Many distributors and vendors treat customer chargebacks and deductions (or at least a portion of them) as the cost of doing business. But it doesn’t have to be this way! It is possible to both prevent the likelihood of their occurrences, as well as streamline and automate the process of resolving them.
Attain Consulting Group is a deduction management advisory firm dedicated to helping companies improve profitability by reducing and controlling chargebacks and deductions. Founded by Jessica Butler, Attain Consulting prides itself in providing clients with practical, experience-based solutions to address their deduction management and compliance challenges to help companies “Take Control of Deductions.” In their comprehensive 2021 Deduction Survey, data from over 200 companies was gathered to help guide evaluation of your own company's deduction management processes.
A new question added to the survey that we thought was particularly interesting asking companies how well they are able to comply with the mandated timeframes for their customers 'dispute window." 26% reported that despite efforts to prioritize, they are often outside of the customers' dispute window, and of that 26%, nearly half either the customer does not accept or companies simply write off.
A staggering figure that carried over from the previous survey is that only up to 10% of claims are valid, meaning the other 90% of claims are left for the supplier to dispute. Respondents had a 60% recovery rate on average. Attain says the biggest challenges in processing deductions and chargebacks are internal challenges. Deductions are, frankly, a company-wide issue.
There are two main tactics that help take the frustration and sting out of chargebacks and deductions: Prevent them from happening in the first place, and when they do occur, clear them up as quickly as possible.
Attain asked respondents to share their strategies for preventing and resolving deductions so that others may consider this in their own improvement efforts. The top 5 actions reported by all respondents are illustrated below:
Chargeback and Deduction Prevention Steps
Chargeback and Deduction Resolution Steps
A company’s internal communication and cooperation between departments are instrumental in the prevention and resolution of chargebacks and deductions. When Attain asked companies their biggest internal challenge when trying to control deductions, a third of respondents reported "cross-departmental cooperation." "Lack of resources" and "access to information" followed as the second most popular answers, receiving 28% and 15% of responses, respectively.
Attain found that companies surveyed frequently stated that their existing ERP systems and A/R packages do not provide the functionality necessary to effectively manage deductions. Whether it is the ability to track the status of a deduction throughout the process, edit reason codes, or automatically pull customer claim information or signed PODs from portals, Attain found the traditional systems of many companies fall short.
An excellent starting point in assessing your company’s current deduction performance is to review Attain’s deduction maturity model. This model is provides a fantastic overview for reviewing existing processes and benchmarks. For a full copy of the detailed 2021 benchmark survey, simply request it HERE.
Implementing a 3rd party technology solution such as iNymbus can automate the manual activities associated with deduction management, by disputing and resolving chargebacks and deductions for you. In one example, a book distributor successfully cut their chargeback and deduction processing costs by 80%!