Key Steps to Avoiding the Most Common Source of Overpayments
This post was contributed by Troy Romero, Co-Founder and Chief Operating Officer at Belmero, Inc.
When it comes to inefficient use of company revenue, audits have shown that organizations’ over-payments most often result from unresolved supplier returns.
What are supplier returns? Supplier returns are credits or deductions from a supplier, or vendor, that an Accounts Payable (AP) department never receives or processes.
Some companies may wonder if they should be concerned about lost supplier returns. The short answer is yes. For some organizations, returns can amount to hundreds of thousands of dollars a year in lost payments and, year on year, this results in a significant amount of lost savings.
Below are a few important steps to limiting the number of unclaimed supplier returns.
- Centralize supplier return management. There are several strategies to assess the extent to which lost supplier returns are an issue for an organization. One way is to determine whether a centralized group or team actively manages and is responsible for all of the returns to a supplier. A centralized group capable of capturing supplier returns is key in this process and an organization should consider establishing such a group if one doesn’t already exist. An alternative to internal management of supplier returns is a partnership with a third-party company that specializes in this area.
- Secure supplier returns. Securing supplier returns is a multifaceted process that involves many stakeholders including the end user, the supplier, inventory and purchasing personnel, and the accounts payable department. A great deal of coordination and communication is needed from all parties to ensure the full lifecycle of the return is executed properly and that AP receives accurate, timely returns. Supplier returns can easily get lost amongst other AP tasks and issues, particularly when there isn’t an internal, centralized team, or third party, in place to manage them.
- Establish internal protocols. Where a company elects to manage supplier returns themselves, a standard protocol should be established and implemented across the entire organization. At minimum, the protocol should address: the threshold amount for returns, how problems with shipments should be handled by the receiving dock, what information is needed to process a return, what the individual who is returning the goods/products is responsible for completing in the return process, and how the company’s supplier returns group can be reached. Essentially, the protocol should address all of the touch points through the entire lifecycle of the supplier/vendor return.
- Control supplier return data. Finally, ensure that the supplier returns are being entered into the company’s ERP system. A paper-based process is prone to inaccuracies, missing information, forgotten returns, and numerous inefficiencies. While many organizations believe that supplier returns are being entered into their ERP, this is a significant source of failure in the supplier returns process. When a high percentage of returns are not getting entered into the ERP, or if they are not getting entered correctly, the company incurs a loss in un-recouped credits/deductions.
In all, organizations should seek to create a centralized group responsible for managing supplier returns (where one does not already exist) or partner with a third-party that can assume this role. Next, a clear protocol for how returns should be handled increases the chances that the organization receives the credits or deductions owed to them by their suppliers/vendors.
If you have questions regarding any items in your supplier/vendor return process feel free to reach out to the team at Belmoro. We would happy to assist you, answer your questions, or discuss our end to end fully managed Return to Vendor Service.
About the Author
Troy Romero is the Co-Founder and Chief Operating Officer at Belmero, Inc. in Woodbury, Minnesota. Troy has 20 years of experience developing and supporting Enterprise Financial and Supply Chain Management systems for Fortune 500 Companies. Troy is an expert in AP and Sourcing Automation which includes business process improvement and Workflow. He has extensive experience in Healthcare, Government and Higher Education. Troy has built unique solutions such as a Bill Only Constructs solution and a Supplier Return Managed Service. He is known for his expertise, demeanor, and his ability to relate to others.
Belmero Inc. is a highly specialized team of PeopleSoft, Oracle Cloud, Workday, SAP, Lawson, Epic, and Cerner consultants and experts that help organizations take their solution to the next level and realize ROI. We also resolve their operational pain points, resolve functional production support issues, and provide expert counsel to their leadership/steering committee. One of our most exciting Managed Services is our Supplier Returns Managed Service, which resolves the #1 Overpayment issue. We are also known for helping customers with successful incremental implementations, upgrades and individual expert functional & technical consulting resources.Rate this Post: