Okay, all right, I’m going to be moving very quickly through these slides. So let’s see if they work. The green button.
Oh, that one, the one with the big zero on it. Okay, so we’re going to, I’m going to share some information from the deduction survey, the 2021 customer deduction survey, then I’m going to really summarize, I guess, five highlights of some observations, and then how technology can help those challenges when it comes to deductions. And then at the end, I’m going to share some tools with you that you can use to measure your performance. So those of you who know me know that I am a deductions geek, I guess, have done, you know, over the last 20 years, I’ve done a lot of work with companies to help them reduce and control deductions, and what can they do. And I’ve done a lot of work with HighRadius and their tools to help clients figure out what are the best processes that they can use. I’d love to share information. And I love to try to give you things that can really help.
So again, though, a very short time period. So I’m going to quickly move through a lot of these slides and try to leave some time for a Q&A. A lot of these, the benchmark stuff that you’re going to see on these presentations come from this little booklet, which this year, for the first time, it’s only a PDF, I didn’t print it, it was so hard not to print it because I love touching the little booklet, but I figured we’d save the trees. So this book has a lot of information, a lot of deduction information. And I will share my website at the end, if you want to, you can go online, put in your email address and get a link to the PDF version of the survey. There are over 60 questions in the survey. So there’s a ton of information, I summarized it in the beginning. And then at the end is a table with really a lot of information.
The information is broken out by these seven industries. And then there’s also a composite of all of them. We also broke out the information with companies with annual revenue under $500 million, and those over $500 million.
Again, I won’t spend a ton of time, but you can see that 53% of the companies said their primary customers are retailers, although there really was a very good cross-section of organizations.
The biggest was food, beverage, and grocery, you can read through apparel, a lot of different industries. Also, I feel like there was a really good size comparison.
62% of the companies had annual sales of over $500 million. But there were also quite a few that were under 500 million so that you could see throughout the survey what some of the differences were.
So I’m going to show you just a couple of observations, a couple of things that I saw that I think are relevant to technology. And then we’ll talk about how technology can help.
So five things that I think are takeaways from a lot of the information in the survey is one, it takes a long time to manage deductions, it takes a long time to resolve deductions. And then there are challenges with cross-functional cooperation and collaboration. That’s always the number one. Was interesting this year, that there’s a lower recovery rate. And I’ll share some slides with you about this. Limitless deduction aging, there are many companies that let deductions age forever, and definitely not a best practice. And then we’ll look at reporting a little bit.
So the first one is that 53% of companies when I asked what has been your biggest issue, trying to manage deductions during COVID 53% said there’s a longer turnaround time, right harder to get information, it just takes longer, because people aren’t together.
That’s when I look at challenges with cross-functional teams. The number one internal challenge of companies forever has been cross-departmental cooperation, getting people to work together because you all know that deductions. While finance is often left to clean up the mess. They didn’t create the deduction. So it’s hard to get other organizations other departments to work with you to have accountability to deal with these things. Also, when you look at this, it was interesting 66% of the companies that responded said they do not have a dedicated compliance group. So without a dedicated compliance group, it’s very hard to have visibility and accountability across the organization. So you’ve got to send out information but what’s interesting is, if you look at it by industry, it’s very, very different. And it makes sense because if you’re an apparel organization, apparel companies, and retailers, they have a lot of deductions that are not trade-related. They have a lot of unique deductions about ticketing and labeling and hang tags that are off and, and pallets, lots of different things. So these are often outside of the finance area. So they may need a compliance group, where other areas other industries, since such a large percent of their deductions fall in the trade and promotion area, they may not have a compliance group. But they’re still going to have fines and shortages and other penalties. So how companies work together to deal with that is really critical.
Low recovery rates, it’s really very interesting to me, that one of the questions we asked or to what percent of your deduction dollars that are invalid are ultimately recovered. And what we found is that while for a number of industries, the percent that is invalid has gone down. Also, the recoveries have gone down. So if we looked three years ago, if you look over on the right-hand side, three years ago, for food, beverage, and grocery, the median says 70% of their invalid, deductions were recovered. And this year, that went down to 60%. If you look at apparel, footwear, and accessories, it went from 50% to 30%. And again, this is the median. So as you’re looking at this slide, if you know in your organization that you are not even as good as this, or this is where you are, you’re at the median, nobody wants to be the median, you want to be better than the median and you want to be in the top 10%. So what are the types of things that you need to do to get better recovery? How can you solve a lot of these issues?
