Retail Deductions Management for Dummies

Speakers

Tim Walker

Financial project Systems Manager,
Brightstar

Transcript

[0:00] Host:

Right, I think it’s time to kick off. So the first session of today is retail deductions management for Dummies. So, we have our presenter here today, Tim Walker. So a little bit about Tim. Tim has over 20 years of experience in the field of Finance. He worked with the Pepsi beverage company for more than 13 years. He is currently a financial product systems manager at Brightstar. And is the key person responsible for setting up the HighRadius collections, deductions, and EIPP solution. Great stuff. So, I shall leave you to the stage.

[0:40] Tim Walker:

Thank you. Morning. Okay. Just so you know, I did not come up with the title. I’m not calling you dummies. Starting out with a little bit of humor.

[1:02] Tim Walker:

Some of the pain points in processing deductions. Information gathered by numbers and Attain Consulting, so 10 to 15 minutes takes to dispute a claim on a customer portal. Average time over 1600 man-hours are spent claiming deductions on the retailer’s websites. 90 days is the median time it takes to resolve a deduction and 87% of companies write-off at least some small-dollar deductions. Have you had that experience? Do you guys write-off some small-dollar at Brightstar? We made the decision when we first started with our retailers that we were going to just dispute everything. And so we’ve continued down that path, even if it’s deductions, we disputed 10 cents if it’s invalid. We used to have a tolerance before but we figured out that sometimes a retailer will figure that out and they’ll start taking a whole bunch of smaller deductions. So we decided to nip that in the bud with HighRadius’s deduction module and to speed it all. So the most common retail deductions are in trade deductions category or they’re a little bit easier to investigate and resolve just because they’re like pre-planned, you know in advance that the customer is going to take that deduction. So sometimes there are some issues with that, they can get kind of complicated, but for the most part, that’s a little bit easier to deal with your non-trade deductions, shortages, damages, invoice pricing errors, etc. Those would be the most challenging to resolve. From your perspective, what’s the most complex non-trade deduction for you?

[3:10] Tim Walker:

Anybody?

Well, for Brightstar, it was return deductions. We’ll go into some of our challenges. So what was that our biggest challenge? Well, we got HighRadius that entered like the large big-box retailer space. And there was no one in the company that had much experience dealing with retailers and weren’t prepared to deal with returns. The biggest challenge was Walmart for us, I don’t know what your experiences are but there were like one or two people that had experience in dealing with returns deductions. So how were we able to achieve a 50% reduction in write-offs in spite of these?

[4:24] Tim Walker:

So one of the biggest roadblocks or challenges was an improper collaboration of workflow. So this is actually the reason I was hired at Brightstar to come in and kind of do some analysis on the process behind the returns. And quickly figured out that we didn’t have the right collaboration.

[5:04] Tim Walker:

So the returns team in the warehouse didn’t understand when they were processing the actual return into the returns portal. They didn’t understand how the data that they were entering affected the AR department in their ability to reconcile that deduction. So that was the biggest issue. So we started working on that.

[5:33] Tim Walker:

But anyway, this kind of led the HR team, it pointed out quickly that the HR team did not have a proper platform that provided enough oversight. We had some smaller kind of minor risks that quickly snowballed and spent a lot of time on non-value added work, basically chasing paperwork, so trying to get the claim from the retailer, then going to the returns department and trying to find paperwork because they didn’t enter the information correctly. So it was a long process. This slide speaks about the second major challenge while dealing with returns. And that’s information-overloaded, which happens due to the data aggregation in-retailer portals. So all of that information would go into, we would grab all that information. The actual product return would get to our warehouse and when they process it, they would not put the proper reference ID. So the retail would have their claim on their document. Our returns department would not enter that or they entered it incorrectly. So it was very difficult to match that credit up with the return deduction. So that became pretty difficult as they didn’t have all the correct data in the right place.

[7:18] Tim Walker:

So we set out with some plans to figure out how we could kind of correct this process. So what we did for us was just kind of benchmark the whole thing. We knew we needed some technology to help us out in this area. So it worked for HighRadius. We worked through the entire process to find out where our breakdowns were, where the flaws were and finding where we could improve that process.

So involving a bunch of different departments planning to so everybody was aware of the changes that we needed to make and so we had a little bit of easier exchange of information across departments. And then centralizing data across all the verticals complete the data package in one place. So a single source of data, which was a high reduction module.

