9 Reasons to Automate Trade Promotion Settlements
March 1, 2023
Embracing an integrated Deduction Management and Trade Promotion Solution isn’t just a choice; it’s a strategic move to revolutionize Trade Promotion Management (TPM) and curtail marketing expenses. This dynamic solution validates accurate trade deal deductions while pinpointing deal non-performance and helping recapture deduction errors that can drain your profits.
Customer deductions remain a plague on profits for the consumer goods industry.
TPM is indispensable in Consumer Packaged Goods (CPG), where manufacturers compensate retailers for driving sales through diverse marketing strategies. However, managing trade promotions presents challenges, particularly in tracking and reconciling retailer billback deductions – errors that can inflict significant losses on manufacturers. The complexity amplifies with various marketing strategies, including discounts, coupons, co-op advertising, rebates, free products, and in-store promotions.
The settlement, either through “off-invoice” allowances or “billback” deductions, adds another layer of intricacy. Retailers’ disparate requirements and processes for billback deductions further complicate matters, leading to errors, inaccuracies, and substantial losses. Post-audit deductions, emerging one or more years later, exacerbate the challenge, with error rates soaring to 50%.
In the CPG segment, “trade deals” budgeted for 5-20% of total revenues carry an error rate as high as 15%. This isn’t just an expense; it’s a significant opportunity to transform profits.
1. Improved Accuracy: Automation significantly reduces errors, ensuring precision in managing trade promotions and deductions.
2. Time and Cost Savings: TPM deduction management software frees resources from manual tasks, enabling cost savings and focusing on value-added responsibilities.
3. Increased Visibility: TPM and A/R software offers real-time visibility into promotions, claims, and deductions, facilitating informed decisions and trend identification.
4. Validation: A robust TPM system automates the validation of billbacks, aligning them against sales data and accrual balances by customer, product, and trade deal.
5. Matching: System matching against credit memos efficiently charges back erroneous or excessive bill-back deductions to retailers.
6. Integrated Workflow: Streamlined workflow processes handle exceptions requiring human action without offline complexities.
7. Workflow Optimization: Automation optimizes processes from claims submission to settlement, reducing processing times and increasing efficiencies.
8. Streamlining: Automating trade promotion deduction management can optimize the process from claims submission to settlement. This will reduce processing times and increase efficiencies.
9. Better Customer Relationships: Comprehensive trade promotion deduction management ensures timely and accurate deduction resolution, enhancing customer relationships.
Integration with Accounts Receivable Deduction and Trade Promotion software tackles challenges by streamlining the TPM process and mitigating the risk of errors. Automated systems capture comprehensive data on trade promotions, generating reports and analytics to identify trends, optimize promotions, and make informed decisions.
An integrated AR, TPM, and Deduction software solution maximizes productivity and slashes the “profit and revenue leakage” resulting from deductions plaguing consumer goods companies.
1. Integrate Deduction Management Software: Implement specialized software seamlessly connecting ERP, accounts receivable, and trade promotion management systems.
2. Data Preparation:
• Gather and clean historical data on deductions, accruals, contracts, and related metrics for effective preprocessing.
• Engage in feature engineering to extract relevant features, capturing relationships between deductions, accruals, and performance criteria.
3. Establish Validation Rules:
• Define clear rules based on contracts, agreements, and historical data to guide software in identifying valid and invalid deductions.
• Configure algorithms with a blend of machine learning and human expertise for optimal outcomes.
4. Automate Data Matching: Configure software to automatically match deductions against supporting documents, ensuring accuracy and reducing manual efforts.
5. Use Machine Learning: Incorporate machine learning to analyze historical data, identify patterns, refine rules, and enhance accuracy over time.
6. Flag Discrepancies: Automatically flag deductions violating rules or raising red flags for focused attention on potentially invalid deductions.
7. Generate Dispute Cases: Create dispute cases for flagged deductions, streamlining the dispute process and enabling timely resolution.
8. Track and Monitor Performance: Monitor performance, reconfigure models as needed, and use analytics to measure effectiveness and identify improvement areas.
• Regularly review and update validation rules.
• Maintain data quality for accurate results.
• Collaborate with trading partners to establish clear expectations and processes.
• Consider a cloud-based solution for easy access, scalability, and regular updates.
• Reduce manual effort and costs associated with validation processes.
• Improve accuracy and compliance with trade promotion agreements.
• Identify and dispute invalid deductions more efficiently.
• Gain valuable insights into deduction patterns and trends.
• Protect profit margins from inaccurate or invalid deductions.
Machine learning and intelligent rules are crucial in validating billbacks and preventing erroneous deductions. Analyzing historical data, machine learning algorithms can detect errors early, enabling corrective action and preventing losses.
Furthermore, machine learning optimizes promotions by analyzing past data, identifying effective promotions, and refining future strategies for enhanced ROI.
Implementing automation poses challenges, notably in data quality and expertise. High-quality data is essential for effective machine learning, requiring investments in data cleansing and normalization processes. Specialized skills and data science and analytics expertise are imperative for successful implementation.
Specialized software solutions, such as Carixa TPM features, provide manufacturers with the means to improve accrual spend liability. By automating accrual calculation, tracking balances, and offering real-time visibility, Carixa ensures accuracy in accounting for future liabilities. Investing in automation and machine learning positions companies for long-term success in a complex and competitive CPG industry. The dividends of embracing advanced technologies in TPM and deduction management are streamlining processes, reducing errors, and gaining a competitive advantage.