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Think You've Got it Sorted When it Comes to Your Incentive Claims Process?

Tue, Sep 4, 2018

If you’re a CFO, Financial Controller, or Accounts Payable Professional, it’s possible that you’re often asking yourself the following questions on how to manage your incentive claims process:

  • Whom do I have to pay?
  • What transaction is this related to?
  • How much was accrued?
  • How much was paid?
  • How much is left?
  • What period is this transaction related to?

The fact is many companies are losing millions of dollars in duplicate, non-existent, or fraudulent claims. Are you sure you're doing it right? Managing claims activity can be a nightmare if you don’t have great software and a systematised way to account for claims.

The complexity of claims transactions increases with the growing number of customers, vendors, promotions and products making it difficult for organisations to manage trade promotions, claims and funds.

Let’s clarify what claims are...

Steve Peppler, Chief Product Officer at Flintfox, defines claims:

"Claims are requests made by a customer or vendor to the manufacturer or distributor for payment. A claim may be to cover previously agreed upon billback or lump sum components of a promotion, or for example to cover for breakages or spoils. Proof of performance of an activity may be required to receive payment for a claim."

As you can see from its definition, the claims process is quite an intricate everyday task for B2B commercial transactions. To efficiently manage the process, a company has to take into consideration all the stakeholders involved such as resellers, partners, wholesalers, distributors, and retailers. All the information related to promotional components such as billback, lump sum, chargebacks, accruals, trade agreements, etc., also needs to be controlled.

Now let’s cover the process flow for claims

You’ll typically receive claims for what the customer or vendor considers to be correct amounts owed to them; this is usually related to, although not limited to promotional activities. The claims process is executed through different methodologies and frameworks, and this will be managed differently depending on the company’s size, industry and business.

 A claims management process exists to provide visibility for promotional spending and other related variable costs. Our diagram illustrates the buy side claims process.


The steps for the process can also be explained as follows:

  1. Receive the claim from the customer (buy side) or vendor (sell side) and acknowledge it
  2. Validate the claim against a sales order, trade agreement or relevant transaction
  3. Approve or reject the claim request
    1. Rejected: Return it to the customer
    2. Approved: Process payment
  4. Generate invoice, credit note, voucher, check or any other document related to the payment
  5. Generate payment reports

What’s crucial in this whole process is being able to distinguish between invalid and duplicate claims so that you can prevent unauthorised payments. If a claim request is invalid, you’ll need to provide a report for the customer or vendor detailing why it wasn’t approved. It can become challenging trying to track the information and having the resources to respond within a required timeframe.

So, how can you improve your claims process?

In summary, you know your business runs an efficient claim process if you can efficiently deliver on the points below:

  • Track the amount to be paid for every promotion
  • Determine if a claim is valid or invalid
  • Avoid duplicated claim requests and payments
  • Make sure all legitimate claims have been settled
  • Generate detailed claims reports

If you have limited visibility of your claims requests, your customers could claim back money and there’s no way you can disprove them, resulting in lost revenue. With better visibility, such as that provided by a Trade Revenue Management solution, you’ll ultimately have more control over your revenue growth.

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