Avoid invoice chargebacks deductions fines

  March 16, 2012       By Ray Atia
In Vendor Management, it is absolutely crucial to try and avoid chargebacks, deductions, invoice offsets. As a supplier, it is hard to keep up with your retailers wants. This is why they charge a small fee or price with every order made (if they do this to every single order, imagine how much they make when buying bulk) so that they can keep up and make a profit. About 3 to even 4% from your own sales will evaporate in front of your eyes. There are many reasons why companies lose to charge backs, such as executive direction, scale, understanding charge back process, and remediation. Executive direction is when the executives do not have "operational" experience to realize that charge backs have to be addressed by things like IT, logistics, sales, etc. Scale is when the company sees and diagnoses the charge back as only one violation. Understanding charge back process is a process that only a few companies realize enough to thrive; normally it is just having planned documents and examines how it changes per trading partner. Remediation is when a company receives a chargeback, makes the correction, and then a few months later become a victim to the same retailer or a new one, with the same issue. As you can see, its a very difficult and confusing process if not done correctly or with precaution. There are simple ways to help mitigate charge backs, and it helps carry out Return on Investment (ROI). First, organize a team with executive leadership (it is recommended to have IT, logistics, accounting, etc. for a secure and professional start), then start to work on identifying the most common charge back types and create a plan for corrections that you can follow up periodically. Then, get help reporting a solution for tracking your order to cash process, it is important that the correct people are subscribing to the alerts. Lastly, insure that your guidelines (everything) are up to date (assigning someone to check is a great way to be certain). Its very important to know how much charge backs can cost and how it can affect your company its overall impact. Reducing your charge-backs will speed up a accounts (your accounts receivable). It truly is a very annoying process overall, but if not properly taken care of, it will come back and back again when it is so easily preventable if done right.