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10 Steps: Standardize Deductions and Claims Processing


How can foodservice manufacturers streamline trade deduction and claim processing? Foodservice manufactures should start with a contract management tool that centralizes trade programs and settlement information in one place. Then, you can focus on standardizing your process.



Deduction volumes have been growing. According to High Radius, 32% believe overall deduction dollars as a percentage of sales in the past 12 months increased.

Some of the most critical pieces of trade promotion management include budget planning, deduction management and claims processing.

When properly managed, trade promotion deduction processes boost a company’s profits and reduce losses. But that doesn’t mean that managing billbacks, deductions and claims isn’t an ongoing challenge for manufacturers. After all, the deduction management process can be inefficient because

  • inconsistent processes
  • no supporting documentation / backup
  • matching invoice to plan

According to the CRF Journal, the automation of manual and repetitive tasks is a very successful method to speed up trade deduction resolution – freeing up resources to work on other high-value and complex activities.

You can close the gaps in your deductions and claims processes through *this* proven method.

I recorded a webinar with a detailed review of the 10 steps to take for more efficient trade deduction and claims process.


The Building Blocks for Better Deduction Management

🧱 Invest in an organized contract management tool

🧱 Create standardization for claim submission

🧱 Enter deductions in your internal ERP system

🧱 Streamline trade deductions/claim processing

🧱 Track customers not submitting backup properly

🧱 Build a standard repayment letter

🧱 Track collections for invalid deductions

🧱 Implement a write-off process

🧱 Set a deduction balance goal

🧱 Create a deduction task force


Let’s take a closer look at each of these steps.


Step 1 »

Invest in an Organized Contract Management Tool

Set up a process with your team to ensure contracts are created and approved on time. Communicate and review the deals with your customers. Your customers need the right information in their system to track and create deductions when necessary.

By the way, it’s important to simplify your contracts when possible. If your contract is complicated, it causes confusion and makes it difficult for distributors to enter and create a claim against it.

I also recommend that foodservice manufacturers move contracts to rebate instead of fixed price. A rebate is more straightforward for distributors to execute against.


Step 2 »

Create Standardization for Claim Submission

Develop claim submission guidelines for your customers.

These guidelines make your customers aware of the information you need to process their claim as fast as you can.

I recommend including fields like:

  • Distributor ID
  • Distributor name
  • The amount you’re claiming
  • What program / operator are you referencing
  • Your preferred format of claims submissions
  • Where to send invoice information

Reduce unnecessary confusion by providing customers with advanced notice of any changes to your current processes.


Step 3 »

Enter Deductions into Your Internal ERP System

Create a process for the cash applications team when coding deductions.

Utilize reference numbers on claims backup for auto match.

This process means less deductions and billbacks for your analyst to match, and less manual intervention.

Then, enter your information at the distributor house level.

If you enter claims at distributor house level, but the deduction is created at a higher level, it may not auto match. That leaves additional deductions and billbacks for your analyst to offset.


Step 4 »

Streamline Deduction / Claim Processing

In my experience, between a trade management system and ERP system – if you have the same deduction amount, customer number, reference number – those claims can be offset automatically. Foodservice manufacturers should encourage their deduction management & claims processing teams to collaborate. Talk about whether one of your distributor customers is a serial deductor. Is there a way to standardize the reference number for them?

If a distributor is not submitting in your preferred format (like Excel or EDI), what software can you invest in to help you work faster? Remember, your goal is to get the submissions into a useable format to audit – and then submit the claim. You want to approve billbacks quickly; you don’t want to add age to deductions.


Step 5 »

Track Customers Not Submitting Backup Properly

It’s a smart idea to identify your customers that aren’t sticking to your established claims submissions guidelines.

Check that your terms and conditions are clearly defined on the programs (and enforce them).

If you’re not getting traction from the customer on some of these issues – whether they’re not submitting back up – sometimes getting sales involved will help move the needle.


Step 6 »

Build a Standard Repayment Letter

After a deduction has been audited and validated, if there is an invalid amount taken by the distributor, develop a standard repayment letter that provides them with the information regarding the invalid claim. Include:

  • Contract
  • Operator (if applicable)
  • Item
  • Distributor
  • Rate
  • Reference Number
  • Time Period
  • Invalid Claim Reason

You’ll get more traction for repayment than if you don’t send a repayment letter at all. Be as specific as possible for the invalid claim reason to get that money repaid. Don’t forget – generate and send the repayment letter in a reasonable amount of time. If you wait too long, the customers will be less willing to work with you (especially if they owe you money).


Step 7 »

Track Collections for Invalid Deductions

After you send the repayment letters, follow up with customers that haven’t responded. Track your collection rate by the customer – know which customers have outstanding deductions and who repays you.

If you are reaching out to customers and they’re still not repaying you or willing to work with you, then here’s a strategy you can use: Account for invalid deductions during local marketing program negotiations.


Step 8 »

Implement a Write-Off Process

Create a write-off policy for your company. A write-off policy helps clear aged and invalid deductions when no clear resolution is achievable. If you have old deductions, and aren’t getting tractions with the customer, decide when it’s time to write that off. Is it 100 days? 250 days?


Step 9 »

Set a Deduction Balance Goal

I would set a deduction balance goal for cross functional groups in your organization – cash app, the deduction management team and the claims processing team. Encourage collaboration between groups to help achieve your goals. And, of course, celebrate your wins!


Step 10 »

Create a Deduction Task Force

Put together a cross functional team to help resolve customer issues and create a target customer list that identifies the top 10 customers who:

  • Don’t adhere to your claim submission guidelines
  • Have the largest invalid claim balance
  • Submit outside of the acceptable claim timing guidelines


5 Benefits You Gain with TPM Automation:

Automation creates opportunity for your business. It’s much easier to create an efficient workflow and clear deductions when using a trade promotion management (TPM) software.

  1. Gain visibility into contracts and settlements
  2. See all contracts and settlements in one place
  3. Improve accuracy and decrease discrepancies by auditing
  4. Utilize TPM system functionality to streamline deduction and claims processing process
  5. Track settlements (including short pays)