For suppliers, accounting is often a good place to start for root cause analysis. In the bigger retailers, compliance programs usually cause painful revenue loss, but they are also important clues to figuring out where to start fixing problems.
The auditing process for most suppliers surrounds hunting down solutions to these problems, but audits performed by a retailer (or, more often than not, a third party hired out by a retailer), are a helpful way to understand the variety of areas that accountants need or may be asked to cover in their own audit processes.
Retailer Audits: Post Audits
Retailers do financial audits of their suppliers as well in the form of Post Audits. These are oftentimes six-figure fines given to suppliers via email. These charges are amalgamated from transactions, email correspondence, and supplier agreements via a review of outstanding payments.
From an accounting perspective, they represent something of a catch all, requiring knowledge and experience of a large variety of supply chain processes.
Types of Post Audit Claims
There are many types of post audit deductions. Some of the most common are for:
- Pricing
- Allowances
- Freight & Handling Charges on Returns
- Trucks Ordered Not Used
- Failure to Combined Loads
Pricing
Pricing post audit claims can occur when an item is price-protected, and all the units were not captured in the coop when it was calculated. Other pricing scenarios may occur as well.
Allowances
Example allowances include cash discounts, defective allowances, and quantity allowances. These allowances are typically off-invoice, not given at the time of invoicing, and come in the form of fines.
Freight & Handling Charges on Returns
If you are a collect supplier, you could see charges for freight and handling on returns. The auditors will calculate the cost of delivering the cargo on the damaged product and create an audit to recover the freight charges for the item.
Walmart accounting calculates a 10% handling charge on all damaged products. This charge occurs in order to recover the cost of handling the product that Walmart could not sell.
Trucks Ordered Not Used
Trucks Ordered Not Used (TONU) is a charge that occurs anytime the supplier doesn’t use a truck, and Walmart or the supplier must reroute the driver. Suppliers may see this claim when they cancel a collect order.
Failure to Combined Loads
Audits for Failure to Combined Loads are typically for a collect supplier that does not use the loads, as planned by the retailer, properly.
Anytime a purchase order is removed from a truck, the logistics company dispatches a new truck to cover the load.
These are just a few examples of post audit claims. There are many others that vary from retailer to retailer, and some suppliers may see a much higher percentage of one kind over another.
Claim Packets
Post Audit Claim Packets contain important information for understanding and disputing post audits. Some of the most important portions are the:
- Claim Code and Type
- Claim Explanation
- Supporting Materials
- Contact Information for the Auditor
- Fighting Post Audits
Most larger post audits require a response within a pretty narrow time period (i.e. Walmart requires the supplier to contact the auditor within 15 days of email receipt).
The process of disputing post audits, painful and tedious as it is, will actually help accountants for suppliers get a sense of the whole spectrum of revenue loss and its larger effect on the organization.
Maintaining Proper Documentation for Internal and External Audits
One of the most fundamental aspects of accounting is having and maintaining organized documentation that would be easily accessible in the case of an audit, internal or external. Many of these and their essential retail supply chain function have been covered in greater detail earlier in this eBook, but here is a good overview:
- Shipping Documents (i.e. BOLs, PODs, ASNs, other EDI documents, etc.)
- Financial Records (i.e. POs, invoices, expense reports, etc.)
- Supplier/Retailer Agreements
- Emails/Correspondences