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