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Inefficient Deductions Management: The Silent Margin Killer
19 Plays1 month ago
“You can’t manage what you can’t see.” When it comes to deductions, that lack of visibility is quietly draining margin from CPG brands every single day. In this episode, Kyle Barnholt—longtime CPG operator and co-founder of TrewUp—dives deep into the broken processes behind deductions management and why they’re costing more than you think.
We’ll walk through:
- Why manual deductions processes are still the norm—and the hidden cost of sticking with them
- The 10 signs your process needs a serious upgrade
- A step-by-step playbook to streamline deductions without needing a full ERP overhaul
- How to introduce automation gradually (and painlessly)
- Real-world margin impact from better deductions management
If your team is still chasing PDFs, stuck in inbox chaos, or just trying to “clear the books,” this episode is your wake-up call. Get the tools, mindset, and tactics to stop reacting—and start reclaiming margin.
🔍 Want more?
Check out the free Trade Spend Health Check at trewup.com or connect with Kyle on LinkedIn to keep the conversation going.
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Transcript
Introduction and Challenges in Deduction Management
00:00:00
Speaker
You can't manage what you can't see. And when it comes to deductions and trade spend, most CPG teams are flying blind. The result burned time, wasted dollars, and teams stuck in reactive mode.
00:00:14
Speaker
Welcome to the CPG Trade Spend Podcast. I'm Kyle Barnholt, longtime CPG operator and co-founder of TrueUp. And I've seen firsthand how broken deductions processes drag down even the best teams.
00:00:29
Speaker
In today's episode, we're breaking down why manual deduction management is quietly killing your margins and how to start fixing it without blowing up your systems. Let's go.
Impact of Manual Processes and Communication Issues
00:00:43
Speaker
Welcome to the CPG Trade Spend Podcast. I'm Kyle Barnholt, and I've spent years helping brands navigate the messy world of trade spend, deductions, and promotions. This podcast is all about breaking down the complexities of trade spend, uncovering hidden insights, and turning data into profitable decisions.
00:01:03
Speaker
Whether you're a finance pro, sales leader, or just trying to make sense of it all, you're in the right place. Let's dive in.
00:01:13
Speaker
right, so let's talk about why manual deduction management is costing you more time than you think, and maybe even more money. So first of all, let's just think about this, ah the context and the process as it comes as it relates to deduction. So first of all,
00:01:29
Speaker
Let's look at the format and let's look at how these deductions are coming. So the format is in a PDF. It could be 500 pages long. Even the CSVs are over 100 megabytes.
00:01:41
Speaker
And this information is coming in all over the place, whether an email or a portal. And what ends up happening is teams spend hours and hours and hours just literally trying to get the backup documents,
00:01:57
Speaker
deciphering what it's for, decoding these deductions, figuring out which retailers, which UPCs, and by the end of all this work, they have to go do a new project, they lose where they left off, and they have to start over.
00:02:10
Speaker
And it's a complete time suck, and it takes them away really from the more valuable and important work that they're trying to do, which is accounting, which is getting the trade spend insights and data to the sales team, and Really, at the end of the day, these folks are just not being utilized to the best of their ability.
00:02:31
Speaker
And so let me tell a story just to kind of paint the picture of what we're talking about here. We have a brand that I can think of that, you know, they'd get 50 deductions on a payment. So maybe that payment was 25% of what they expected because of all the deductions that came through on the payment.
00:02:50
Speaker
And then when they go pull the deductions and start to do the work, it would actually take them a day or sometimes a week, depending on how many deductions they there were And let's just break down what was causing all that time spent.
00:03:05
Speaker
So theyd they'd get the payment. It hit the lockbox. They'd now go into reactive mode to understand which deductions came through on that payment and why it was short paid by 75%.
00:03:19
Speaker
seventy five percent And so they'd now jump into, okay, let's go into the email, figure out what the deductions are for. They'd have to go search through their email inbox, find the different deductions, which can be very challenging just to locate them in the first place.
00:03:41
Speaker
They'd pull the backup in. they'd now go through a process of reviewing what could be a hundred pages, 500 pages of PDF, and they'd have to start to decipher what these deductions were for. And it was a little bit like Groundhog's Day.
