By Tom Tipps
Here we are in 2011…and most Foodservice manufacturers are still settling all or most of their claims via distributor deduction. The manufacturers can’t process the distributors’ claims within payment terms, so the distributors just deduct.
So, what’s wrong with that? Here’s a two-part answer…
1. If the manufacturer is actually auditing every line item on the deduction against their contract and issuing a rebill invoice for invalid deductions…that’s okay from an audit perspective.
2. But, if the manufacturer is just issuing debit memos without audit…the distributor has taken ownership of the payment decision. The auditors will love this!
Part of the problem here is that billback claims are typically overstated by 15 - 20% - for a whole myriad of reasons. For example, let’s say the manufacturers offer 20% discounts to their larger restaurant chains…and these discounts are passed through distribution to those operators. In the final tally, this will cost the manufacturer another 15 -20% in overstated claims…at a total cost of 35 – 40% discount. Hello CFO!
There was a time when there was no real solution, manufacturers’ gave-in to this practice and gave-up trying to control the situation…out of frustration. So, they ended up “rubber-stamping” approval of the deductions. The process still goes on today…big-time!
However, this situation is changing.
For example, Answers Systems ContractPro® has developed connectivity with every broadline distributor in the US and Canada, and within their ContractPro solution they are able to pay about 75% of these distributor’s claims via check – within the distributors’ payment terms. And their manufacturer clients are able to immediately catch invalid deductions and get them rebilled and collected with very timely and accurate information.
Answers Systems ContractPro also identifies errors in the distributors’ pricing systems and help get those errors corrected – so the manufacturer does not have to deal with those same errors every month. Our industry is finally starting to get some traction on real collaboration between trading partners, which will finally resolve the deduction issues and many other areas of inefficiency.
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