I’m going to go back here for a minute and kind of expand on this a little bit. One of the things that we decided to do with our returns functionality was to require a BOL or a claim number be entered as the returns team was entering the product for return. That was the first thing we did then we figured out they were just entering whatever they wanted. So we came up with a solution to provide the list of all returns deductions that were open in the system. We grab the claim number from those deductions and make that available in our returns portal. So they can then pick that number from a drop-down, they can kind of start searching with the number and then it pulls up. And they can pick the one that they want. We still had to allow them to have the option to manually enter a BOL because sometimes the retailer, the paperwork that they send with the product doesn’t have the right reference on it.

So in those cases, they have to enter something so they’ll usually use something like a tracking number or something the retailer’s tracking number. But that did help us out a lot with being able to reconcile returns with having the right information. So faster deduction resolution with automation. This slide explains how the major features of HighRadius helped us resolve deductions faster with automation. So it shows how all the claims and dispute information are exported from the retailer portals in one single batch. So no longer a need for a person to go into retailers and pull down each claim individually and save it somewhere. And then do the same thing for invoice, POD, whatever other documentation you need. So all of that’s pulled in together and we keep it in the HighRadius. But I think you have the option to kind of move those some of that stuff to your ERP. The slides have a little bit of an error from the returns team and that’s our return credit invoice with all the line item details. So this explains how there’s a three-way matching of item level details before the system decides whether it’s valid or invalid. So you have the credit invoice then you have the customers claim information in the system then take all those details of that claim and matches together. The quantity and pricing that the retailer took against the quantity and pricing that we got entered into the system for the return.

Yeah, it’s with Walmart specifically. They sometimes include a handling charge in the document in the one claim. And for those, we enter a credit memo manually the AR department does to offset that deduction for the ones that are not included, that’s a little bit more manual because there’s no credit to link and you got to figure out what deductions they go with but that’s what we do, we enter a manual credit memo and then that gets picked up by HighRadius and it matches. There’s no item number or anything like that for handling. So we’ve created like, like a non-inventory item that we just call returns freight and returns handling. And so somebody has to manually then go into HighRadius on the claim, put that item number in and then it will match when it gets the credit. And then when you drill down into the details, item-level details tell you whether it’s valid or invalid, or it can’t tell. And then at the header level, you also have whether it’s valid or invalid. So how does this change the deduction analyst’s day? Well, AI helped auto code deductions. So when the system goes and grabs the claim, pulls it into the system, it automatically converts the claim information into your standardized codes. So the only work left for the employee is the analysis work. Since everything is already attached, and your codes are mapped to your internal codes, that’s really all that’s left for them to do. This slide shows how I hope to download the claims with all the supporting documents.

So talking about PoD’s and BoL’s and that kind of stuff. So that’s all within the system. So that just kind of leaves the work of investigating the validation of the claims for the human. This slide explains how artificial intelligence helps resolve dispute correspondence automatically providing the flexibility for humans to customize information for mass correspondence. So it’s very easy and quick for the analyst to just pick a bunch of deductions, run a correspondence job, and then that can be automatically pushed to the dispute portal for the retailer, or emailed or printed or mailed us. Now you have the options.

The audit trail explained all the information required for disputing deductions. So since the system is grabbing all of your information in one place, you have a complete picture of how that deduction was created, what happened in the meantime and how it was resolved. So, not everything’s there at your fingertips, you just have to look at it. So now figuring out anything from metrics that we tracked.

So, before we started the process of figuring out where we were going wrong with our returns deductions. They were being kind of lump sum together, sometimes posted onto the account as one lump sums all the returns from one check. So we didn’t have a whole lot of metrics to use because we didn’t have them being recorded correctly. But we did gain collection efficiencies of over a million dollars a year and it improved production recovery of $5 million a year. And our average days to dispute a deduction was down about 80 days. So we were running around 90 days sometimes a little bit longer to dispute a deduction in with all the automation put in place. The best I think we got was five days but it hovered usually between seven and eight days as an average. With the implementation, we’re able to start tracking days’ deductions outstanding. We could find out how that deduction was resolved and repaid. Did we write it off? If we wrote it off, where do we write it off? Was it a credit memo? Those types of data. I think I went a little bit quicker, but we’re at the Q&A portion. So does anybody have any questions?

[17:33] Audience:

Hi. So you mentioned that one of the problems you had with returns initially was the matching because of the way that it was keyed in and you said your solution was to change the returns portal so that they could have an easier way to select the correct number. Was that a HighRadius solution, or was that your solution?

