Smaller consumer-packaged goods (CPG) suppliers often wrestle with reconciling receivables from payments received from their larger counterparts because they lack the resources — and budgets — to bring proper systems to bear on making sure what they are paid is exactly what they invoiced.
When they don’t match, understanding the reasons for those deductions is both time-consuming and stressful — particularly when these smaller brands are so heavily dependent on channel partners for distribution. Many of these brands are still tracking finances via spreadsheets.
Up to 20% of deductions made for retailers by CPG brands are disputable, according to John Helmle, executive vice president and division president of FinTech at applied data platform company Inmar Intelligence.
“That big of a line item on their P&L becomes a pretty dangerous equation,” he said. “We believe that through better exchanges of information, as well as through technologies [and] automating this process, small to medium-sized brands can reinvest in their core business rather than back office, which will enable them to create new products, invest in sales and grow their business even further.”
Earlier this month, Inmar launched its DeductionsLink™ platform to help smaller suppliers in the CPG and healthcare sectors dispute and reduce the deductions for channel partners. Helmle said these pain points are having a disproportionate impact on businesses that don’t have the staff or tech to resolve them in a more efficient way.
See also: Inmar Intelligence Debuts DeductionsLink AI-Based Platform
Fixing Inefficient Data Exchange
Helmle said that at the core of the issue is a matter of inefficient data exchange, and it causes problems for all parties.
Disputes over deductions can arise for a variety of reasons — discounts not applied to invoices, or done so incorrectly, are typical causes — and they can be useful with proper handling.
“These deductions tell a story,” Helmle said. “They can tell a story around product defects or product enhancements that are needed. They can tell a story about who your best trading partners are, or your best customers. All of that [is] information that, unfortunately, these small to medium-sized businesses aren’t garnering today and using to their advantage.”
See also: Homebound, Health-Conscious Consumers Still Driving Increased Consumption
The Bright Future of Autonomous Settlement
At present, many of these disputes go unresolved, “and unfortunately, the manufacturer is left holding that receivable,” Helmle told Webster. Artificial intelligence (AI)-based solutions can even the odds by giving brands data they can use in disputes.
Beyond resolving deduction issues, a single source of truth can inform packaging and logistics, product design and provide other insights for improving products and distribution.
Having this capability is also useful in a time of supply chain disruptions, as more than ever, small brands need data for other kinds of decisioning about how to manage channel partners.
“There is only so much product to go around, and you want to put that product into your best customer’s hands,” he said.
With disputes up during the pandemic and inventory at a premium, he added, “This product enables brands to be able to determine who those best customers are. Who you might think your most profitable customer is might not be at the end of the day, once you add all the numbers up.”
As Helmle said, chief financial officers are often the first to get it when it comes to autonomous settlement.
“It’s enabled them to learn more about their organizations and inform their teams,” he said, “particularly sales teams around who their most profitable clients are, who their best trading partners are, and it’s helped improve trading relationships.”