Many companies overlook trade promotion deduction errors that eat away at their revenue. Retailer chargebacks can build up unnoticed, until they surface at the worst possible moment. Imagine facing an audit or a board meeting, suddenly having to justify millions in unexplained write-offs.
“From what I’ve seen, it’s just like a health issue. At first, people ignore it, pushing it under the rug. The deductions pile up, they start aging, and no one reacts. Then, one day, like any other health problem, it hits hard.
Suddenly, management starts asking tough questions, and the scramble begins. Unfortunately, by that time, it’s already too late. The deductions have piled up, and clearing them in a meaningful way becomes incredibly difficult.“
— Haroon Jafree, CEO of EA
Learn how trade promotion deductions can drain millions from your profits. This guide will help you:
- Protect your bottom line
- Safeguard your role as a CFO
- Save your company millions
Let’s get started.
Table of Contents
How Unchecked Deductions Drain Your Profits
Trade promotions expenses are the second biggest line item in the company’s P&L statement. Each year, companies receive thousands of deductions. These deductions are written off without the validity of each chargeback being checked. As a result, companies can lose millions of dollars to possible abuse.
For instance, a CPG (Consumer Packaged Goods) company that sells snacks generates $500 million revenue.
Here’s a simplified version of its Profit & Loss (P&L) Statement:
| Category | Amount ($ in millions) |
| Revenue (Sales) | $500 |
| Cost of Goods Sold (COGS) | $250 |
| Gross Profit | $250 |
| Trade Promotions Expense | $75 |
| Marketing & Advertising | $40 |
| Logistics & Distribution | $30 |
| Administrative Expenses | $20 |
| Net Profit | $85 |
Since these trade promotion expenses are often 15%-30% of revenue, they become the second-largest cost after COGS.
The trade promotions expenses are spread across various deductions from retailers, promotional spend adjustments, and backend charges that lack clear documentation.
Retailer chargebacks, in particular, can often be a challenge. Retailers deduct amounts from invoices under various claims, pricing discrepancies, unauthorized promotions, and post-event adjustments. Many of these deductions come with vague justifications, and disputing them is time-consuming.
Hence, deductions from invoices may not always align with agreed-upon promotions leading to the complex and frustrating reconciliation process.
Here’s why this is a serious problem:
- Retailer deductions can quickly spiral into a profit-draining black hole if not closely tracked.
- Without granular visibility into trade promotion spend, companies risk significant revenue leakage.
- While the board may accept some uncertainty in the short term, repeated unexplained costs can erode trust and put the CFO’s job at risk.
Once the deductions pile up, it can be challenging to clear those deductions in a meaningful way.
Why?
👉Because many companies simply lack the resources or trained personnel to investigate them thoroughly. Even if you do have unlimited resources and an unlimited amount of money, identifying unauthorized deductions isn’t enough. Industry standards dictate that if a deduction isn’t disputed within 90 to 120 days, it becomes permanent.
As a result, by the time the problem surfaces, many organizations are left with no choice but to write off millions in lost revenue.
Shortage of Manpower
Another major challenge is the shortage of manpower in most organizations. With thousands of deductions to review and hundreds more coming in daily, finance teams are already stretched thin.
If CFOs decide to prioritize historical deductions while keeping up with new claims, they are forced to divert limited, high-value resources to an overwhelming task. This creates a constant trade-off—focus on recovering past losses or preventing new ones from slipping through the cracks.
Either way, without the right systems in place, companies risk losing millions in unverified deductions simply due to a lack of bandwidth to address them.
And even when discrepancies are identified—say, a retailer made unauthorized deductions a year ago—recovering that money is often impossible. Retailers typically respond with, “It’s too late. You should have disputed this within 90 days!” This means that by the time finance teams catch these issues, the window for recovering lost funds has already closed, turning potential recoveries into permanent financial losses.
Misaligned Teams
Misaligned teams lead to costly trade promotion failures.
Haroon Jafree, CEO of EA, states, “One of the common themes I’ve seen, even with some big companies, is that nobody understands the whole picture. So they try to attack bits and pieces of it. But unless it is solved from start to finish, addressing all the different areas of this process and its cross-functional aspects together, you can never bring this process together in a meaningful way.”
For trade promotions management to be a success, there has to be a strong collaboration between the cross-functional teams (i.e. sales, accounting, and deduction analysts teams). (This is shown in the image below). Many companies struggle to align these teams, leading to inefficiencies and revenue leakage.
*note: the individual teams are highlighted in the orange boxes.
Here’s how the process typically flows:
- Sales Team – Creates the promotional plan.
- Commercial Finance / Accounting – Calculates monthly accruals for trade promotions.
- Deductions Clearing – Handled by:
- Accounting teams (reporting to the controller), or
- Deductions analysts (reporting to commercial finance).
- Reporting – Ensures all promotional expenses are tracked accurately.
- Reconciliation – Matches trade promotion data between the trade promotion management (TPM) system and the ERP system.
Since trade promotions involve multiple departments, a lack of collaboration can create major inefficiencies such as:
-Sales, finance, and accounting often work in silos, leading to misalignment in promotional spending.
-Deductions may go unverified or disputed too late, resulting in lost revenue.
-Without a clear reconciliation process, tracking trade promotion expenses becomes challenging.
