Chargebacks: Accounting or Replenishment?

Author: 8th and Walton

accounting

Retailer deductions can cost suppliers way too much. Often, the source of the problem is in the accounting. Numbers from invoices and purchase orders have to match, so a slip that changes one digit can result in invalid chargebacks. Walmart’s accounting requirements are strict, and they’re different from other retailers, so it’s easy to have a small error in accounting, and that small error will often lead to deductions.

Getting into the accounting and tracking down the error — whether it’s on the supplier’s side or the retailer’s — can be time consuming. Even if the error is found, drilling down to the root cause can take even more time.

If no error is found in accounting after extensive work, a smaller supplier might feel that taking the deduction will cost less in the end than diverting team members to the task of continued searching. Needles in haystacks start to come to mind.

Recently, a supplier came to 8th & Walton with just this challenge. Invoices and purchase orders all seemed to be correct, and the supplier couldn’t find the accounting error.

That’s because there was no accounting problem.

8th & Walton determined that the chargeback issue began with replenishment. It may be surprising to hear that deductions were related to replenishment, but there are plenty of possible points of failure there. A product pack that contains a different number of items than what’s on the paperwork, an item number that doesn’t match, even an RFID label misplaced on a package can create errors that trigger a deduction.

8th & Walton provided a replenishment expert to support the supplier through an examination of the parts of the supply chain that were exposing the supplier to deductions. Correctly identifying the root cause of the deductions and putting systems in place to correct the issues provided excellent ROI.

Takeaways for suppliers:

  • Systems throughout supply and retailing are often interconnected. Look beyond the obvious when seeking the cause of a challenge like deductions.
  • Be conscious of your entire supply chain. Issues that arise on the other side of your doorstep can have consequences for your company.
  • Don’t hesitate to reach out to experts. 8th & Walton’s experts are often able to identify issues much faster and more cost effectively.

Contact us today to learn more about how we can help you.

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