Data and automation are key to preventing unnecessary margin erosion

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CPGS Walks a Fine Line of Profitability and Loss

When it comes to profitability, CPGs don’t have a lot of wiggle room to start with, let alone small to midsize CPGs looking to establish and maintain storage space in a hyper-competitive retail environment. And managing deductions plays an important role in protecting profitability.

Validating deductions and managing discrepancies with retailers is difficult. This requires tedious research and accounting and jeopardizes hard-earned relationships with retailers. Too often, Accounts Receivable (AR) teams find themselves overwhelmed with manually processing thousands of deductions across multiple retailer formats, leaving no time for recovery, let alone prevention.

There’s a Thing Between GICs and Maximum Cash Recovery

This thing is automation. Introducing automation and artificial intelligence 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, and since many retailers have strict litigation windows, that time could be the difference in money collected or left on the table.

Automation for better inter-team collaboration

Once deductions are quickly coded, analysts can continue to leverage automation to validate claims. Validation requires a collection of supporting documentation, such as additional invoices, receipts, proof of delivery, and a bill of lading. These documents are often housed in different locations and AR analysts work with other internal stakeholders to find and collect them. These back and forths often happen via email, creating a convoluted chain of communication and unorganized management of important documents upon which cash collection depends. 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 hectic 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.

Get ahead with invaluable data and insights

Arguably, valid inferences are 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.

Make the most of vital partnerships

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 retailers’ pattern of deductions can also allow 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.

The added value of automation is undeniable. From extraction, validation and recovery to providing information to inform prevention, improvement opportunities and retailer relations, introducing data and automation into the process of managing deductions help protect against margin erosion, increase productivity and drive overall growth.

Dash Bibhudatta is vice president and general manager, product, fintech at Inmar, a leading data platform company.

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