Published on: October 9, 2002
Consumer products manufacturers lost 9.9 percent of their total annual sales due to invoice deductions in 2001, according an Invoice Accuracy study released by the Grocery Manufacturers of America (GMA). The study found that 82 percent of the deductions were resolved in the retailer’s favor, 14 percent were collected from the retailer and four percent were written off by the manufacturer.
Survey respondents said the complexity of pricing, promotions and deal structures, poor internal and external communications and a lack of information synchronization were the biggest obstacles to achieving invoice accuracy. Invoice accuracy is defined as when a customer’s purchase order completely matches the manufacturer’s invoice.
Promotions, billbacks and pricing errors are the primary causes of invoice deductions, cited 65 percent of the time by study participants, while 17 percent of deductions were reportedly caused by a combination of shortages or damages in products, coupons and penalties. However, not all deductions are triggered by errors – 64 percent of participating manufacturers said their companies use authorized invoice deductions as a preferred method of payment to their retail customer.
Other study findings include:
• Fifty-six percent of respondents said they measure invoice accuracy, which is consistent with the results of the 2000 GMA Invoice Accuracy Survey.
• Sixty-four percent report measuring purchase order accuracy on the front-end, when the invoice is received by the manufacturer, and 57 percent report measuring invoice accuracy on the backend as the invoice is sent to the customer.
• Respondents said that upgrading their information systems and increasing the use of electronic data interchange communications would most improve invoice accuracy in their companies.
The study, conducted by Prime Consulting Group, inc. for the Grocery Manufacturers of America, collected data from 25 consumer products manufacturers and focused on 10 “best of breed” companies that ranked highest in efficient invoice accuracy practices.