00:03:57
Speaker
They'd try to go in understand what it was for, do it again, come in the next day and do more of the same type of decoding. And what would end up happening is they would spend a day or a week, like I mentioned,
00:04:12
Speaker
just trying to get the categorization of these deductions, what they were for. And this didn't have anything to do with getting the data out for the sales team, nor did it really even relate to understanding the root cause analysis of these deductions and you know, are they legitimate in the first place?
00:04:33
Speaker
And or are there things we could be doing differently to manage these deductions so that we get less of those non-working trade dollars hitting us and spend more money towards promotions?
00:04:47
Speaker
And so at the end of the day, what ended up happening as a result is they'd spend all this time trying to book the check. They'd move on to the next thing. And then they'd come back and have to do it over again. And they would never really get to the data and the insights.
00:05:03
Speaker
And even worse, there were deductions that they knew were just kind of going under the rug in terms of these are deductions that you know we could reduce our costs, whether it's through changing process or doing other types of things to ensure that you know, we're not leaking dollars from this bucket.
00:05:24
Speaker
Furthermore, what ends up happening is the team now is working in reviewing these deductions and they need to ask questions to the
Signs of Ineffective Deduction Management
00:05:34
Speaker
sales team. And so what ends up happening is They send an email out to the sales team or the operations team.
00:05:41
Speaker
And inevitably, the sales team, as they should be, are out at a sales call, traveling on the road, possibly the whole week. They see the email come through. They see the 500-page PDF.
00:05:54
Speaker
And they can't make really heads and tails because it's multiple retailers for multiple events. And there's really no recap or information that helps the sales team.
00:06:05
Speaker
give a good answer back to the person managing the deductions, whether it's accounting or a deductions analyst. And so what ends up happening is now the deductions analyst is on hold waiting for the sales team to respond and tell them, hey, this is legitimate or we should be looking at this document to validate this point.
00:06:27
Speaker
And now that person's on hold, the sales team comes back, they have a bunch of follow-up to do with the account where they probably just had a category review or a big meeting.
00:06:39
Speaker
and or they're preparing for their next meeting and the cycle continues over and over and over again. And what ends up happening is now you get backed up on your deductions from, you know let's say today, you go in tomorrow, next week,
00:06:54
Speaker
Same thing happens and it's this vicious cycle where time is wasted, time is lost, and you don't get a chance to actually reconcile them. And you have all these other priorities, as you can imagine. So now you are getting further and further behind. So if this sounds familiar, and if you're kind of kind of nodding your head,
00:07:14
Speaker
You've been there, you understand what we're talking about. And i think the key takeaway here, right, a couple of key points is it's highly manual. It's time intensive, it's error prone, and it's demoralizing for the team, for the people, whether that's you or the people working for you um or your cross-functional partners that are trying to help this organization be successful.
00:07:39
Speaker
It's manual, it's demoralizing. Most teams are overpaying or getting these deductions come through that they can't actually spend time to analyze and figure out what the root cause was, and therefore they can't reconcile these deductions.
00:07:57
Speaker
And the cost isn't just dollars. Again, this is opportunity cost, it's morale, it's insights into the information. That's what's at cost here. That's what we're losing when this is the process. And so if you're still chasing PDFs each month,
00:08:17
Speaker
You're not managing deductions. You're just trying to survive. and And trust me, you're not alone. We talked to hundreds and hundreds of people in the same boat. I've been there personally myself, whether it was managing the deductions or managing the team that was overseeing the deduction management process.
00:08:36
Speaker
And so you're not alone. um And good news. We're going to share with you tactics and techniques here today that will allow you to get this under control and really feel like you're not flying blind anymore.
00:08:51
Speaker
Like you're actually on top of it. You have it under control and best of all, you're starting to reduce your costs that aren't driving ah sales revenue and you're starting to book those checks and save those dollars that you're trying to save.
00:09:10
Speaker
All right, let's talk about the 10 signs that your deductions process needs a makeover and how to fix it. So if we just got through that portion and you're thinking, yeah, it's not that bad, Kyle.
00:09:22
Speaker
you know Some of that resonated, but really, as I look at my process, I think we've got it pretty well under control. And you know let's dive into these 10, because if you're experiencing one or multiple of these different signs, then within your process, you have opportunity to kind of tighten the bolts and really get more control over this process of managing deductions, which, oh, by the way, makes up over 25% of your revenue and is likely the second largest line on your P&L.
