Contributor: Jim Mangano
Many corporations, particularly manufacturers of consumer product goods, medical devices and transportation companies, struggle with adhering to process workflows when managing complex transactions, such as deductions and chargebacks. These transactions often occur in the order-to-cash cycle and can literally drain a corporation’s revenue if not handled properly.
You may be asking, ‘What exactly are deductions and chargebacks?” To clarify, deductions are transactions that typically stem from customer product returns, but can also include errors in price or discount, quantity, tax and freight charges—among others. Chargebacks, on the other hand, can be classified into three primary types, consisting of: intentional chargebacks, or the deals, advertising and promotional allowances that occur between a vendor and a retail organization; preventable chargebacks, including those that involve operational and compliance issues, such as early or late shipments and missing goods; and unauthorized chargebacks, or those that arise from circumstances that are not planned and may not be preventable, such as an unexpected return of a good.
Much of the difficulty involved in managing these complex transactions stems from the numerous steps involved in the routing process, which may include multiple interaction and approval points across manufacturing, shipping, sales and customer service. The process may be further complicated by requirements to establish many different workflow streams based on an array of variables that can include items such as product line, sales area, type of deduction, amount, timeframe and more.
To minimize the costs associated with deductions and chargebacks, corporations need to institute a blend of best practices and technology, which can help optimize processes, lessen processing time and reduce associated costs. In fact, many corporations today are adopting business process management (BPM) solutions, which are specifically configured to address common types of process management that occur during invoice settlement, while also allowing for additional workflows to be built as needed.
BPM solutions offer increased visibility and control around deductions and chargebacks. This insight will guide corporations in identifying process failures, allowing them to establish valuable process changes, which can facilitate improved productivity and minimized revenue leakage. Furthermore, incorporating a BPM solution will help corporations ensure compliance and an audit trail for complex or multi-level approval workflows.
How does your corporation managing deductions and chargebacks? Is this done manually? And, if so, what challenges have you experienced relating to resolving these transactions? Is a BPM solution something you would find useful?