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Managing Chargebacks And Accounts Receivable With A Consumer Goods ERP

Managing Chargebacks And Accounts Receivable With A Consumer Goods ERP


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Managing Chargebacks And Accounts Receivable With A Consumer Goods ERP

7 Jan 2020

Ken Weygand

Similar to the other posts in this direct-to-consumer series where we’ve addressed the inefficiencies with warehouse operations , electronic data interchange (EDI) and adjusting to this new shipping landscape, in this post we plan to address the inefficiencies with the resulting invoices in accounts receivable as well as the recording and processing of deductions taken by your customers. This also touches on how valuable visibility into those deductions is, as it helps identify problem areas where you may be able to address them and find a successful resolution.

When you do ship directly to consumers, you end up generating large amounts of transactions within your ERP system. As a result, as those orders are processed, you have thousands, if not tens of thousands, of invoices within accounts receivable. That can be really challenging to manage, and it also means many hours of work—receiving payments, processing them, recording them, and accounting for all deductions, penalties, discounts and allowances that larger retailers expect at the time of payment.

As an extreme example, during peak season, certain larger e-commerce corporations may process 50,000+ DTC orders in just a few days, which then results in just as many invoices. That’s a lot of transactions, and really, a lot of work.

ERP Functionality to Support DTC

To account for the high volume of orders that are being placed and then processed, you want your ERP to have features that support DTC shipping. To have to manually re-key tracking numbers back into your ERP or worse, into a website, would add hours of manual labor to work efforts with no real benefit. An ERP that can seamlessly print and capture tracking information and then manage deductions efficiently could really be beneficial, as it saves you time, money and resources.

As the market evolves, the role that the drop-ship vendor plays evolves as well. Retailers are inventing new ways to take deductions off payments, so it’d be really valuable to have an ERP that keeps tabs on all of your data. Not only does it limit the amount of manual labor that your employees are tasked with, but it can track all your data so that when you do have a penalty or deduction you have the visibility to see why that occurred and then address that concern quickly. From validating consumer addresses to timeliness to missing 855 EDI documents, an ERP can help you manage all of that information.

Bottom line: you don’t want to give away your money. Minding the details of your business, like where you’re getting those deductions, is essential. You need visibility to understand where they’re coming from and why they’re happening. Was it your fault? Was there an exception? Can this be avoided in the future?

EDI, Import Features, Chargeback Processing and Visibility

In terms of an ERP, there are some key features and functionalities you should look for and strive to use, as it relates to the number of payments and the volume of those payments. EDI, import features, chargeback processing and clear visibility are all key functions you should employ when managing your volume of invoices and deductions.

  • Integrated and automated invoicing capabilities with EDI – You want to get invoices to your customers as quickly as possible, without human, manual involvement. You don’t want to waste time and energy asking an employee to stuff an envelope, or gather data and manually type information into a website. You want a system that’s going to do that for you. Your ERP system, ideally, will have built-in EDI capabilities to support the system electronically sending the invoices (810s) to your customers, along with efficiently receiving those orders and sending acknowledgments (855s) and ship notices (856s), and let’s not forget receiving and processing remittance advice for payments (820s).

  • Import features in AR - Now that your customer has paid, how do you apply payment to the various invoices they’re paying you for? You must be efficient. An ERP with import features for accounts receivable will enable an elevated level of efficiency. The import features grant users the ability to upload, or import, information into the system, whether that’s an EDI 820 document, an Excel file, or any other kind of remittance documentation. And deduction details are more easily managed. The right ERP should provide you with as much detail as possible about any deductions your customers are taking, as well as provide visibility and analysis into those deductions.

  • Chargeback processing – Your ERP should have functionality that allows you to capture many details related to deductions. You want to be able to capture things like deduction numbers, reason codes, expiration dates, related invoice or purchase order numbers, store IDs and status codes.

    In addition to defining, creating and capturing deductions in the ERP, you also need visibility. A good ERP system will have workflow associated with these deductions, the ability to assign deductions to an individual for review and approval, and the ability to share the list of deductions so everyone has access to this kind of detailed information and can account for what those deductions may do to the bottom line. It also provides the ability to see all outstanding deductions across your organization. They might not mean anything now, but these outstanding deductions could mean a loss of hundreds or thousands of dollars down the road. They’re sitting on a balance sheet but if the window of time expires, it might mean lost dollars. Similar, your system should have the ability to highlight where your business is in terms of resolving deductions.

  • Visibility – You want your ERP to grant you visibility into your deductions, specifically including profitability analysis which allows you to incorporate all deductions (chargebacks) in the analysis. This provides you with the kind of oversight you need to make smart, informed decisions when it comes to the financial security of your business.

In terms of an ERP, you want it to provide all these tools to your team to allow you to efficiently capture payments and deductions, but also to be able to report on those deductions, and give you visibility and insight into dollars that you may be giving away. You want tools to capture all the details and information, but also be able to report back to various levels within the organization as to why that occurred and where those dollars are going.

The fulfillment landscape has changed and it’s time for you to change with it. Learn more about how you can better manage chargebacks and accounts receivable during the DTC revolution by visiting our Apprise ERP overview page.

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