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VENDORCOMPLIANCE.INFO

Specializing in EDI and vendor compliance for manufacturers, distributors, &  retailers.

BENEFIT - Avoiding Chargebacks

By complying with your customer's requirements, you will avoid the chargebacks (financial penalties for non-compliance) that your customer assess.  Please make sure that you are fully aware and have reviewed your customer's chargeback schedule so you understand how you can be penalized for non-compliance.  The charge-back schedule is a good checklist for identifying processes in your internal operations and computer systems that need to be improved to avoid charge-backs.

Typically, chargebacks are simply taken off a payment (deducted from the check) when your customer pays one or several of your invoices.  The reconciliation of charge-backs becomes tricky as the chargeback might reflect a shipment or order several weeks or several months ago that is not related to the invoices currently being paid!  

The charge-back will typically reference a customer purchase order number, a shipment bill of lading number, or a customer-assigned cross-reference number, as well as the type of chargeback being assesses (i.e. bad barcode labels, wrong transportation carrier used, etc.).

You might be required to research the original purchase order in your sales order system, the shipment information in your shipping system, or when a document was sent or received in your EDI system, as well as look back through sales order and shipment documentation.  As many people know, the old saying "the customer is always right" is not always correct - sometimes the retailers make a mistake and assess a charge-back incorrectly.  It is therefore very important that computers systems and filing cabinets be accessible and organized to permit charge-back research.  

Chargeback auditing is an absolute necessity within a business that sells to retailers with vendor compliance requirements.  A chargeback, especially one that is assessed over and over again, can point to problems in an internal operation of a company.  Chargeback assessment should not be used to hunt for the employee to be blamed for the mistake, but rather to make sure that internal operations and computer systems are corrected and employees are properly trained so that the charge-back is avoided in the future. 

A company cannot simply "write-off" charge-backs to some mystery general ledger account and bury them in the accounting books!  Chargebacks increase the cost-of-goods sold and can lead the way to improving processes in the internal operations and computer systems of a company.

As a final note on this topic - be forewarned that your customers, (and this is very common with retailers), may be performing vendor audit reviews on a quarterly, semi-annual, or annual basis.  What does this mean to a vendor?  A vendor who consistently fails their vendor audits may get dropped by the customer and replaced with a competitor's brand!  In order to protect your investment in vendor compliance, make sure you adhere to customer's rules 100%.