We also look at companies and we ask, what’s the average? When do you write things off? How long can deductions remain open? And 44% of responding companies said, you know, like, for the rest of my life, that’s what literally, they didn’t say that but no time limit. That’s definitely not a best practice. And you can think about why does that happens? And sometimes it happens, because there’s limited accountability. So who is it that’s supposed to clean it up? What time is it? What’s the timeframe that allows someone to deal with it, or there may be poor visibility and reporting of the information? Also, sometimes people feel like they’re eternal optimists? No, I’m never gonna write something off. Because I can always try to collect, I don’t know, I would have a discussion with them about that, and whether it’s real or not. But there are definitely opportunities once there’s accountability and visibility, and you know, what information is in the system, to be able to come up with a new plan in the organization for how you’re going to start taking control and maybe even charging some of these deductions that aren’t cleared to the rest of the organization. Then we asked about reporting.
So it’s also very interesting that 68% of survey respondents said their reporting was average. So I take averages, average, not really very good, I don’t want to be average, only 12% said they have excellent reporting. And if you think about that, 65% of respondents said their deduction reports are manually generated. So definitely not what you want to do. 35% said that they’re not able to track the information that they need in their system. And also, which is not a stout not surprising or astounding, because I work with a lot of companies who are in this position. Only 14% of companies responding said that they’re able to automatically track repayments. So everybody else, they’re either not tracking repayments, or they are manually trying to keep track of repayments. And that’s a really I feel a very important metric to know how you’re doing and what you’re doing because those recoveries, you know, that’s real dollars to the bottom line.
So what can companies do? How can automation help deal with these solutions with these challenges? What can automation do? So the first thing that automation can do when you’re looking at a longer turnaround time, is getting the information faster. So using these technologies, you can link your customers and your carriers, and the logistics team to the same information. And these tools can automatically pull in claim backup, they can automatically capture line items or detailed attributes from those and attach documents. So there’s Big difference between researching a shortage deduction and when you get it, you need to go out to the portal, get the claim backup, you need to go get the invoice, you need to go and get a pod or contact the carrier, save all of that on your desktop or attach it. And then starting your research, that takes a long time. But if you’re using these tools like a HighRadius tool, what happens is when that deduction is there, the first time you see that deduction, the invoice, the claim, the pod can automatically be attached so that you start your research. So it makes it a lot easier. And you can save a lot of time.
Challenges with cross-functional collaboration, if you’re using a tool that everyone can work within, it replaces your posts, or your Excel emails back and forth, and your notes and you can have the tracking information, and the history. And all documents or all notes on a specific deduction can be contained there. You can create tasks, you can set reminders, so everybody can be within the system. And also you’re able to have people in different areas involved in the system and be able to route information back and forth and route deductions back and forth. You may decide, for example, when a deduction comes in, and it’s a shortage, it’s going to my logistics team, when it comes in, and it’s some other kind of a compliance violation, it goes to another group. So rather than having to prepare and consolidate and send emails, they can automatically be routed to the right person. So when that person logs in, it’s already on their worklist. So these are the types of things that save time, it’s how do we use these tools to really automate the nonvalue added activity and the manual tasks that people are doing? How can we use that to really save time?
Another way is, as Sashi talked a little bit about AI. So for deductions, what you can look for, or and what the HighRadius tool can provide are things where they’ll take the historical information that you have. So the historical research you’ve done as to whether something’s been valid or invalid. And based on that, they’ll create algorithms to determine and tell you in the future, whether this deduction looks like it’s valid or invalid and a confidence percent. So take that information and having that information, you can decide if there’s, for example, very high confidence that something is valid, maybe I’m not going to spend as much time looking at it as something that if it has a very high confidence invalid, I might want to jump on that right away. I want to dispute that right away. So how can this tool How can your history predict what happens going forward and help you focus the energy of people who are doing the research. Also, when you’re looking at these tools, if these tools are integrated, as soon as a deduction comes in, as soon as the reason code is there, and it’s identified, it can move through the rest of the system, you can decide when something’s invalid, it’s automatically going to flow from the deduction tool when they dispute it and now the collector has visibility. So they know something’s been deducted. And they have visibility, and they’re not waiting for any additional information and all of the backup documentation is there.
And finally, when we look at limit list aging, again, if you look at how AI can really transform the work that people are doing, if you look at the green box over on the left-hand side, if you’ve got deductions that the system says are invalid or valid, excuse me, so they’re valid, and the dollar volume or the dollar value is relatively low you’re probably not going to spend as much time dealing with those, because you can remove them from the work queue more quickly, without people having to spend a lot of time. If you look in the middle, the ones that are valid or invalid they’re either valid and their high dollar amount, or they’re invalid in their low dollar amount. Again, you’re going to want to spend some time on that. But maybe less or it may not be your priority, as opposed to over on the right-hand side. These invalid deductions where the system has said these are invalid with a high confidence level of being invalid and a good amount of dollar the dollar value is high of those, you’re going to want people to jump on those right away, because that’s your real opportunity to really save money, right or to get that money back that dilution back.
