BY ROBERT PRATHER, FOUNDER AND OWNER OF DEDUCTION MANAGEMENT SERVICES
“Post Audit Claim”. Just that phrase can cause the most seasoned A/R or Chargeback person a great deal of anxiety. Most major retailers employ in-house Audit Departments as well as Third Party Audit Firms (who get compensated by earning a percentage of what they find and charge back). It’s important to understand, they are both rewarded by how aggressive they can be in finding things that were not taken previously. The issue with these types of claims is the fact that in most cases, these claims are for transactions that occurred one, two even three years ago. How are you supposed to research that? The first step in understanding how to fight these claims is knowing what research process the Post Audit team is using to determine the amount due.
The retail audit team uses a process called “data mining”. Data mining is a process where algorithms that use certain key words or transactional circumstances are applied to sales, payment and claim histories, hoping that they find allowance or violations that were missed initially. It’s important to remember that they are looking for certain key things:
- Specific TYPES of allowances or violations. (See Case Study 1 below)
- Whether the allowances or violations were TAKEN PREVIOUSLY
(See Case Study 2 below)
The are many ways to research and dispute these claims. For this article, I will share 2 situations where my clients were charged for Internal Audit claims, and we were able to get them reversed (paid back).
Case Study 1:
A major Dotcom retailer charged our client almost $40K for Freight and Damage Allowances not taken from sales that were over a year ago. Our client was a multi-divisional Houseware vendor that sold to more than one department at this retailer. When this Post Audit was deducted, it was originally considered valid. They remembered that this customer did in fact have terms that were consistent to the ones being referenced on the claim, and the purchase orders/invoices listed on this claim did not have the Freight and Damage Allowance deducted previously. I wanted to be sure that the client was correct, so I researched the Vendor Agreements and Terms for every department this vendor sold the retailer. I came to find out that the department these purchase orders were written for DID NOT have the same terms & allowances as other departments they sold. After much back and forth we got the claims reversed.
Case Study 2:
A major chain store retailer charged my client over $23K for Vendor Violation claims that they claim were not deducted previously. The claims were against deliveries that were more than a year old and referenced “Late Ship” and “Carton contents not being the same as ASN” as the reasons for the violation. Again, when the client checked their internal records, these claims appeared to be valid and were written off. We were skeptical and began our research. Luckily, this particular retailer had a vendor portal that allowed us to research claims by purchase order. We found that these exact claims were taken previously 9-12 months previously under different reason codes. We presented our findings to the retailer and secured a reversal of the claim for our client.
Conclusion
These claims are never easy to fight. Even when you research and find they are invalid, it can take weeks or months to get them to reverse the claim unless you know exactly who to contact and how to present the dispute. Luckily, our experience and familiarity with the inner workings at these retail stores allowed us to get the claims reversed. In both cases, we used these situations to train their in-house A/R & Chargeback Departments, so they’d be better prepared to handle future Audit Claims.
I hope the tips I shared with you helped. If so, let me know! I like to hear from companies and people I’ve helped. If you have any further questions or would like to inquire about our services, you can send me a message or call (626) 736-3588.
Until next month…
