CPGS Walk a Fine Line of Profitability and Loss
When it comes to profitability, CPGs don’t have much wiggle room to begin with, let alone small and midsized CPGs looking to establish and maintain shelf space in a hypercompetitive retail environment. And deductions management plays a big role in protecting profitability.
Validating deductions and managing discrepancies with retailers is challenging. It requires tedious research and accounting, and puts hard-earned retailer relationships at risk. All too often, accounts receivable (AR) teams find themselves overloaded with manually processing thousands of deductions in multiple retailer formats, leaving no time for recovery, let alone prevention.
There's One Thing Standing Between CPGs and Maximum Cash Recovery
That thing is automation. Introducing automation and artificial intelligence to deductions management can protect profit margins by transforming the manual deductions management process from beginning to end.
Boost Productivity and Efficiency Right Out of the Gate
From the moment CPGs receive deductions from retailers, automation can be leveraged to extract information and prioritize claims. This seemingly simple step can save analysts loads of front-end time, and as many retailers have strict dispute windows, this time could be the difference in cash collected or left on the table.
Automation for Enhanced Cross-Team Collaboration
After deductions are quickly coded, analysts can continue to leverage automation to validate claims. Validation requires a collection of supporting documents, such as additional invoices, receipts, Proof of Delivery, and Bill of Lading. These documents are often housed in different places, and AR analysts work with other internal stakeholders to track down and collect them. This back-and-forth often happens via email, creating a convoluted string of communication and unorganized handling of important documents that cash recovery depends on. If the deduction is invalid, even more back-and-forth may be necessary to prepare the dispute.
Automated deductions management solutions provide a single source of truth for all documents and information, helping simplify this hectic process. Many solutions also allow multiple users to access a shared dashboard — providing organized workflows, clear accountability, and seamless communication between teams. That’s a powerful capability, and the benefits of AI and automation don’t stop there.
Look Ahead With Invaluable Data and Insights
Arguably, even more critical than invalid deductions are valid deductions. With newfound time from automating validation and parts of the dispute process, AR analysts can leverage data and insights made possible from a centralized system for all deductions information. This data can inform internal inefficiencies and, paired with improved cross-team collaboration, CPGs can prevent future deductions from happening in the first place. For example, packaging errors or shipping delays may be the root cause of many deductions, and AR teams can work with operations to correct them.
Make the Most of Vital Partnerships
Beyond prevention, automated deductions management solutions can deliver powerful insights into retailer performance that allow CPGs to focus on improving and nurturing these valuable relationships. Insights into how specific retailers are trending when it comes to deductions 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 flip side, data can also reveal trends into how successfully AR teams recover cash from each retailer.
The value-add of automation is undeniable. From extraction, validation and recovery, to delivering insights to inform prevention, opportunities for improvement, and retailer relationships — introducing data and automation to the deductions management process helps protect against margin erosion, increase productivity, and drive overall growth.
Dash Bibhudatta is the vice president and general manager, product, fintech at Inmar, a leading data platform company.
Dash leads the Holistic Settlement platform for Inmar’s FinTech business unit, including AR/AP, trade promotions settlement and working capital solutions. For the last two decades, Dash has been transforming Finance / back-office functions through leadership roles in corporate and consulting organizations.
Prior to joining Inmar, Dash worked for McKinsey as Senior Expert / Associate Partner and was the global leader of the quote to cash transformation service line. He partnered with over 50 organizations in improving deal velocity, fulfillment accuracy and cash conversion rates.
Prior to McKinsey, Dash held leadership roles in IT and Finance at Microsoft. He led centralization and simplification efforts in Microsoft IT. As part of North America Finance, he led their two-year effort to transition Finance from support service to trusted advisor role.
Dash started his career in ERP implementation (Siemens) and subsequently in shared services leadership roles (Covansys, now Computer Associates). He holds an MBA from NITIE, Mumbai and an undergraduate degree in Mechanical Engineering from NIT, Rourkela, India.