Managing the ‘Receiving End’ of Post-Audit-Recovery
Given the inevitability of increased examination of trade funding usage in the future, and up to six years in arrears, it can be important for KAMs to ensure that they audit-proof their budgets, by assessing all aspects of the supplier-retailer partnership in order ensure that all payments and collections are fully accurate and defensible.
Areas of influence for KAMs
Whilst Post-Audit-Recovery (PAR) covers all aspects of the supplier-customer relationship, it is perhaps more beneficial for KAMs to focus upon their areas of influence, especially in pricing and trade funding.
Bearing in mind that both parties will benefit from the adoption of common standards, a KAM should aim at understanding process and the KPIs associated with the following:
| Returns Allowances Cash/Trade Discounts Co-op Advertising Deals Supplier Programmes Duplicate Payments Price/Margin maintenance Pricing adjustments Rebates Incentives Stock clearance |
Efficiency payments Volume discounts Listing allowances Cash discounts Multi-buys Price support Displays Pricing adjustments On-pack Value offers Promo-price support Guaranteed discount. |
If a KAM avoids setting, documenting and managing standards in these areas, they will be set on the KAM’s behalf, with inevitable loss of KAM influence in the process. There is too much to be gained through funds recovery for trade funding to be left unmanaged in the future.
Essentially, the KAM needs to address processes, controls and measures. This will result in a reduction in business risk, cut unnecessary costs, and provide a better return on trade investment.
In practice, this means improving visibility of funds in both supplier and customer organisations, by separating fund-types into:
- Pricing: the basis for supply
- Trade fund: investment for performance
Ideally this analysis should be built up over time, by customer, brand and country, on the basis that any fund not having a defensible rationale is vulnerable. Even more so, the manager of the fund… Trade fund management should link brand-plan and customer-plan objectives, within a channel plan context, to trade funds strategy.
In addition this strategy should aim, in part, at helping the customer achieve on supplier scorecard, and retailer KPIs such as Demand forecasting, Promotions management, Ranging, Shrinkage, Availability and Financial resources management. It is worth bearing in mind that the customer can also be measured on customer retention rates, returns, trading up and share of total expenditure.
In essence, Post-Audit-Recovery obviously represents a major opportunity for retailers to enhance net profits, but by taking the initiative and building appropriate checks and balances, a KAM can anticipate the inevitable and gain influence and status in the process.
Alternatively, there is no alternative…
