Deductions are, quite simply, the difference between the amount of a manufacturer's invoice and the amount of a distributor's actual remittance. Deductions must be reconciled, and the time and effort to do this represents a significant cost to the Canadian food and consumer packaged goods industry. Recently, significant progress has been made against the issue of unexplained deductions. A benchmarking study, showed that best practices work very effectively for those companies that invest the time and discipline against the process.
The reality is studies continue to show that deductions consume far more resources than they should, considering the amount of money the company can expect to recover despite their legitimacy. At the same time, a business that does not address deduction issues faces increased unwarranted pressure.
Benchmarking studies in Canada have shown best practices work very effectively for those companies that invest the time and discipline against the process.
FCPC has faciliated work on the issue of deductions through the FCPC Deductions Working Group, a cross functional group made up of individuals from sales, supply chain, and credit organizations. The working group focusses on the following key areas:
- Best practice sharing and process improvement on internal practices
- Retailer teams to meet with individual retailers quarterly on deduction related concerns/opportunities
- Working towards a revised industry protocol with RCC and CFIG