JTPP: Elevating Deduction Management Roles

Feb 26, 2009

By John Walsh

a special arrangement, presented here for discussion is an excerpt of a
current article from The Journal of Trading Partner Practices (JTTPP),
the official online publication of the Vendor Compliance Federation (VCF),
the Trade Promotion Management Associates (TPMA), and the Federation of
Credit and Financial Professionals (FCFP).

As the transformation
from manual to automated deduction management systems becomes more prevalent
in the consumer products industry, the skills required of credit and financial
professionals is likewise evolving with the times. According to Yessine Alvarez, director of client services at Smyth Solutions, “the
demand for human capital has been characterized by the need to acquire
employees with greater analytical and managerial skills, since most of
the processing is done by the automated systems.”

Ms. Alvarez, who is also
president of the Federation of Credit and Financial Professionals (FCFP),
said the trend of companies consolidating back office or revenue functions
and creating shared service and customer financial service organizations
is happening more and more. She added that the actual skill set of staffs
and departments is shifting from training in the discipline of managing
deductions to technology and system training.

Ms. Alvarez noted that
the technology has become so sophisticated that much of the A/R and deduction
reconciliation functions that required a great deal of human intervention
in the past are being automated via A/R workflow systems. Therefore the
skill sets of those employed in the field are changing.

Managers who previously
were not involved in chargebacks can step into
the position of a chargeback specialist by understanding the details of
an A/R/ workflow system. Technologies that provide workflow and reconciliation
can allow a staff member to process a deduction using detailed, matched
and reconciled information, whether it’s a shortage, deduction, returns
deduction, etc. Such systems can save companies hundreds of thousands if
not millions of dollars by better matching and reconciliation; however
they will require current staff to understand technology and to elevate
their roles to more strategically manage business processes.

Increased regulatory
compliance requirements (such as Sarbanes-Oxley) will also speed the movement
toward automated workflow programs. Ms. Alvarez noted that those who manage chargebacks and
deductions have visibility and awareness into company errors and shortcomings
as well as into the specific requirements of their retail customers, which
may be the most valuable knowledge managers have because it provides insight
into other departments and facets of the organization. Leveraging the opportunity
that technology brings to get away from transaction-based work and further
into strategic business-process change management associated with reducing chargebacks can
enable individuals steeped in chargeback knowledge to create a broader
role for themselves within their organizations.

Discussion Question:
What shortcomings have you noticed in how vendors are handling chargebacks and deductions? How will the arrival of automated
deduction management systems impact the deduction management process
and vendor/retail relations? How might the duties of credit and financial
professionals be altered?

Please practice The RetailWire Golden Rule when submitting your comments.

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4 Comments on "JTPP: Elevating Deduction Management Roles"

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Mark Lilien
13 years 2 months ago

Many suppliers don’t try to reconcile a monthly statement with their customers. When a reconciliation is attempted, say once a year or even less often, it’s unbelievably difficult, if not impossible. Too much time goes by. It’s surprising (to me) how often this happens. Decade after decade, the same process issues repeat.

Bill Bittner
Bill Bittner
13 years 2 months ago

The simplest way for everyone to manage chargebacks and deductions is to begin with an identifier for both costs and discounts. For costs, this is a price list number or version. For discounts this is a deal sheet number. Product related deductions should be documented at the time of receipt through a driver release document which confirms the missing or rejected product with signatures from both parties. Now, all the information is available to create a fully documented remittance advice with the payment that shows the price list number, the bracket, any deal sheets factored in, and the driver release sheet number. The retailer and vendor should be able to agree on all the adjustments quickly and if someone disagrees, all the information is available to quickly resolve the issue.

Oh what a perfect world!!!

Susan Rider
Susan Rider
13 years 2 months ago

The biggest mistake is the lack of communication and collaboration among retailers/vendors. Some vendors just take it even when they feel they are in the right and shrug it off as a cost of doing business. Others try to fight it, leaving a contentious relationship. I had a customer doing a laborious process three years after the vendor didn’t need it anymore.

Lack of communication is rampant. Having software to automate the process may help in some situations but may make it extremely difficult in others. I agree with Ryan; Garbage Into System, Garbage Out!

Ryan Mathews
13 years 2 months ago

The central problem lies in the arbitrary guidelines set up around chargeback resolution. Some companies clear all chargebacks below a certain amount. Others turn to their sales and marketing agents to resolve the issues for them. Automating the process doesn’t do anything except speed up things. If you’re speeding up a bad model you just end up doing the wrong thing more efficiently.


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