CPG Deduction Glossary
40+ essential terms for CPG finance teams managing trade deductions from UNFI, KeHE, and other distributors.
Published by RevyaUpdated
Core Concepts
Trade Deduction
Any charge that a distributor or retailer subtracts from a brand's invoice payment. Trade deductions include promotional allowances, slotting fees, freight claims, and chargebacks. Review the supporting terms and records to determine whether a particular charge is valid.
Deduction Code
A code used by distributors to categorize deductions (e.g., 'OI-9', 'PROMO-ADJ', 'FRT-01'). Understanding deduction codes is essential for identifying invalid charges. Codes vary by distributor.
Trade Spend
The total amount a CPG brand invests in promotional activities, distributor fees, and retail programs. Trade spend is typically the second-largest line item on a CPG brand's P&L after COGS.
Trade Promotion Management (TPM)
The process of planning, executing, and analyzing trade promotions. TPM software helps brands optimize promotional ROI and connect promotions to resulting deductions.
Deduction Recovery
The process of identifying invalid deductions and filing disputes to recover lost revenue. The amount recovered depends on the errors found, supporting evidence and resolution of each claim.
Invalid Deduction
A deduction that doesn't match the brand's records, contracts, or promotional calendar. Common invalid deductions include duplicate charges, wrong dates, wrong amounts, and unsupported claims.
Dispute
A formal challenge to a deduction, submitted to the distributor or retailer with supporting documentation. The applicable policy sets the filing deadline and evidence requirements.
Deduction Types
Promotional Allowance
A deduction taken by retailers or distributors for running a promotion on your product. Common codes include OI (Off-Invoice), Scan, and TPR (Temporary Price Reduction). These should match your promo calendar; mismatches are often disputable.
Slotting Fee
An upfront payment required by retailers to place a new product on their shelves. Slotting fees can range from $5,000 to $25,000+ per SKU per retailer. Watch for duplicate charges or fees for stores where you're not actually placed.
Shortage Claim
A deduction taken when a distributor claims they received fewer units than invoiced. Valid shortage claims require proof of delivery discrepancy. Many shortage claims lack proper documentation and are disputable.
Freight Claim
A charge for shipping and transportation costs, often deducted when a distributor claims the brand is responsible for freight. Verify against your contract terms and BOL (Bill of Lading) documentation.
Chargeback
A post-invoice deduction for non-compliance with retailer or distributor requirements. Common chargebacks include labeling errors, EDI failures, late shipments, and packaging issues. Also called 'vendor compliance chargebacks.'
MCB (Manufacturer Chargeback)
A specific type of chargeback from distributors like UNFI, indicating the manufacturer is being charged for a distributor cost or issue. MCB codes require careful review; many are disputable.
OI Deduction (Off-Invoice)
A promotional deduction taken directly off the invoice at the time of sale, rather than as a post-sale rebate. OI promotions should be pre-agreed and match your promotional calendar.
Scan Allowance
A promotional payment made to retailers based on actual units scanned/sold at POS (point of sale). Unlike OI deals, scan allowances are performance-based and paid after the promotion runs.
Bill Back
A deduction where the distributor 'bills back' promotional costs that were initially paid to retailers. Bill backs should match your authorized promotions and contracted rates.
Spoilage/Damage Claim
A deduction for products that arrived damaged or spoiled. Valid claims require documentation (photos, inspection reports). High spoilage rates may indicate supply chain issues worth investigating.
Distributors
UNFI
United Natural Foods Inc., the largest natural and organic food distributor in North America. UNFI services retailers like Whole Foods, Sprouts, and independent natural grocers. Known for complex deduction processes.
KeHE
KeHE Distributors, a major natural and specialty food distributor. KeHE serves conventional and natural retailers across North America. Uses KeHE CONNECT portal for deduction management.
Distribution
DSD (Direct Store Delivery)
A distribution model where brands deliver products directly to retail stores, bypassing distributor warehouses. DSD brands manage their own deductions directly with retailers.
Documents
Remittance
The payment document from a distributor showing what they paid and what they deducted. Remittances are the primary source for identifying and categorizing deductions. Parsing remittances accurately is critical for recovery.
BOL (Bill of Lading)
A shipping document that records what was handed to the carrier. Use it with a signed proof of delivery to compare shipped and received quantities in shortage and freight disputes.
POD (Proof of Delivery)
Documentation confirming that a shipment was received by the distributor or retailer. PODs are critical evidence when disputing shortage claims.
Metrics
Win Rate
The percentage of disputed deductions that are successfully recovered. Specify whether the measure uses claim counts or dollars, and compare resolved claims from the same cohort. Keep open claims separate.
Recovery Rate
The percentage of invalid deductions that are successfully identified and recovered. Higher recovery rates indicate better deduction management processes.
Auto-Match Rate
The percentage of deductions that can be automatically matched to promotions, shipments, or contracts without manual review. Higher auto-match rates reduce labor costs.
Deduction Aging
The time elapsed since a deduction was taken. Older deductions are harder to dispute and recover. Best practice is to review deductions within 14-30 days.
Planning
Promo Calendar
A schedule of all planned promotional activities, including dates, retailers, products, and discount rates. Promo calendars are essential for validating promotional deductions.
Lift
The increase in sales volume during a promotional period compared to baseline. Understanding lift helps brands evaluate promotion ROI and plan future trade spend.
Baseline
The expected sales volume without promotional activity. Baseline is used to calculate promotional lift and evaluate trade spend effectiveness.
Accounting
Accrual
An accounting entry to recognize expected trade spend or deductions before they are actually taken. Proper accruals help brands forecast cash flow and P&L impact.
Reconciliation
The process of matching deductions to authorized promotions and contracts. Reconciliation identifies discrepancies that may indicate invalid or disputable deductions.
GL Code (General Ledger Code)
An accounting code used to categorize deductions in your financial system. Proper GL coding enables accurate trade spend analysis and reporting.
Cash Application
The process of matching incoming payments to outstanding invoices. Complex cash application is required when distributors pay multiple invoices with various deductions in a single payment.
Portals
UNFI Connect
UNFI's supplier portal for managing orders, invoices, deductions, and disputes. Brands must navigate UNFI Connect to file and track deduction disputes.
KeHE CONNECT
KeHE's online platform for suppliers to manage their business relationship, including deductions and dispute filing.
Retail Link
Walmart's supplier portal providing access to sales data, inventory levels, and deduction information. Essential for brands selling through Walmart.
Technology
EDI (Electronic Data Interchange)
A standardized format for exchanging business documents electronically. EDI compliance issues are a common source of chargebacks from major retailers.
ASN (Advance Ship Notice)
An EDI document sent before a shipment arrives, detailing contents and delivery timing. Missing or incorrect ASNs frequently result in retailer chargebacks.
UPC (Universal Product Code)
The barcode used to identify products. UPC mismatches between invoices and physical products can result in chargebacks and deduction issues.
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