00:09:54
Speaker
So let's dive in. First of all, if you're relying on email to go back and forth with either the sales team or the operations team, or you're getting your deductions via email and that's your source of your kind of portal for these deductions, then this process can be optimized.
00:10:14
Speaker
If your finance and sales team are consistently asking each other for updates and it's kind of this ping pong back and forth, finance is saying, hey, did you review that email?
00:10:25
Speaker
The deductions that I sent you and or the sales team is coming back around and saying, hey, I need more visibility and insights into my trade spend or what that deduction was for what the result was, the outcome of that deduction.
00:10:42
Speaker
If you're seeing some of that ping pong back and forth, then you likely are seeing a sign and a symptom of a process that's broken. You don't know your open deductions balance by retailer. Or said another way, we don't know how much we're spending at the retailer level because we're looking and flying at the very highest level, which may be at the distributor level, or maybe it's a ah large national retailer and you don't know.
00:11:10
Speaker
you you know which regions are driving your trade spend. If you're seeing this, ah then your process and the data that you are getting to is probably not optimized for where your organization needs to be.
00:11:25
Speaker
um If you don't have a standard coding structure, you're not categorizing these deductions in a standard way, and you're kind of just allowing either multiple people to do it and there's no standardization across organization, or you come in and it's Groundhog's Day and you're redoing it each and every day or each and every week, then your process is likely broken.
00:11:50
Speaker
um If you have aging deductions balance over a month, or in some cases we've seen six months, 12 months of aging deductions, just again, because of that process and how things are um being managed with the sales team out and the analyst likely having multiple projects on their plate, then we've probably got a problem here.
00:12:15
Speaker
no clear owner for your trade non-trade related deductions so we've got our trade deductions, which are driving dollars through the register. It's driving sales, it's driving revenue.
00:12:27
Speaker
And then you have your non-trade deductions. These could be logistical fees and fines. It could be shortages. It could be spoils, other types of fees that are coming through as deductions.
00:12:39
Speaker
If we don't have someone clearly owning that process and running point, even though it might be you know for different deductions across the organization, like operations or customer service or the sales team, then you're likely wasting time and wasting money.
00:12:58
Speaker
um Sales doesn't know what's valid versus invalid. So we talked about that example where the sales team is traveling. They get an email asking for you know what this is for. It's a 500-page PDF. So the sales team says, what I don't know what what you want me to do with this.
00:13:18
Speaker
There are multiple retailers in this one backup for multiple events. Then you're likely in a process that it could be optimized.
00:13:29
Speaker
and could be made better so that those conversations with the sales team can be more productive. If you don't track the categories and address the root cause issue, right? So we're maybe we may be doing as good as we're getting the category for the deduction. It's manual, but we're getting there.
00:13:49
Speaker
putting it in our accounting system at the GL level um and you know we feel pretty good but no one's coming back around and saying well hold on we continue to get hit with these late fees or we continue to short to this warehouse then you're likely leaving money on the table and if you can't report On those categories. So let's talk a little bit about reporting.
00:14:16
Speaker
If you don't have ah good reporting structure that's allowing the team and enabling the team to be able to see kind of month over month, how we're performing, are those types of deductions going down? Are they going up?
00:14:31
Speaker
Who's in charge of trying to reduce those deductions then? So if we don't have that reporting in place, then we're likely in a scenario where we're wasting dollars.
00:14:43
Speaker
And finally, If you're just clearing deductions just to kind of keep the ball moving, and we've all been there, no judgment. But if if we're kind of just sweeping it under the rug and you're just clearing the deduction because you've got 10 other priorities coming down from the CEO or your manager or just for yourself and your business, then you're likely in a process that could be optimized and allow you to save more money, which of course we can now redeploy into trade events that are going to drive top line sales.
00:15:19
Speaker
So if you're nodding along with you you know one or multiple of these, it's time for a process reset and we're going to give you a step-by-step guide and how you can do that.
Strategies for Process Improvement and Optimization
00:15:33
Speaker
All right, so here is the five step guide that will help you get your arms around and wrangle this beast to the ground, which is managing deductions. So this is your step-by-step guide to streamlining your deduction management process.
00:15:48
Speaker
And I think it's important to preface this by saying you don't need to do a full overhaul to your ERP system to improve these deductions. We don't need to kind of tear the whole thing down and start over.
00:16:02
Speaker
you can actually do this by just following this guide and starting to enact these steps within your process um and fit them into how your organization is managing accounting.