Many companies also lack a culture of cross-functional collaboration, making it difficult to align teams and streamline operations. As a result, instead of driving revenue, trade promotions become disorganized, inefficient, and costly.
Individuals involved in trade promotions management often become frustrated because they attempt to fix issues within their own department. However, since this is a cross-functional process, improving just one part of it won’t resolve the entire problem unless all areas are streamlined and aligned. As a result, inefficiencies persist, and frustration grows.
To address this, management must first understand the entire trade promotions process. They should know how different functions interact and where breakdowns occur. From there, they can deploy the right solutions, such as specialized software, expert consultants, and accounting expertise, to ensure a cohesive, efficient system that works across all departments.
Why a TPM Software Alone Won’t Fix Your Problem
TPM software is a powerful tool, but it’s not a strategy on its own. Success depends on how well a company integrates it into its overall process to drive meaningful results.
Many companies, especially larger ones, rush to implement TPM software, such as Blacksmith, believing it will be the ultimate solution to their operational challenges. And while the right software can be a game-changer, it’s not a magic fix. The real value comes from knowing how to integrate it into your workflows effectively.
It is common for companies to invest hundreds of thousands of dollars in software implementation, only to struggle. The problem? They didn’t fully understand their processes, the software’s purpose, or the ultimate goal. (The goal is robust reporting). As a result, despite the hefty investment in software implementation, they fail to achieve the expected results.
The key to successfully utilizing the software is to implement it early in the process and ensure that management fully understands the entire workflow. This includes knowing how to operate the software, coordinating cross-functional roles, and focusing on the end result, i.e. achieving robust reporting.
How to Prevent TPM Problems
Management Understanding of the Whole Process
One of the key ways to prevent TPM issues is ensuring the right staffing in each functional area. The individuals assigned to the project must not only understand their specific roles but also see the bigger picture and share a common goal: achieving clear TPM reports.
At its core, this is a vision issue. Success requires commitment, especially in larger companies, to not just implementing the software but also aligning people, processes, and training. Everyone involved must be equipped with the knowledge and skills to work toward a shared objective.
Additionally, the system must be structured to generate the critical reporting needed at the end of the process. Management needs reports that provide actionable insights to drive informed decisions. Without this, even the most advanced TPM software will fail to deliver its full value.
Essential Skills and Training for Successful Trade Promotion Management
As stated earlier, when cross functional teams collaborate, the trade promotion management is successful.
Accounting teams must collaborate closely with the sales team and other departments, ensuring the accurate transfer of information and the smooth integration of processes across the organization.
Here are examples of skills required from each team:
Sales teams:
Sales teams should be skilled in robust planning, which is a critical component of the process from the start. They are already familiar with planning but need to adapt to a system-based approach for efficiency.
Accounting teams:
Accrual Calculation: Accounting teams must be able to use the information provided by the sales team to generate accurate monthly accruals. This is essential for booking expenses in the correct period. They need a strong understanding of how to calculate accruals accurately to avoid issues like prior year adjustments.
Deduction Analysis: Accounting teams require strong skills in deduction analysis, including understanding retailer portals, different sales channels, and the process of obtaining and matching the necessary backup documentation to the promotions offered. This skill ensures accurate matching and deduction clearance.
Process Understanding: A clear understanding of the entire accrual and deduction process is crucial. Accounting teams must be able to navigate each step smoothly and efficiently, ensuring that all elements are aligned.
Reporting to Management: Accounting teams need to be skilled in generating reports that allow management to evaluate the effectiveness of trade promotions. These reports should be clear, insightful, and help management make informed decisions.
The Power of Rigorous Chargeback Verification in Reducing Losses
Retailer chargebacks can quietly drain a company’s revenue, often going unnoticed until they accumulate into significant losses. Many businesses only audit a fraction of these deductions, leaving substantial amounts unclaimed.
But what if you could verify 100% of retailer chargebacks without overburdening your internal team?
By utilizing EA’s cost-effective resources trained by a US-based management team, companies can conduct thorough chargeback verification, uncovering potential claims worth hundreds of thousands of dollars. A review process not only ensures rightful recovery but also signals to retailers that every chargeback will be scrutinized. Thus reducing the likelihood of unjustified deductions in the future.
The key is consistency. When businesses establish a rigorous system for validating every chargeback, they don’t just recover lost revenue, they also strengthen their position against recurring disputes. Over time, this approach leads to fewer frivolous claims, improved cash flow, and better collaboration with retail partners.
Investing in an efficient chargeback verification strategy isn’t just about recovering lost dollars, it’s about reinforcing financial control and preventing revenue leakage before it happens.
Conclusion
In trade promotions management, problems often go unnoticed until they surface—by then, it’s too late to recover lost revenue. A lack of cross-functional collaboration further compounds the issue, leading to millions of dollars being written off as retailer chargebacks each year. While software can be a valuable tool, its effectiveness depends on having the right people with the necessary skills and a strong culture of collaboration across teams.
With the right approach, companies can take control of chargeback verification and minimize financial losses. EA’s cost effective resources, trained by a US-based management team, will enable you to verify 100% of retailer chargeback, which will almost certainly result in filing of hundreds of thousands of dollars of claims. A rigorous chargeback verification process sends a signal, reducing frivolous claims in the future.
By strengthening internal processes and ensuring accountability, businesses can turn chargeback verification into a strategic advantage, protecting margins and improving overall financial health.