The term ‘deduction’ is pretty self-explanatory, right? In laymen’s terms, a deduction is just something that is subtracted from a larger whole for whatever reason. When it comes to Consumer Packaged Goods in the retail space, though, deductions can be a bit uncertain. So, what is a deduction and why you should manage them?  

Let’s dive in.  

Now, the basic idea still exists. A deduction is a dollar amount that the distributor and/or retailer withheld from an invoice remittance (read: payment). The reason for said deduction can be for a whole litany of things. Maybe it’s something you agreed upon like promotional allowances (like a billback allowance, for example). But it just as easily could be for something you were never even told about.  

Just like in a lot of other areas of your CPG business, you have to be your own advocate. You have the right to push back against the deductions that were not agreed upon. Some will still be applicable to your invoices, and you will just have to accept that they are going to be a part of the equation going forward. But others can (and should) be repaid. They may have been applied to you initially because the retailer has agreements with other vendors that include those same deductions so they just applied them to you as well. Some may have just been included because of human error (never forget that most times you are dealing with real live humans who can make mistakes). If you are tracking and managing your deductions, then you will be able to recapture that income and also change the behavior of that retailer going forward.  

Unanticipated deductions can have a serious impact on your bottom line, especially if you don’t have a process to monitor, track, and push back when necessary. So, get familiar with your invoices and the line item documents your retailers are sending back with payments. Make sure you are getting every dollar you are entitled to. It will be incredibly beneficial to you in the long run. 

Reach out to Come Sell or High Water to walk you through the deduction process and all the other processes to get you product from the manufacturer to the store shelves.