00:16:14
Speaker
But these five steps will allow you to manage your deductions more efficiently, streamline them, and really start to see time savings, money savings, and just optimization of those deductions and trade spend. So The first part of this is to lay the foundation and set up a process. And i'm going to come back and talk through each one of these individually.
00:16:37
Speaker
But the first one is to lay the foundation, set up a process. We need to then to create a standard operating procedure for reviewing these deductions.
00:16:49
Speaker
And three, you want to empower this point person to reconcile deduction. So we need to really get the backing from our cross-functional teams, whether it's sales, executive, marketing team, accounting team.
00:17:04
Speaker
We need to... enable, empower this person to be able to reconcile these deductions. And so we'll talk about that. And then we need to align with the accounting team to make sure we're closing the loop. And it could be the accounting, could be sales, could be operations, but we need to align as a team in order to make sure that we've got a good closed loop process.
00:17:28
Speaker
And finally, number five is to report on the data and drive continuous improvement. right It's important that we are tracking this, we're measuring it, and then we're actually starting to see an improvement and we're continuing to improve on what we learn each and every week.
00:17:48
Speaker
So let's now dive into each one of those areas, all five steps, so that you have some clarity around what we mean by each one of those. So when we think about laying the foundation and setting up a process, the place that I like to start is really understanding what your agreements say. And when I say agreements, I mean those contracts with your distributors and with the retailers.
00:18:15
Speaker
um We should be leaning on the team to get those contracts into one place. So a share folder where anyone can review these. But having those contracts, understanding what we've agreed to, because that's going to really be critical when we go to reconcile and understanding kind of where these different implications can happen, whether it's fees, fines, and other parts of the agreement.
00:18:43
Speaker
So that could include... your distributor agreements, retailer agreements, there's inbound routing guides, there's fee schedules. So getting those and collecting them, storing them in a place that anyone can get their hands on them. And we're going to talk about how we need one person really to run point on that.
00:19:02
Speaker
And then assigning that point person to own the deductions. um And then ensuring that the person has access to all necessary portals, inboxes and tools. So perhaps we have one spreadsheet where we can keep um the different portal credentials So that should something happen to that person, like they leave the organization or the salesperson who had the only credentials leaves, you know, what do we do now?
00:19:33
Speaker
um We want to make sure that that's all in one place. We know where to go, where are the portals or what email address are these deductions going to. um So really just laying the foundation and setting up a process that we that can become repeatable and scalable.
00:19:52
Speaker
Next, we're gonna talk about how you wanna create a standard operating procedure of reviewing these deductions, right? And i like to think about this as it's a periodic ah process. And where I see people best in class is this is a daily and weekly process.
00:20:12
Speaker
This isn't a, I come in once a month and review these because i guarantee you, you're only going to be getting more as you continue to scale the business and they're coming fast and furious. So you get behind and it just continues to build up and stack up. So we want to set a cadence and I would suggest a weekly cadence um at worst, maybe a bi-weekly cadence.
00:20:36
Speaker
And I know in some cases it ends up being monthly, but what's the right cadence? And then you can hone it in from there and what makes sense for your organization. I always like to prioritize, of course, kind of by dollar, so largest deductions and down.
00:20:53
Speaker
So if you're keeping track of what you have reviewed and what you haven't reviewed, um then within that spreadsheet, kind of sorting by size of deduction and ah starting at the top and working your way down. Of course, um logically, that's going to make sense.
00:21:11
Speaker
Rather than looking at a $5 and $10 deduction, we want to look at the biggest ones. um And then a process of comparing. And this is where those contracts that we talked about come into play.
00:21:24
Speaker
Also, any promotional calendars or promotional contracts that we have from the sales team or our broker partners or our distributor and retailer partners, We want to have that handy so that when the deductions come through, it's not a process of now seeking out all of this information from the sales team.
00:21:44
Speaker
Like we talked about, they're likely on the road so you can get their documents to help you review, validate, reconcile these deductions. And um you want to make sure that you have kind of clear um visibility to which stakeholders within the different departments of the organization we can lean on when it comes to certain types of deductions.
