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Service Spotlight: Deductions Management

Accountfully Service Spotlight: Deductions Management

You’ve met our people, our clients, and learned more about the teams that support our services, but how about the services, themselves?  Welcome to the Accountfully Service Spotlight series, where we share the details on each outsourced accounting service.  Find out what we offer, how it can help, and see if it is a good fit for your business.

If you are an emerging (or established, for that matter) CPG or inventory-based business, listen up.  If you are selling into retail, you have most likely met the concept of distributor deductions.  UNFI/KeHe are some of the top players in the wholesale food space, but it may come with some hefty accounting considerations.  With CPG being at the forefront of our client base, we know all too well the accounting and long-term cash effects of deductions.  The good news is we can help you manage them too.  If you are considering selling into the space or have already entered the world of wholesale grocery this service is for you.

‍Why Deductions Management Is SO Worth The Cost:

Many times the excitement of finally getting that big break into retail can overshadow some of the intricate details laid out in the contracts.  In a nutshell, many companies can be severely affected by the long cash cycles caused by the process, or when deductions are taken that were not expected.  We offer a proactive solution to counteract many of these, dispute inaccuracies, and help establish relationships with these vendors.    

Increased profitability: 

Deductions management can result in thousands, sometimes hundreds of thousands of dollars in repayments. The key is to mitigate the charges before they are incurred. Once manufacturers begin to manage and dispute their deductions, they see a significant decrease in deductions initially charged by the distributors.

Creation of Equitable Relationships: 

Deductions management helps foster healthy and equitable relationships between the manufacturer and the distributor, resulting in reduced overall deductions.

Insightful Reporting: 

Accountfully runs basic financial analyses to track trends. This includes deductions as a percentage of revenue in a given period and dollars disputed versus dollars repaid. This helps the client understand the return on investment (ROI) of the service over time. This metric will continue to be monitored on a monthly basis.

What Is It?

We track, manage, and dispute deductions incurred from your retailer and distributor relationships.  The support can be ongoing, or be transferred to a team member within your organization, once a cadence and process have been established

When Do I Need It?

Any business that needs regular or one-time deductions support and insight into their deductions status will benefit from deductions management services.  Typical benchmarks that point toward the need for this service are:

  • you need more visibility into your distributor deductions
  • you have disputes and you can’t get any headway on your own
  • you are concerned about the potential cash flow implications of deductions and want to be proactive
  • You are considering entering into a retail/wholesale relationship or have a newly established wholesale account 

How Much Does It Cost?

Deductions management is charged hourly at the rate of $175/hour and the scope is broken down into three main phases: 

PHASE ONE:  Discovery and Implementation of the Deductions Management Process

Deductions management starts with a discovery period where we explore our clients’ chargebacks. Here we dive into the intricacies of slotting, spoils, sales discounts, vendor fines, shortages, non-compliance fees, cash discounts, etc.  This is completed by working with our clients to understand their business and the process behind each distributor relationship.

PHASE TWO: Tracking and Disputing of Deductions (Agreed Upon Time and Scope)

Once we have an understanding of each process and the business itself, we begin to track all deductions; validating the deductions incurred, and disputing any that are not valid. Next, we track expected refunds or credits to be received from each distributor.

PHASE THREE:  Deductions Tracking Going Forward

As the process is finalized, clients have two choices moving forward:

  1. To continue this service indefinitely or, 
  2. We can create a process and tracking mechanism that we train the client on to manage themselves going forward.

For those seeking a more ad-hoc, or hourly/project-based option, we can provide you with custom service levels.  Tell us about your needs and we will chat through a solution.  

What Do I Get?

  • Increased profitability
  • Visibility over deductions with helpful reporting
  • Key relationship building
Each new client will get the benefits of having their deductions tracked and disputed.  Cash flow concerns can be mitigated and key points of contact are established with wholesale accounts.

What Do Your Clients Think?

Since we offered this essential service, many of our clients have seen huge improvements and sizeable returns on their investments.  

Some notable metrics pulled from our longest-standing clients include:
  • Average repayment amount of $94,329
  • Average return on investment:  $384%
General deductions stats:
  • 58% of our deductions management clients are also using other services of ours
  • 41% are solely deductions management clients
  • We have recovered over half a million dollars to date for clients
  • We deliver an average ROI of 132% across all clients

That is a lot of payback for the hour invested in managing deductions!  Some of our newer clients have earned huge ROIs upwards of 667%!  Here is what one of our clients had to say regarding our deductions services:

“$100,000 of incorrect deductions from our two largest distributors. Yes, that number is correct. My brand Pitaya Foods is on pace to re-coup $100,000 this year (already $50K+ back in our bank). Last year we made the decision to hire someone full-time just to keep track of these deductions and my biggest regret is that we did not do this a long time ago. If you are a brand just getting off the ground, pay attention to this early, if you are a big brand thinking it isn't a big deal, you are wrong.” 
–Chuck Casano • Pitaya Foods

How Do I Get Started?

For new clients, we will start by learning about your business and addressing the service level that meets your needs.  You can start by sharing the basic details of your business and scheduling a call on our contact page.

For existing clients, we can start with a discovery call that will help us evaluate the best direction to go to get started managing your deductions.  

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