[17:53] Tim Walker:

Was that internal? Okay.

[17:57] Audience:

Second question. Do you use the portal? Or do you do a settlement with them?

[18:06] Tim Walker:

Okay, the only thing we dispute on the portal is the 9070 claims which are like virtual returns. I don’t know if you experienced that, but I don’t think we have them in our house. We don’t actually get the product back.

[18:22] Audience:

You know what we do, but they’re minimalists.

[18:24] Tim Walker:

So yeah, there’s not a lot of industry. Yeah. But we do use their portal to dispute those.

[18:29] Audience:

Okay. And the last question is regarding trade deductions. So, do you use HighRadius? Is your solution matching for that? I mean, is it an easy one to one system for you where you know, the customer has one trade deduction and you have one trade credit, or is it kind of an interwoven web. We have these programs and some of them overlap with deductions that you have, does HighRadius help with that?

[18:56] Tim Walker:

Ours is not that complicated. The sales department is aware that this deduction is going to happen at some point. So once the deduction is taken, we notify the sales team. And then they process the credit for that return. And then it’s matched.

[19:25] Audience:

So the follow up is with the sales team and in which portal is their information being entered.

[19:30] Tim Walker:

They’re entering the credit in our ERP.

[19:35] Audience:

And then that feeds into HighRadius.

For your email correspondence, are you using the email inbox feature they just launched a couple of months ago?

[19:48] Tim Walker:

No, not yet.

[19:49] Audience:

Are you thinking about using it?

[19:51] Tim Walker:

Yes, we are using it for collections.

[19:53] Audience:

Okay.

[19:56] Tim Walker:

That’s been very helpful.

[20:00] Audience:

Have you started to use artificial intelligence with deductions where they recommend what you should use?

[20:07] Tim Walker:

For returns. We haven’t really started using it, but returns will most likely be the first area where we do start doing that. I mean, it is telling us right now whether it’s valid or invalid. But it just still takes somebody to kind of look at that to figure out what happened, let’s say the customer deducts four items of a particular product, and when our returns department processes the return, we got five, so we get one extra. Well, HighRadius codes that as a valid deduction. When in fact, we owe them that money back, right? They return one more than what they did. So it still takes the person to look at that report that spits out to say that you know what exactly needs to be built back. There has to be a little bit of manipulation sometimes.

[21:13] Host:

Any more questions?

[21:15] Audience:

So what’s your success ratio if you’re disputing all as invalid?

[21:23] Tim Walker:

If we realize that, like for a shortage, for instance, we don’t have proof of delivery, we won’t dispute that. But we have all the documentation we disputed. Since I’m not in the AR department, I don’t know that number of stuff. I don’t really know. It’s sometimes hard to tell, especially with Walmart, because they will take a deduction. Let’s say how much time do they take to get those claims with shortages delivered. So then you dispute that. Because you have the paperwork. So that’s resolved, but then sometimes on the same check, they’ll take that deduction again as a different type, right? Could be a different dollar amount. So it’s kind of a little convoluted, you have 100% shortages and then you look and see that you got paid back on all those. But that’s offset by the fact that they retook it.

[22:39] Host:

Any more questions, guys?

[22:48] Audience:

Hi, I just want to get a little more clarification on could you go back to that one screen where you said there was a three-way match for the returns. So can you kind of explain a little bit what HighRadius does? So, as you said, they match it for you. And then your analyst submits to the customer. So HighRadius actually takes the deduction and the credit analyzes it and spits out a result.

[23:31] Tim Walker:

Yeah, it spits out like a reconciliation report basically. So what happens is, when the deduction comes in, there’s a reference number on that deduction, which is stored in HighRadius and also in the ERP. Then when the credit invoice is generated from the returns team, that same reference number is entered. And so when that credit generates in our ERP, it has the same reference number. So within HighRadius, every day when credits come in, they look in the system for that reference number on a deduction and if they find it, then they take the details from the credit, the details from the deduction and then do that reconciliation for you.

[24:19] Audience:

So this is the quantity variance and this is the pricing variant.

[24:23] Tim Walker:

Correct.

[24:24] Audience:

And then your analysts will just submit it to the customer.

[24:27] Tim Walker:

Correct.

[24:28] Audience:

Okay.