00:22:08
Speaker
And so just kind of setting the clear kind of roadmap on who to reach out for what. And of course, if we have those contracts, we want to minimize the amount of times we have to go out. That's more of on on an ad hoc needed basis as as opposed to like a daily. So we want to do our best to reduce the emails flying around and, um,
00:22:32
Speaker
Then last but not least in this portion, we wanna track the status. So whether this is in a spreadsheet or another format, you wanna understand kind of what's new in my deductions, what have I reviewed and is under review, what's been approved so that I don't need to come back and re-review a deduction by accident and say, oh yeah, I've already looked at this one.
00:22:53
Speaker
um Dispute, what's sitting in disputed. wanna keep track of what's open disputed and what's been resolved. And that'll just really help give clarity as you manage this process within the organization.
00:23:08
Speaker
Now let's talk about the point person. It's super important. And in some organizations, this could be multiple people. If there's kind of account based kind of deductions, folks who run point for multiple accounts. So say you're a large organization, you have one person managing this distributor, one managing that retailer deductions.
00:23:29
Speaker
um Or maybe you're a little bit smaller and you're you have less resources. We see this all the time. There's kind of one person who's the quarterback. And as those deductions come in, that person is now doing the review, doing the reconciliation, reviewing the contracts, ensuring everything is kind of stacking up to what they would expect.
00:23:49
Speaker
And so... I think the key here is you want to empower the point person to be able to do that reconciliation process. And I think this is something that has to come from the top down and it needs to come across. So we need our cross-functional team members like the sales team, the operations team.
00:24:08
Speaker
We need everyone to kind of be marching in the same direction so that we're all saying and thinking in the same way of, hey, when a deduction comes through and there's a question, I know that this is taking me away from maybe my core responsibility, but I want to help that person answer the question they need so they can really stay on top of this kind of building, stacking um pile of deductions.
00:24:34
Speaker
And so getting that buy-in across the organization and also the leadership team really driving that down as well will help that person be successful in this role.
00:24:45
Speaker
um I would always recommend kind of keeping a paper trail um so that you really understand, you know, where did I leave off on this conversation or this deduction or, you know, approvals.
00:24:58
Speaker
um So just kind of keeping nice paper trail to understand where we've left off and continuing to build confidence internally um by showing that, hey, we've seen success in this area.
00:25:11
Speaker
So for that point person, they want to start to build kind of a library of the success that they've been able to get with their cross-functional stakeholders or in their job and in the process of managing their deductions.
00:25:26
Speaker
Number four is to align with the accounting team to make sure we're closing the loop. so we want to close loop process. A lot of times we need to file a request for backup or a dispute.
00:25:39
Speaker
um Or perhaps we're working with those folks in sales or operations to get answers to deductions. And so it's just important that we're constantly kind of closing the loop as things are um being resolved. So um as an example, ah you know, let's say that you get a deduction you um you know, you're requesting backup because it it didn't come with the information you need to really make heads and tails of what's what it's for.
00:26:14
Speaker
Well, once that comes through, it could be tomorrow, it could be, you know, two weeks from now, we want to make sure we close that loop so the accounting team can ah assign the deduction to the right category within the GL codes and and therefore the P&L.
00:26:31
Speaker
Last is then a reporting process. So number five, we want to make sure that we're reporting on the data and we're driving continuous improvement. I actually have a framework that helps you lay out a reporting process so that you can have a month over month view of your deductions by category. And so this would be at the category level.
00:26:55
Speaker
And then as you drill in understanding what deductions are making up the number. So if there's $20,000 in the month month of April, we can drill in and understand what those deductions are for and from what accounts.
The Role of Automation in Deduction Management
00:27:09
Speaker
But having that Continual reporting, I would recommend on a monthly basis. um And even if you have to do it manually, this is this is critical to making sure that we're measuring what we're working on. And this will allow you to see where you see spikes or ebbs and flows, or perhaps just a continual, um even if it's kind of slight, but over time it builds cost, then we can understand are those non-working trade dollars that we want to root cause and analyze, reduce our costs and you know reduce the the leaky bucket. So um this reporting is going to allow you to do that if we're doing it by account and then drilling down by retailer or division and then by deduction type or category.
00:27:59
Speaker
which then we can do in a ah root cause analysis. um We want to highlight those kind of outliers, those repeat offenders or repeat issues. Maybe not offenders, but like we've got a certain deduction within a certain category.
00:28:14
Speaker
where we continue to you know show up late or get these deductions for late fees, what's going on there, right? This gives you the ability to highlight those and drill in and you really understand contextually, is it worth my time or not?
