| Reducing Chargebacks |
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| Written by EDI Academy | |
| Monday, 21 July 2008 | |
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Chargebacks (often referred to as “expense-offsets”) are financial penalties for non-compliance with your customer’s requirements. Retailers issue chargebacks because vendor noncompliance disrupts operations and creates an additional expense for the retailer. Therefore, retailers create “expense offset policies” that are intended to recover the additional cost incurred by the retailer due to vendor noncompliance. (The following is an extract from the EDI Training course EDI Fundamentals Best Practices) Unfortunately, EDI-related chargebacks have become profit-centers for a lot of retailers. Chargeback fees vary greatly from customer to customer. A $100 penalty for an EDI document containing errors would not be uncommon. Most of the retailers provide a charge-back fee schedule. Chargebacks are usually deducted off the check payment. Some common challenges that organizations face with chargeback problems are:
Strategies To Reduce Chargebacks Cross-Functional Teams Deductions are a company-wide issue. Do not conduct chargeback research to play the “blame game” instead make sure that internal operations and computer systems are corrected and employees are trained. The Credit Research Foundation (CSM Communications Co., Inc., 2003) conducted a customer-deduction survey of 280 companies across 22 industries. The finding was that 75% of those companies that used cross-functional teams to manage deductions and compliance violations have reduced the number of deductions received: • In addition to challenges of dealing with customers; many companies experience their toughest challenges within. • “Lack of cross-departmental” cooperation was their biggest internal challenge
The following graph shows the biggest internal challenges for resolving chargeback issues: ; "Image")
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