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CPG Deductions Trickery: The real pain of deductions is lost time

We get it, and we agree. It’s unfair how distributors treat their brands and manufacturers regarding deductions.

Manufacturers work their butts off to land a distributor, get them to place a purchase order, and finally ship their product, only to be left holding the proverbial bag of expected cash flow. When invoicing their customers, brands often expect to receive an amount much lower than listed on their initial invoice due to the often convoluted process of deductions. And if they don’t, they are often hit with a surprise (or many surprises) in the form of deductions, which, of course, negatively affects cash flow and limits growth.

Don’t take this as some meaningless mistake by the distributors – they are doing this on purpose. Speaking recently with a large popcorn company in America, we learned they receive deductions in a large paper packet via snail mail. And get this – their distributor is one of the largest in the game. Not surprisingly, it takes them hours to digest and manually enter the details of these documents into their internal systems / ERP (with untold errors). Once they spend hours of processing time, they can finally quantify their deductions, understand why they got less than expected, and ultimately understand their true product margins.

Another brand we spoke with receives their deductions in detailed documents electronically. Sounds great, right? I mean, we’re all using email now, aren’t we?? So we learned this wasn’t so great for this manufacturer. Every document received was different from the last. Meaning that in some months, columns were missing, in other months, column headers were missing, and in other months, the format or spacing between lines changed. The ever-changing nature of their deduction documents leads to processing headaches and slow turnaround times. To make the situation even worse, the slow time it takes to settle their deductions creates significant accrual issues, which force this brand into performing accounting gymnastics to address this.

The real killer here is time. Distributors are forcing manufacturers to focus on something other than the core of their business – producing and selling those products – because they have to deal with deductions trickery.

The team at Adesso hears the industry calling out for a change. Adesso creates software that does the heavy lifting of managing deductions so you don’t have to. No more manual transcription of deduction documents – simply upload and let Adesso transcribe. No time wasted trying to make sense of deduction documents – let Adesso’s reporting show you what deductions to settle to your ERP or dispute with your customer. Aggregating these processes into a single system with the appropriate user permissions can empower your team to manage deductions effectively and efficiently. Connect with our team now to learn how Adesso can work to streamline your deduction management process quickly and holistically. Connect with our team now.