[24:29] Tim Walker:

And the way we do Walmart is, we reconcile each check, one at a time. So we don’t reconcile individual doctrines, we just do the whole check at once. And then the way the process works, and you may already be familiar, but you have to then build them back once a quarter for whatever the differences are, and then they will come back and say, “Okay, we’ll give you 20% of what you’ve built us back”, or whatever they decide the only thing I’ve been able to figure out how they come up with that percentage is they look for errors in your spreadsheet or whatever data that you’re sending them to build back. They look for errors in there and if they find any, they reduce the amount that they’re going to pay back. So if you have a formula error or you know, some kind of calculation is wrong, they’ll do that for you.

[25:32] Audience:

Another question. So besides Walmart, do you have returns issues for Amazon or Best Buy?

[25:41] Tim Walker:

We did have big issues with Amazon. But we stopped doing business with them. Thank God. But we have Best Buy because you got to input into the grid. So does HighRadius help you with inputting into their grid?

[26:02] Tim Walker:

We have not yet started the Web Push to their portal for Best Buy, we’re still doing that manually.

[26:09] Audience:

Okay.

[26:10] Tim Walker:

But for Walmart, for instance, for a shortage production, there is a template that’s built within HighRadius that has all the information that their dispute portal requires. So when that deduction is ready to be disputed, all that information is already there, along with all the documents that are required to be attached, and it will push all that information out to their portal, creating a dispute for you.

Say that again.

Correct. So like when you run the correspondence job in HighRadius, it will then kick off a job to go out to their portal, file a claim and include all the information that’s required for that. And even if you aren’t doing a Web Push for some customers, they don’t have it, they might not have a portal or something, HighRadius can still build a template for completing the customer’s documentation. So if they require a form to be submitted, you can have that form built within HighRadius and have it auto-populated for you. And then when you run your correspondence, you have that completed along with your attachments.

[27:41] Audience:

Once the auto-matching happens in HighRadius, is there feedback to your ERPs system that says that closes credits out on that side as well?

[27:52] Tim Walker:

We don’t do that. But you can do that. For whatever reason, Brightstar decided to not have any information come back from HighRadius into our ERP. So we do all of our matchings in our ERP and then feed that back into HighRadius. So then we can see how it was resolved.

Correct?

Yeah, well for the one particular check, and all the BOL’s, it will grab all the deductions and grab all the credits, and then create a line item on a holding account to build that back to Walmart once a quarter.

[28:40] Host:

Okay, Any more questions? Great questions. Thanks, guys. It’s always good to see interactive discussions going on.

Okay. Great. Well, thank you very much, Tim. It was a pleasure listening to you. Thank you so much.

[28:56] Tim Walker:

Thanks, everyone.

[0:00] Host: Right, I think it’s time to kick off. So the first session of today is retail deductions management for Dummies. So, we have our presenter here today, Tim Walker. So a little bit about Tim. Tim has over 20 years of experience in the field of Finance. He worked with the Pepsi beverage company for more than 13 years. He is currently a financial product systems manager at Brightstar. And is the key person responsible for setting up the HighRadius collections, deductions, and EIPP solution. Great stuff. So, I shall leave you to the stage. [0:40] Tim Walker: Thank you. Morning. Okay. Just so you know, I did not come up with the title. I’m not calling you dummies. Starting out with a little bit of humor. [1:02] Tim Walker: Some of the pain points in processing deductions. Information gathered by numbers and Attain Consulting, so 10 to 15 minutes takes to dispute a claim on a customer portal. Average time over 1600 man-hours are spent claiming deductions on the retailer’s websites. 90 days is the median time it takes to resolve a deduction and 87% of companies write-off at least some small-dollar deductions. Have you had that…

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  • Key factors that contribute to the challenges in handling retail returns deductions
  • Witness the perfect strategy to achieve zero auto write-offs
  • Learn how Brightstar achieved 65% reduction in FTE’s in the A/R team size along with lesser deductions
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    HighRadius Integrated Receivables Software Platform is the world's only end-to-end accounts receivable software platform to lower DSO and bad-debt, automate cash posting, speed-up collections, and dispute resolution, and improve team productivity. It leverages RivanaTM Artificial Intelligence for Accounts Receivable to convert receivables faster and more effectively by using machine learning for accurate decision making across both credit and receivable processes and also enables suppliers to digitally connect with buyers via the radiusOneTM network, closing the loop from the supplier accounts receivable process to the buyer accounts payable process. Integrated Receivables have been divided into 6 distinct applications: Credit Software, EIPP Software, Cash Application Software, Deductions Software, Collections Software, and ERP Payment Gateway - covering the entire gamut of credit-to-cash.