This post was written by one of our partners, SPS Commerce, specialists in EDI solutions.
During a post-promotion audit, a third-party auditor (or similar organization), often employed by the retailer, looks for instances of when retailers or vendors have been underpaid for bonuses, discounts, shipping and promotional funds.
Post-promotion audits can be long and painful. The challenges presented by this auditing process are numerous. For most retailers and other merchants, these processes are most similar to going through an IRS audit every year. It can be particularly painful for merchants that have thousands of suppliers, or who work with many large or enterprise-level trading partners.
It’s not easy for vendors or suppliers, either. They often invest 20 to 30 percent of their sales in trade promotions and other funding. That’s billions and billions of dollars across the Retail/Consumer Products ecosystem annually.
After the big promotions end
In particular, post-holiday audits can be full of tension when payment conflicts exist between buyers and sellers. As retailers close out their fiscal years through December and comb through their results in January (and at other times after big promotions, such as following the Back to School season), auditors examine previous communications, invoices, and a variety of other business documents and transactions to keep retailers from overpaying.
Meanwhile on the flip side, auditors working for vendors look for occurrences where they may have been underpaid, incorrect discounts were applied or there's been poor retail compliance at the store in an attempt to recoup some of those funds.
EDI tracks all required audit documents
Electronic automation utilizing EDI and other integrated techniques both simplify these post-promotion audits and can even eliminate the need for many of them. With an automated EDI solution, the digital versions of all the relevant communications can all be found through one system, making the auditing process much easier. The document exchanges tracked through EDI include purchase orders, PO confirmations, advanced shipping notifications, invoices and more.
EDI is used to record and transmit all the promotional information from the relevant documents. This includes what products were ordered by the buyer, what was sent by the seller, and the prices paid, without having to do a lot of time-consuming investigative work tracking down all of the transaction documents across email, fax and mail. Since EDI eliminates a large percentage of PO-to-invoice discrepancies, audits can also benefit from the same automatic reconciliation.
With integrated EDI automation, all of the information is exchanged electronically so there’s no need for manual data entry. All information will match with exactly whatever either the buyer or the seller sent, the prices the supplier charged, applicable discounts, actual quantities and shipping costs. As all of the key parameters previously agreed upon are captured by the system, the documentation is exchanged without alteration. In this way, data entry-related errors are avoided.
EDI may eliminate post-promotion audits
For example, Black Friday deals are frequently negotiated up to nine months in advance. The buyers and sellers agree on what the prices will be, how much of the product will be shipped, when it will arrive and anything that will accompany the product. If all that happened as agreed, everything would be fine; audits would be completely unnecessary.
Things happen in the real world, though, that can throw the whole process into confusion. Perhaps the vendor doesn’t send the full order. Or the retailer insists the invoice received charges the wrong price. Organizations without EDI must spend time and resources auditing such transactions to resolve discrepancies. Auditors will later analyze all transactions to make sure all parties have followed the rules of the deal.
The advantage of EDI automation is that not only can the buyer and seller each be sure the right amount of goods have been exchanged for the right amount of money, but the need to hire additional staff members or outside auditors to ensure the transactions and payments were correct is no longer necessary.
That’s additional savings to the company's bottom line.
Trying to track down all of this information without EDI automation is a very time consuming and expensive proposition. It’s an expenditure that is reactive instead of proactive, and it doesn’t drive business. With an automated EDI system, not only is all your paperwork digitally tracked with ease, but the number of staffing hours and money spent on third-party staff audits can also be eliminated. With these tasks out of the way, you can redirect those dedicated resources to pursue other projects within your company to drive growth and innovation.