00:28:29
Speaker
And once we see it get to a point where it is, then we dive in and and we we take care of it and nip it in the bud at um really the the point of friction.
00:28:42
Speaker
This also gives you the ability to do some ah ROI analysis or just was this event, this promotion, let's say it's a trade promotion, was it effective? So now that you've kind of come out of the, you know,
00:28:56
Speaker
fast and furious mode of trying to review PDFs, you're now into a mode of you've got it under control. you know We can take a deep breath. We can now start to understand, you know was that a good spend? Do I want to repeat that?
00:29:11
Speaker
and And then within this, we want to make sure we're tracking repayments, resolution time, other key metrics tied to ah success and the continual improvement of the process that we've put in place.
00:29:26
Speaker
So you don't actually need automation to start acting like a high performing team. You need structure. We need ownership. We need buy-in. And then we need the discipline in place to stay to the process, stay the course, because you will see success if you implement this five-step process.
00:29:47
Speaker
Do that. And I guarantee you the winds will follow, um, Next, we're going to talk about how to introduce automation without replacing the entire system. So I said we don't need to automate this, but think about a world where it is automated and you can actually come in and you can start to do the work without having you know Start to do the work on the root cause analysis, see the reporting, see where you left off yesterday or last week, see where you've been, where progress has been made, maybe even without you since the last time.
00:30:28
Speaker
you came in and reviewed those deductions or those trade categories. So um if you implement the the five-step process, you will start to see wins.
00:30:39
Speaker
If you implement it with automation, you 10X your results and you do it that much faster. And so next we're going to talk about how you can do that. Okay, so let's talk about how do we introduce automation without replacing our entire system?
00:30:55
Speaker
And I just want to say that i've I've been in your shoes. I've been in the seat where I'm thinking, um my gosh, it needs to do everything for this system. to make sense for us. And I need to and need to tear everything down and rebuild it for this to to make sense for me and my organization. And I just want to relieve you of that stress, that concern, and tell you that right now, if your team is doing this process manually, and you just move it over
00:31:26
Speaker
to a automated process, leveraging a software like TrueUp as an example or others, this is going to relieve your team of that manual work, trying to pull deductions from a portal or an email and then go through the process of decoding those. And then if we're lucky, we spend the extra time to get the data at the UPC and at the retailer level and the category level, right? All of that work is what we do up front and that takes all the time.
00:31:58
Speaker
you don't end up getting the time to come back around and optimize and root cause, analyze why you're getting those deductions to then say, we need to stop this practice or we need to take this action.
00:32:13
Speaker
And so this is where automation comes in and you you take 95% of the work out that was wasted time, human labor, um,
00:32:24
Speaker
bad morale for the team. Nobody wants to do this work, but when you bring it around, and make it automated and you get the data, you have the information at your fingertips, it actually can become somewhat of a fun process to say, okay, I understand what's happening.
00:32:41
Speaker
I can now start to take steps with the organization, with the team, with my retail and distributor customers to start to reduce my non-working trade and increase my working trade that's going to drive sales or increase profitability so that we can get that next production run. so I think that's the key we want to just highlight here is that ah you don't have to tear everything down and start over to get automation.
00:33:08
Speaker
Think about it as an ecosystem, deduction management as an ecosystem and a team or a person. who if we empower that team in person with the tools to manage these deductions, they can 10x, they can almost 100x their result because today the way these documents, the information, the way it comes, it's almost impossible to do with human because it it just takes so much time.
00:33:39
Speaker
You end up having turnover. So this is where bringing automation into the system can really help us to manage this business. And you're taking the extra mile, right? The extra 5% rather than spending all your time upfront getting the data.
00:33:56
Speaker
And so I think the key here is we don't need a full tech stack rebuild. You can start with automation quickly. which includes the pulling of the backup, the decoding, the categorization, the line item data, what retailer, what account, what was the event that ran, but were how many units were sold, you know what was the scan per unit, what additional fees did we have.
00:34:24
Speaker
That is all something that can be automated that allows the team to quickly and easily manage this. So let me give you an example. We talked early on about a Someone I know, a customer of ours, that they were taking the check that they would get, right? And they would spend the next day or week taking all the 50, 100 deductions that were taken off the payment.