And in terms of reporting, the tools that you’re going to look at these tools they should have a lot of out-of-the-box reporting on deduction volume on analysts’ performance on resolution time. A lot of different metrics should be there. And you should be able to go through and slice and dice on that information.
A couple of other things that sort of jumped out to me in the survey. One was we always ask the question, do you use any third-party automation to help you manage deductions. And you can see in the pie chart 57% of all companies said that they do use some sort of automation to manage deductions. That was up from 43% in 2018. And if you look at that little green box up there, what was really kind of astounding to me, is for companies that are over $500 million in annual revenue, 75% of those companies said they are using third party technology to help manage deduction, so some sort of an additional tool, in addition to their ERP. So it went from 58% to 75%, in three years. Now, of course, you know, different companies are potentially responding. But I think that, especially with COVID, more and more companies are looking for I need to automate, what do I need to do? And the final question that I’ll share with you is we asked companies. Do you plan to further automate anything any steps in your production management process within the next 12 months? and 39% of companies responding said, Yes, we do. 16% said they’re not sure you know what, like, Go ask someone then respond? Not sure. Okay, that’s fine. Seriously, that’s not so helpful. You know, that’s collaboration, right? You need to ask people if you don’t know the answer to a question. But again, that I thought was very, very interesting. And shows I think, the way people are going and were kind of we’re going.
And up for a polling question. So for those of you who want to do this, then do I have to look at the answer. Okay. So what do you think is your biggest challenge in terms of further automating your production process? Is it a lack of stakeholder buy-in? Is it the inability to find the right vendor, a high risk of disruption to your current operations, or no clear business case for automation? So you can go to your little phone, maybe I can show you where to do it. There you go,
Go into the agenda. Then there’s a button that says polls, and it’ll pop on up. Easy peasy. And I can see the answers. But I’m gonna wait
I’m glad I didn’t have to present from here.
I’m gonna wait For more answers.
It’s cool. It’s gonna overflow at some point. Just saying.
Thanks, everybody, for answering so far. It’s about oh, my God, it keeps moving. It doesn’t give me percentages. All right, it’s about 40… ah 50% lack of stakeholder buy-in about 30% high risk of disruption to current Ops, and about 20%. no clear business case for automation.
Okay, that’s very interesting. So to me that says that. It’s right, what are the opportunities? It’s getting other people, it’s sort of coming up with what’s our real value? What is our opportunity to save either to prevent these deductions that are coming in? So this dilution, or speed the process, right, we all know, all of the trade deductions that you get in there, 99% of those are valid. So the fact that people spend time asking sales for approval or that people spend time gathering the backup to validate these promotions, it’s not value-added time. So how do you streamline that, so you’re not spending time and what you are spending time on is having people either look at things that you are doing wrong, so valid deductions, for compliance type things where you can, as an organization, take corrective action, or those things that are invalid where you can recover. So what I want to leave you with are these three things. So the first is, this is to help you evaluate how you’re doing as an organization, it’s very hard sometimes to get benchmark information on deductions. So with number one, if you go to the attainconsulting.com website, you can put it in your email and you will get a link with the PDF. If you don’t want to do that. If you give me a card or something with your email address by the end of today, or tomorrow with the latest I’ll just email you the PDF. The second thing is on my website, you can enter five or six different factors like what industry are you in? What’s your annual sales? What’s your total invalid deduction dollars? What do you recover, and by entering those, you will then get a one-page assessment and tell you how you do base on peers in your industry based on the survey benchmarks. So you’ll get that little page you can see, these people weren’t so good, 10 percentile you can see how you do, and you know a little a couple of blurbs about what you might be able to do to improve. And the final thing is this maturity model. So this deduction Maturity Model, I don’t know if you can see it from where you are, but I’ll explain it. And again, if you give me a card for the PDF, I’ll also send you the PDF of this, this is something that often is really great for senior management. And this may be great to help you build your case on any type of deduction improvement that you want to do. What it is, is down the left-hand side, there are six characteristics of managing deductions like managing compliance requirements, cross-functional collaboration, use of technology, trade promotion, management, and then across the continuum from an ad hoc company, which is not where you want to be. That’s why it’s red, moving up to reactive, which by the way, most organizations are reactive, to becoming a little more proactive, and taking a little bit more initiative to optimize. So you can see the different types of characteristics and each one of those boxes and decide where you are as an organization. And what opportunities you have, what I have found is this is really often a really good thing for senior management that usually has a very limited attention span. So if you have production reports that are like six or eight pages, after the first three lines, they’re not looking anymore. So to go here, though, and to like, put a circle where you are uncertain things that gets their attention because often people in senior management are somewhat competitive. And they want to know, well, what do we need to do to get over here, who’s over there. And so it’s often a very good thing it can be used. So again, if you give me something with your email on it, I’ll send this and the PDF, or you can get it on my website as well. So how they do on time can speak very quickly. So, anybody has any questions? Anyone? thoughts, comments?
