What is a post-audit deduction
A post-audit deduction is simply a deduction from a current invoice payment for a past expense found after a review by the customer’s internal audit department or a third-party auditing firm. Because these deductions can come in years after an expense has occurred (and after your finance team has closed the fiscal year) it can be difficult to research and track the right documents needed to either settle or dispute the claims. Moreover, it is estimated that 50% of post-audit deductions are invalid. Invalid post-audit deductions can be due to:
- The deduction already having been paid
- Lack of retail execution
- Inaccurate delivery records
- Or an expense that is outside of the contractual agreement
How to ensure you are prepared for an audit
Always have open communication with your retail customers and understand each other’s expectations and requirements in order to prevent misunderstandings and mistakes that can lead to deductions. Have a clearly stated and communicated policy around post-audits, which should include:
- Advanced notice requirement – 30-60 days to enable you to research and prepare
- Time limit rules stating how far back (1-2 years) an audit can go
- Require supporting documentation, which could include:
For non-promotional post-audit deductions
- Price discrepancy reports
- Proof of delivery/BOL – itemized detail of shortage or unsellable noted on BOL and initialed by driver
For promotional post-audit deductions:
- Proof of performance
- Contract or deal sheet
- Detailed reason for deduction
Maintain a deduction trail
Your systems, especially your trade promotion management system, should enable you to prevent, and if necessary, dispute post-audit deductions.
Here are some ways that CPGvision can help you prepare for (and hopefully prevent) a post-audit deductions:
- Accurate and Complete Data: CPGvision helps you maintain accurate and complete data about your trade promotions, including details about pricing, discounts, and promotional allowances. This can make it easier to provide the auditor with the information they need to verify compliance with the contract terms.
- Audit Trails: CPGvision enables an audit trail of all changes made to the trade promotion, including the date and time of the change, who made the change, and the reason for the change. All settlements records against a promotion are maintained with vital information such as invoice #, amount, contract # etc.
- Document attachment: CPGvision allows you to attach contracts, proof of performance and any other necessary documentation to the promotion record. No more finding information in internal directories, on individual computers or email attachments, all the information you need is stored on the right record and retrievable as needed.
- Real-time Analytics: CPGvision harmonizes the data you need to provide real-time analytics on the performance of your trade promotions, including sales volumes, margins, and return on investment. This can help you identify potential compliance issues and enable you to identify when a retail partner hasn’t kept up their end of the bargain.
- Improved Collaboration: CPGvision helps you collaborate more effectively with your internal teams and maintains all communication linked to promotions in internal, permanent systems.
- Automated Processes: CPGvision has easily configured approval workflows, enabling you to trace all the levels of approval or denial related to promotions and settlements.
- Ability to Manage Promotions, Contracts and Terms: CPGvision enables you to manage all types of discount activities between you and your retail customers, all in one calendar, your team will have complete visibility to all the information needed to understand what deductions are valid.
Conduct regular, internal audits
Conduct regular audits of your contracts, invoices, and transactions to identify potential issues and address them proactively. This can help prevent surprises and reduce the likelihood of post-audit
If you find yourself in a large post-audit deduction, it may pay to consult with an outside firm who has expertise in handling and negotiating with third party auditors and can assist you with assessing your internal systems and processes. But one thing is certain, a full-cycle trade promotion management system like CPGvision is a strong start in shoring up your audit trail!
With CPGvision, you will receive the best-in-class TPM solution for consumer-packaged goods. Our dedicated customer success team and CPG industry experts can help you optimize your trade promotions. Find out how we can help you by getting in touch today.