By Martin Heubel, Founder and Director of Consulterce, a strategy consultancy for B2C Household & CPG brands.
Unpaid invoices (shortages) keep Amazon vendors up at night. And that’s no surprise. I’ve seen outstanding shortages account for over 20% of total sales with the online retailer.
But contrary to popular belief, this isn’t an intentional revenue stream for Amazon.
Instead, it’s caused by decades of rapid development by decentralised tech teams that have not aligned catalogue attributes with existing inbound and warehouse processes.
1P suppliers affected by shortages know that disputing these shortages and getting their invoices paid is anything but pleasant.
- Amazon automatically rejects many of the disputes in Vendor Central.
- Vendor Managers don’t have the resources to understand the validity of the payment request.
The result?
Unpaid invoices pile up until vendors reach a breaking point. Either they settle the outstanding amount with Amazon, or they halt their PO shipments to the retailer.
But it doesn’t have to come to this point.
Let me give you a blueprint of how your teams can effectively manage shortages with Amazon:
- Set up the foundation
The first thing to ensure you keep on top of shortages is to set up internal tools and processes to review the amount of unpaid invoices. Work with your finance business partner to dispute unpaid invoices weekly via Vendor Central.
- Define trigger points
Next, work with your finance department to set revenue thresholds of the $ shortage amount in relation to your Net Receipts that trigger an escalation with Amazon. For example 5 or 10%.
- Create escalation mechanisms
Make sure you escalate the outstanding dispute amount to your Vendor Manager and AVS Brand Specialist. Send them an overview of the PO, invoice, shortage volume, and unpaid invoice amount with the request for resolution within 14 days.
If you highlight that otherwise the business trade is at risk, they will likely expedite the resolution.
Note: this only works when you have followed the steps before. Taking shortcuts won’t work.
Bonus: Outsource or automate
Keeping on top of these processes takes time, effort and (expensive) resources. You don’t want a full headcount resource raising disputes all day long.
Instead, outsource the dispute resolution process or work with a service provider that performs or automates this process for you.
For further insight and support, contact Martin Heubel here