No questions? Oh, my goodness, everyone’s gotten quiet, you’re in our way. They’re too fascinated watching the ice podium melt. I highly recommend at some point that we take a tracker on how full this is going to get.
Oh you know It’s gonna be over.
Because we’re gonna get very fast
Hi, good morning, Jessica.
So then there was quite a bit of a median drop in invalid deductions for apparel footwear from 2018 to 2021.
I noticed that.
Yeah, what’s, what do you think is going on?
So a couple of different thoughts that I have. First of all, since I don’t audit all of their results, it’s hard to know whether they’re right, but I think I have two thoughts. One is that during COVID, there was less research being done by organizations, so they didn’t find as many invalids, because they were not spending as much time on invalid. They were just sort of processing deductions. So some of it, I think, might have to do with a lack of diligence in terms of research. But the other one, I think might also be because there were a lot of waivers and exemptions granted during COVID different by different industries. But there were a lot of waivers and exemptions. So I sort of think it might be a little bit of a blip. And then we’ll see in the next few years that it will sort of go back up because if you think about it, where it was in 2018 it was like 15%. That’s really high. So that’s what I think. Yeah.
Do you think it could be related to the whole remote work? function and the fact that people didn’t have a system like HighRadius to be able to validate.
Yeah, I really, I have a number of companies that I talk with where they just we’re just trying to process and get them through? And yeah, and it’s, here’s a question here. I think it’s also hard if you think about it, is it good to have a higher percent of invalid or a lower percent of invalid? Who thinks it’s better to have a higher percent of an invalid who thinks it’s good to have a lower percent of invalid, I think There’s no real right answer. And the reason is, if you have a very low percent of invalid, I’m a little concerned that you’re not doing the right research to really identify those things that are invalid, that you’re just passing things through. On the other hand, if you’ve got a very high percent of invalid, I think that you are contributing to the problem that is causing your customers to think that there are these deductions when they’re not. So it’s sort of a fine line. But that’s why I need to look and see how people what research you’re doing, and what you’re finding. And if you don’t have invalid shortages for Amazon, you’re definitely doing it wrong, because they’re almost
Actually has a comment for the previous question. And in order to resolve any invalid deduction, it basically takes two to tango, right? Like you can identify, but the retailer needs to be there in order to acknowledge, and during the pandemic, they basically laid off most of their back office. And they were closed and a whole bunch of them went bankrupt.
So and that, you know, we are aware I’m not in fashion. But we are also basically in wholesale, and we had the same experience. We do not have unlimited lifetime and deductions. So you just read and write it off. I don’t know Unfortunately, the reason I’m here is that I don’t even have a reporting on how many invalid deductions we have. And what is the recovery period, or percentage? So we don’t because we don’t have any visibility.
And it is interesting. And if I remember, I’ll add it. If you give me a card, I did a survey, I guess last year, about just a specific COVID survey and ask people, maybe there were 10 or 12, custom questions about COVID. In general, you know, did you work out deals with your customers? Did you reach out to them? Did they reach out to you differently by industry? And it was very interesting. I mean, during COVID, I had some clients who were struggling so much, because they just ever the bottom dropped out of everything. And what were they going to do with all the goods and others who were struggling so much, because they couldn’t fill the orders? Right? They just had so much business, and they were taking a lot of things like the foodservice, the big commercial grade stuff, and now How could they put like, you know, 15 pounds of bacon in the supermarket? They couldn’t, you know, the supermarket needs one pound packages, not 15 pound packages. So it was a big struggle for companies. Does anybody else Any other questions?
Actually goes back to the question about the increase or the decrease rather than the imbalance for the apparel industry. Knowing the apparel industry and what they went through during COVID, with the extension of payment terms, I’m wondering if it could have been a lot of agreements made that will increase your terms to 120 days, but don’t be taking it. Or along the lines of all the problems in shipping and supply chain that everyone said you know what? customers, right? We don’t have a leg to stand on.
And even think about this. I’ve just started this based on what you said that because there were so many shipment problems and so many orders were canceled that all of those deductions that typically are invalid, like shortages and certain compliance. You didn’t have those because you weren’t shipping and what you did still have were all of the trade promotions, which really are all valid most of the time anyway. So yeah, interesting. Good. Okay, I’m done. All right, thank you, everybody. And again, if you can either get the stuff on my website or give me a card and I’ll send it to you