Every Step for Wholesalers to Prevent Chargebacks
Vendor chargebacks from retailers are a serious threat to wholesalers and greatly impact their bottom line. From the largest retailer on down, almost all have instituted compliance guidelines, resulting in significant losses for wholesalers who fail to comply with vendor compliance guidelines.
These chargebacks cost wholesalers tens of thousands, even millions of dollars, depending on the infractions. Chargeback reduction is a crucial profit center for wholesalers. Although chargeback recovery can help, doing everything possible to avoid vendor compliance chargebacks is the best strategy. This is why high-quality, knowledgeable back-office support is critical to wholesalers.
The following are best-practices to help wholesalers avoid costly vendor compliance chargebacks:
- Clarify shipping requirements beforehand
- Every retailer has specific requirements and practices vary from company to company. It’s essential to establish clear expectations from the start. This allows everyone on your team to be in agreement and working from the same playbook. When you break into a new account, it’s best to get everybody from production down to allocation to discuss and document all of the retailer’s requirements.
- Keep a routing master, ideally within your order processing software and keep it up-to-date
- It’s important to keep a routing master as part of your ERP or other order processing software. Doing so will enable you to keep track of all compliance information for each retailer. It provides data on how far in advance you need to route, when to send your ASN, how to put tickets on goods, and how labels should be applied. If you keep an updated routing master, it will be transparent to everybody involved, so you’re less likely to run into mistakes that can cause chargebacks.
- Create a shared knowledge base because nothing substitutes for experience and knowledge
- As a wholesale executive, you accumulate knowledge and experience over time. When everybody on your team has a platform to share those knowledge processes and procedures, it helps your operation avoid chargebacks over time. When one person is out of the office or you have a new hire, it is critical to have that shared knowledge base to minimize repeating past mistakes.
- Ensure proper delivery of PO, invoice, ASN, and other electronic notifications
- When a good EDI system is in place, it enables all accurate and efficient electronic information like proper deliveries of your POs, invoices, ASNs, and other electronic notifications. It also provides a means for strong communications between the wholesaler and the retailer.
- Analyze past chargeback occurrences
- It’s important to understand which chargebacks reoccur and are most costly to your bottom line. You should work with your back-office accounting department to view the previous year’s numbers and then analyze them to see where, when, and why the chargebacks occurred. Examine if there are any trends or patterns, then dig deeper to see why they keep happening. By identifying any issues, you should be able to rectify them going forward.
- Use a strong 3PL
- Having a strong 3PL can be a good ally in avoiding chargebacks. They should have a strong track record of compliance. It’s wise to use a 3PL that’s used to handling anything regarding international shipping, warehousing, and transportation to ensure consistency and compliance in your company.
- Assign compliance personnel
- Since each retailer has its own set of guidelines, you should have one knowledgeable back-office person to specialize in each vendor account. This way, these individuals can develop knowledge, experience, and genuine and personal relationships with their retailer compliance team, resulting in less or no chargebacks. When there are regular communications between both compliance teams, you can ensure any changes in policies or procedures aren’t missed.
- Review technology in use
- You should periodically review the technology in place to ensure that there are no changes in standards and those standards are always met. These should be under review:
- SKUs – The SKUs in your system should always coincide with those in the retailer’s system. The character length of the store or unit codes on the labels should match.
- Fully scannable barcodes – There should be quiet-zone margins on the barcodes labels and are of the correct specifications. Barcode labels must be fully scannable and not cut off.
- Test your warehouse printers – Printers must be maintained to avoid label scanning problems upon the retailer’s receipt of goods.
- ASN in the correct format – There should be no errors in your ASNs. The biggest sources of chargebacks are improperly formatted, late, unreadable, or inaccurate ASNs.
- Document everything
- As a wholesaler, you must document everything. Make it a point to assign someone in your back-office support staff who can create a documentation procedure and make it a priority to be diligent and detailed when documenting your shipments. Without robust documentation and failure to ensure procedures are followed, retailers can reject any challenges to your chargebacks.
- Accounts Receivable department to work with incoming invoices
- Analyzing your incoming accounts receivable can help you tell if retailers have hit your wholesale business with chargebacks. You need your Accounts Receivables department to monitor incoming payments and communicate with the appropriate party in production and operations when chargebacks occur.
- Information technology team for proper EDI and transaction processing
- For proper EDI and transaction processing, look to your information technology team. They can implement your EDI and create processes and procedures, along with the mechanisms for auditing and quality checking.
The key to avoiding vendor compliance chargebacks is getting your back-office staff to effectively manage various processes and technology in place. When working in conjunction with your information technology, development, and data-analytics teams, your chargebacks can be reduced, helping to increase your bottom line.
Wholesale Executive Insider is a publication dedicated to helping owners of wholesale companies stay up-to-date with the latest industry insights to improve their operations and increase their bottom line.Our team has in-depth industry knowledge and a network of solution-providers that help wholesalers run their businesses more efficiently and maximize profits. If you’d like to get free advice and recommendations on avoiding vendor compliance chargebacks and more, feel free to book a time to speak 1-on-1 with one of our knowledgeable industry advisors today!