00:34:50
Speaker
And they were now going out and doing that manual work I just talked about. When they implemented TrueUp, they were able to automate all of the retrieval, all of the categorization, get all of the data out and sanitized in a way that they could now work with it from an accounting, ah trade spend standpoint.
00:35:14
Speaker
And that was all done at the click of a button. So they came in in the morning, it was available for them rather than having to do any of that work upfront that was all done for them. They booked the check in five minutes.
00:35:27
Speaker
And then they had the reporting and all the tools were already available for the team. So that person actually didn't have to do the additional work to create reports for the team.
00:35:39
Speaker
So think about the amount of time that person saved, that organization saved. And now they take that time and they redeploy it to reviewing the root cause, understanding what has taken place when there's a non-working trade deduction that they want to try to reduce or eliminate.
00:35:58
Speaker
And now they're able to go in and optimize. And they were able to save within $100,000 in the first couple months. And as you can imagine, that's only gotten better, they've only optimized more and this has allowed them to drive their business.
00:36:16
Speaker
I think it's gone up 5x since when we first started working with them and their trade spend is in line, it's in budget and they continue to just crush the numbers and crush the budget. So I think, right, hopefully that helps to paint the picture of how when you implement the automation, you take out the manual work, you reduce your paper cuts, morale goes up,
00:36:39
Speaker
The team's equipped with the data, the information, and the insights they need to do the job that you hired them for, rather than do that low value work that really is a never ending saga and is something that a human can't
Strategic Importance of Effective Deduction Management
00:36:55
Speaker
do.
00:36:55
Speaker
Now they can move into understanding what's happening and optimizing those dollars. And so The key takeaway here is you don't need to rip out the entire system and redo it and overhaul it to make these improvements.
00:37:11
Speaker
Think about it as an ecosystem where if you give the tools to the team, they can start to see success on day one immediately. And then the integrations and all the things after that can follow. And that's all good. And we want to you want to get there and you want to do those things, but you can see success.
00:37:30
Speaker
you can see success right away because this process is so man. All right. So let's talk about the real impact of deductions management on our profitability as an organization. And I think this is a really important, um,
00:37:45
Speaker
aspect of this conversation that we've talked about throughout, but I really want to zoom in on this so that we can highlight how important it is to our business.
00:37:56
Speaker
And it's easy to think about deductions as this back room process that I don't get involved with, but it impacts every single, almost every single element and aspect and area of the business.
00:38:09
Speaker
And so it's important to understand what are some of those implications when it comes to managing deductions successfully. And so and think it's important to think about, like I said, it's not just a back office task.
00:38:24
Speaker
This is actually a financial lever for your organization. And if we manage it right, it could reduce the amount of money we need we need to either raise, it could help us reach our budget, it can help us reach our growth goals.
00:38:39
Speaker
And so I wanna talk a little bit about um a real life example that I've seen personally and how it impacted us as an organization and the organization a way that was really kind of detrimental in the overall grand scheme of things. But then when we were able to get it under control as a team, we actually saw the success that we were hoping for. So let's take an example.
00:39:10
Speaker
$100 million brand, right? They're doing 100 million in revenue with their distributor, grocery, retail partners. And of that 100 million, they have 30% trade rate. trade rate That's $30 million dollars in trade spend.
00:39:26
Speaker
Of that $30 million, they actually should be at $20. So they were overspending by $10 million or 10 points of their budget. So $10 million in overspend.
00:39:38
Speaker
And when we dug in, were actually able to see that that 10% could be completely overspended completely kind of eliminated or even repurposed because it was non-working trade.
00:39:54
Speaker
These were dollars that were getting wasted. It was spoils, it was shortages, it was late fees. you know millions of dollars and different types of non-working trade, that when we were able to optimize those dollars, the profitability shot up.
00:40:16
Speaker
So we went from overspending by $10 million dollars to coming in at budget, to 20% spending $20 million dollars on the $100 million dollar brand.
00:40:28
Speaker
And we were able to see us reach our budget, which meant we reached our profitability goals. So I think it's important to think about how this can be a financial lever for your organization.
00:40:41
Speaker
And if we're not taking it seriously, if we're just thinking of it as a back office kind of something I don't get involved in, but I really hope that we're managing it well, to this is ah top priority for the organization. It's an initiative that we take seriously across kind all of our front end commercial areas of the business.
