for the promotion twice unless you dispute the short-pay and rebill the customer. The no-check, deduction-only policy works. It’s harder for a customer to defend deducting twice for the same claim, than to say the double dip was just due to timing.
- Manufacturers that have a TPM solution are able to reduce the time it takes to research and dispute promotion related deductions.
If your organization is surprised by deductions, you need a TPM solution. Most deductions are valid, and just another form of payment for promotional activity. A TPM solution keeps track of the bill-backs you still owe, and helps you match the deductions to back to the promotional event.
If you use NetSuite as your ERP, iTPM is a native SuiteApp TPM solution that can prevent those deduction surprises, find the invalid deductions faster and get them repaid.
Alex Ring
President
CG Squared, Inc.