The struggle of GICs to protect profit margins

Consumer packaged goods (CPG) brands walk a fine line of profit and loss in their efforts to establish and maintain storage space in a hyper-competitive retail environment. Managing deductions plays an important role in protecting profitability – in fact, deductions represent 15-20% of brand revenue.

Validating deductions and managing discrepancies with merchants is cumbersome and time-consuming. AR analysts are tasked with processing thousands of deductions across multiple retailer formats, leaving no time to act on invalid or avoidable deductions – which account for 15-25% of all deductions.

The key to preventing unnecessary margin erosion

There’s one thing that stands between GICs and maximum cash recovery: automation. Introducing automation and AI to deduction management can protect profit margins by transforming the process of manually managing deductions from start to finish.

Increase productivity and efficiency right from the start

From the moment GICs receive deductions from retailers, automation can be leveraged to extract insights and prioritize claims. This seemingly simple step can save analysts a lot of time. However, only 26.6% of brands have automated this step according to industry research.

Brands should take this into account – as many retailers have strict dispute windows, the time saved could make up the difference in money collected or left on the table.

Automation and cross-team collaboration go hand in hand

Once deductions are coded instantly, analysts can continue to leverage automation to validate claims. Validation requires AR analysts to work with other internal stakeholders to research and collect supporting documentation. This back and forth can be eliminated with an automated solution, but only 19.5% of CPGs have automated support document collection.

Once the supporting documents have been collected, they are analyzed and matched to the claim. If the deduction is invalid, even more back and forth may be needed to prepare for litigation.

Automated deduction management solutions provide a single source of truth for all documents and information, helping to simplify this complicated process. Many solutions also allow multiple users to access a shared dashboard, providing organized workflows, clear accountability, and seamless communication across teams. It’s a powerful capability, and the benefits of AI and automation don’t stop there.

What’s better than getting the deductions back? Prevent deductions in the first place

Valid inferences are arguably even more critical than invalid inferences. By automating validation and parts of the dispute process, AR analysts can leverage the data and insights made possible by a centralized system for all inference information. This data can illuminate internal inefficiencies and, coupled with better collaboration between teams, CPGs can prevent future deductions from occurring in the first place. For example, packaging errors or shipping delays can cause many deductions, and AR teams can work with operations to correct them.

Maximize hard-earned relationships with retailers

Beyond prevention, automated deduction management solutions can provide powerful insight into retailer performance that allows CPGs to focus on improving and nurturing these valuable relationships. Insights into specific retailer deduction trends can also enable teams to make informed decisions in unique circumstances, such as how to allocate limited product in a supply chain crisis. On the other hand, the data can also reveal trends in how well AR teams are collecting money from each retailer.

Don’t wait to reap the benefits

From extraction, validation and recovery to providing information to inform prevention, opportunities for improvement and relationships with retailers, introducing data and automation in the management of deductions should be obvious. However, many brands are slow to invest. Some brands only automated part of the process and 24% did not automate any step.

About the Author

John Helmle is Executive Vice President and President, Fintech for Inmar. A long-time member of Inmar’s finance team, John is responsible for ensuring superior execution of Inmar’s finance workflow and payment processing on behalf of customers in the B2B, B2C and G2C segments while delivering the best possible return on investment from customers’ investments with Inmar. John’s professional experience as a finance and accounting executive is extensive and includes extensive development and management of large-scale B2B settlement and payment platforms. John holds an MBA from Williams College of Business at Xavier University and a Bachelor of Science in Accounting from Northern Kentucky University. He is a Certified Public Accountant, licensed in the State of Kentucky.

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