00:41:05
Speaker
We can begin to manage these deductions and manage a process that's repeatable, scalable, automated and highly tuned so that you can ensure that your dollars are going towards working trade, which is helping drive product into the consumer's baskets and mouths, which is what what everybody wants at the end of the day.
00:41:28
Speaker
And so think about your deductions management and trade management as your financial lever in your business that's low hanging fruit.
00:41:39
Speaker
And i guarantee you, if you can get it If you can get those five steps we talked about, or you do the automation, you're gonna be able to drill in and see areas of opportunity within your organization, whether it's full on process opportunities, deductions that we wanna start to eliminate or remove,
00:41:59
Speaker
or non-working trade dollars that are not helping move the needle that we can reduce and bring that those dollars back in-house or redeploy to kind of high sales events that are really going to drive the needle and drive sales. so The key takeaway here is that better deduction management isn't just a cleanup and it's not an overhaul as we talked about.
00:42:26
Speaker
It's how you recover margin and reinvest those dollars in growth and reach the profitability goals that your organization has, that your key stakeholders have.
00:42:39
Speaker
you know It helps the morale within the organization because you're hitting your numbers. um You have a team that's managing a process and this is critical in highly competitive, fast-paced environment. And if we haven't talked about it, we guarantee your competition in your category is doing this.
00:43:01
Speaker
And so if you're not adopting this within your organization, you're not embracing it, it's not an initiative for your team, then I guarantee you someone in your category is doing it and you're actually losing out on dollars that your brand could be getting.
00:43:20
Speaker
And think about it. They're reaching their budget targets. They're seeing their sales grow. They're not wasting dollars and spoils or other fees that aren't driving sales through the register.
00:43:35
Speaker
They're optimizing and ensuring that those dollars that are going out commercially are driving more product off the shelf. And so it's your opportunity as an organization, it's your financial lever to help you drive growth in the business, be the best brand in the category, and really and ensure that you your business is humming along as you guys continue to grow.
00:44:02
Speaker
All right. Well, thank you. Just to recap, you know we talked today about a lot of stuff. And I think the key call out here is you know manual deductions cost you more than you think in your organization, whether that's time, obviously money, and just morale for the team.
00:44:21
Speaker
This is costing your team a lot of trouble. And that can be ah nipped in the bud. So we talked a lot about that. Most teams are showing those signs.
00:44:34
Speaker
We talked about the 10 signs. Most teams are showing those signs that you need a reset on your deduction management process. And we gave you those tools. We gave you the five steps.
00:44:44
Speaker
We showed you the 10 signs. um Small, consistent process improvements actually matter. And there's low hanging fruit within your organization If you just kind of lean into that, you can start to automate without a full rebuild.
00:45:02
Speaker
So whether that's doing some of this and just working your way through a process of, okay, how do we automate in Excel? And then how do we automate with a software? And then, you you know, look, this is a margin and growth conversation, not just a back office deduction management, something I don't get involved in. This is a strategic initiative for your organization. And I guarantee you, if you embrace it, it will help you guys grow the business,
00:45:34
Speaker
reach the goals you want to reach, reach your budget, and really achieve the the goals and dreams that you have for the brand.
Conclusion and Call to Action
00:45:42
Speaker
And so, look, I really appreciate you spending some time with me here today.
00:45:48
Speaker
You're already spending the money. Don't let deductions quietly steal your margin, your morale. um turn it Turn it around. Turn it into a strategic initiative for your business to help you drive growth, financial leverage within your organization.
00:46:07
Speaker
And let's take back control. Let's start flying with clear visibility, not flying blind. If this episode hits home, let's keep the conversation going.
00:46:18
Speaker
Reach out to me on LinkedIn, engage with us on our website. We're doing a free trade spend health check today, which you can find at trueup.com, where you can actually see your data live and in action. You can see the automation, but...
00:46:32
Speaker
More importantly, you can see the reporting and how you can start to root cause your business, optimize, save money, and drive exponential growth within the business. So I really appreciate you joining me here today.
00:46:48
Speaker
I hope you have a wonderful day. Thank you so much.
00:46:55
Speaker
Thanks for tuning in to the CPG Trade Spin podcast. If you found today's episode helpful, be sure to subscribe so you never miss a conversation. And let's keep the conversation going. Follow us on Instagram, Facebook, TikTok, and LinkedIn at CPG Trade Spin podcast for more insights, updates, and behind the scenes content.
00:47:17
Speaker
See you next time.