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A Whitepaper on Chargeback Management Systems | LoadProof

Executive Summary

Manufacturers and Wholesalers distribute their products to their customers who in turn sell them to end consumers. Manufacturers and Wholesalers (will address them as Shippers in this document moving forward) invoice their customers at rates that were agreed previously. In many cases, however, the customer pays less than the invoiced amount, stating some reason for withholding part of the invoice. One of the reasons for such a withhold is Chargebacks.

Chargebacks are fines that Retailers impose on Shippers because the customers, mostly Retailers, are doing extra work to process the Shipper’s product through the customer’s Supply Chain. The numbers are overwhelming. They drain time and resources from Order fulfillment, Sales, Credit, Collections, Accounts Receivables, Customer Service and Distribution personnel as they need to research and resolve chargebacks. Overall, a sizable percentage of lost profits can be attributed to chargebacks.

The chargeback problem is most pervasive amongst the Shippers that ship to Retailers both online and offline. It exists for many numbers of reasons. At any point throughout the order fulfillment process, anything that goes wrong can cause a chargeback. The problem is as widespread across industries as it is within a company. The ramifications go beyond the obvious costs incurred. Time and resources spent on settling chargebacks could otherwise be spent on more Order Fulfillment activities. Certain chargebacks may innately reflect some form of breakdown in your customer relationships and disputes engender resentment and eventually disrupt relationships. And for as long as an invalid chargeback stays unresolved, the Shipper is, in effect, providing a zero-interest loan to the customer. Managing such risks imposed by chargebacks will be especially essential during a downturn in the economy. All these are opportunity costs that lower a Shipper’s profitability. Effective chargeback management is an attainable objective. With management buy-in, the right processes, the right people and the right tools, a Shipper can take control of chargebacks through the entire life cycle. Their top-line and bottom line objectives will benefit from cutting research time, freeing tied-up cash flows, collecting invalid chargebacks and reducing receivable write-offs.

Introduction

This paper discusses the chargeback problem and ways it can be mitigated, in a thorough manner.

As a first step towards the goal of chargeback management, a Shipper company must recognize that this is indeed a problem and needs executive buy-in and commitment to solve it. Since chargebacks can happen due to many factors contributed by various departments, and since the Shipper as a whole may lack a well-defined process and systematic approach to account for them, management may not necessarily recognize the magnitude of the problem. It is necessary to first alert management to the extent of the problem. Then the next step is to get processes, people and tools aligned with a primary mission to minimize the chargebacks outright.

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