Today’s ultra-competitive business landscape doesn’t leave much room for error. As a business, you can’t afford to throw money down the drain. However, that’s exactly what many companies do when they incur vendor deductions.
In fact, did you know that companies who work with EDI can squander up to 1% of their top line revenue to pay for chargebacks, penalties, and other fees? This is mostly due to inherent flaws in transaction processes—more specifically, a lack of proactive monitoring of late shipments or payments.
That said, not all hope is lost. Solving this issue is possible with the proper tools and a top-down management commitment to implement best practices.
There are three types of vendor deductions: preventable, unauthorized, and authorized. Preventable deductions are usually compliance or data-related errors while unauthorized are classified by shortages or returns. Authorized deductions consist of co-op or discounts that were applied.
Today, many companies find themselves doing business with Amazon, the world’s largest retailer, so we’re going to focus on them for the sake of argument. When we take a look at Amazon chargebacks specifically, we discover fees that can really put a dent in your bottom line. The most commonly cited reason for chargebacks is late, unreadable, missing, or incorrect ASNs or POAs. It’s important to understand that Amazon issues chargeback fees based on the following criteria:
- 1% of cost for late POAs or POA changes
- $5.00 - $150.00 for late ASN
- 2% cost of product: 95-99% compliant ASNs
- 4% cost of product: 70-95% compliant ASNs
- 6% cost of product: less than 70% compliant ASNs
Part of being able to combat these chargebacks is becoming familiar with Amazon’s policies. They require an ASN for each shipment within 30 minutes of truck departure or six hours prior to delivery to a fulfillment center, whichever comes first.
They also require that all missing ASNs be submitted within two weeks (Receipt of Shipment Advice). And when it comes to late POAs (Purchase Order Acknowledgments) they want purchase orders to be confirmed with POAs within 24 hours of arrival. And yes, Saturdays and Sundays are considered business days.
Creating a Culture of Compliance & Empowering Your Staff
So what can you do to combat these strict policies and ultimately avoid the chargebacks? Well, it starts with ingraining compliance into your company’s culture and empowering your team.
Make sure that the person managing your chargebacks has the ability to search, review, and interact with the necessary data and is able to identify exactly why incurred a chargeback.
You should also set up a recurring meeting with every department manager to discuss the chargebacks and their effect on profitability. The communication piece is crucial because most companies work in silos, with one department not having any idea the effect it has on the other. It’s important that all levels of the organization, starting with the executives, be made aware of all chargebacks as soon as they happen so they can focus on mitigation plans.
Working with Your Partners
When managing your chargebacks, it’s important to remember not to work a vacuum. Go to the source and invite your top partners to work with you to address the causes for recurring chargebacks. Most companies continue to deal with them the same way and expect different results—that’s insane!
An easy way to work hand-in-hand with your partner is to make them aware of your document processing schedule. This enables them to work with you to get purchase orders processed as quickly as possible, allowing POAs and ASNs to be sent out quickly.
Remember, you can also challenge the validity of your chargebacks but it takes some time and effort. To do this, make sure you’re documenting all of your issues thoroughly. You’ll need to present solid evidence that the shipment in question was compliant. In most cases, you will likely learn of a chargeback several months and thousands of possible transactions after it happens, so you’ll need documentation or good ways to simply search and review your transactional archives or past orders.
Invest in a Tool to Gain Visibility
If you’re going to invest in a tool to help you combat chargebacks and gain visibility into your supply chain, here are some key features to look for:
- Proactive alerting to identify issues BEFORE chargebacks occur
- Self-service for non-technical users; it should not be a burden for the EDI team
- Collaborative focus, as breakdowns can happen anywhere in the supply chain
- High-level reporting and analytics to identify trends and track improvement
Or you can give Syncrofy a shot.
Designed to add value to any EDI translator, Syncrofy breaks down complex EDI data into usable, easy-to-read insights to help compliance, customer service, finance, and all other departments in your company. In fact, users who don’t normally work with EDI are able to view and share plain English translated versions of native EDI documents and all related transactions.
Ultimately, Syncrofy allows you to interact more closely with your EDI data, allowing you to make faster decisions and avoid costly errors related to your B2B transactions. It also helps you reduce the time-related expenditures of IT by enabling you to directly interact with your EDI data to expedite corrective action, drive more accurate communication, and reduce chargebacks.
To learn more about the power of Syncrofy and what it can do for your business, visit www.syncrofy.com.