How Walmart Allowances Can Go Wrong

Learn about:

• Walmart allowances and why they're used

• The difference between off invoice allowances and allowance deductions

• What causes allowance deductions

• How to avoid allowance deductions

• How to dispute allowance deductions

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In the retail industry, allowance deductions are pre-agreed price reductions designed to sell goods to the retailer at a lower price for alternative benefits like advertising, promotions, transportation, volume purchases, and more. 

What is the Difference Between Off Invoice Allowances and Allowance Deductions?

At Walmart, allowances can be thought of as deductions that are generally used to help Walmart recover some of the cost of doing business. Most allowances at Walmart are Off Invoice (OI), meaning that the discount is taken from the supplier's invoice before the purchase, so there wouldn't have to be an actual deduction taken out by the retailer. 

Allowance deductions depend on what allowances the Walmart buyer and the supplier agree on when setting up the vendor agreement and the terms. When you are negotiating the types of allowances that you are going to give, make sure that the vendor agreement is filled out to match what you have discussed.

Common Off Invoice Allowances

The most common Off Invoice Allowances are:

• New Warehouse Allowances (NW)

• Defective Merchandise Allowances (DM)

• New Location Allowances

Most of the time it is better to agree to allowances beforehand (Off Invoice) than to let the retailer take a deduction out of their own payment. 

When allowances are not Off Invoice, they are harder to track and account for in financial planning. Whenever allowances can be prepared for on a quarterly or yearly basis, the less likely there is to be miscommunication between the parties involved. 

When allowances are not removed correctly from the invoices, suppliers receive allowance deductions. The deduction codes for allowances are in the 50s and generally involve allowances detailed in the Online Supplier Agreement (OSA). 

Walmart's Allowance Deduction Codes 

• Code 50: Advertising Allowance is generated when an advertising allowance (negotiated to defray advertising costs on Walmart's behalf) is listed in your OSA but missing from the invoice.

• Code 51: Promotional Allowance is generated when a promotional allowance (for certain products during a specified period of time) is listed in your OSA but missing from the invoice.

• Code 52: Volume Allowance is generated when a volume allowance (when Walmart buys a large amount of merchandise) is listed in your OSA but missing from the invoice.

• Code 53: Truckload Allowance is generated when a freight allowance (negotiated to offset transportation costs) is listed in your OSA but missing from the invoice.

• Code 54: Warehouse Allowance is generated when a warehouse allowance (negotiated for warehouse orders to eliminate the work and expense of shipping direct to stores) is listed in your OSA but missing from the invoice.

• Code 55: New Location Allowance is generated when a new location allowance (for new warehouses, orders placed prior to the grand opening of new stores, and some purchase orders sent to distribution centers with new stores) is listed in your OSA but missing from the invoice.

• Code 56: Early Buy Allowance is generated when an early buy allowance (negotiated in return for giving the supplier budgeting advantages) is listed in your OSA but missing from the invoice.

• Code 57: Quantity Discount is generated when a quantity allowance (for purchase orders for a particular quantity ordered) is listed in your OSA but missing from the invoice.

• Code 58: DSDC Allowance is generated when a DSDC (direct-to-store, shipped through DC) allowance (used to cover a margin of error within advanced shipment notice [ASN] packs listed on Type 73 POs) is listed in your OSA but missing from the invoice.

• Code 59: Defective Merchandise Allowance is generated when a defective merchandise allowance (to offset against the merchandise costs of returns) is listed in your OSA but missing from the invoice.
  What Causes Allowance Deductions?

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Not Taking Allowances Off of Invoices

One of the most common reasons for getting allowance deductions is not taking the allowances out of the payment calculation when invoicing Walmart.

Some suppliers opt to just receive and write off allowance deductions instead of taking them off the invoices themselves, which can result in variable profit margins and lost invalid allowance deductions. 

Placing the Off Invoice Allowance Incorrectly

Another common reason for allowance deductions is not putting the Off Invoice Allowance in the right place on the invoice. The Off Invoice Allowance should mirror the raw EDI data from Walmart, which will specify the exact place within the invoice that the allowance should apply. Some suppliers do not pull the raw data from Walmart's EDI transmission, so allowances are given in the wrong area of the invoice.

For example, if Walmart's EDI shows that the allowance should be taken off the bottom of the invoice, but it is removed from the top of the invoice, the allowance will be removed from the top and the supplier will likely receive an allowance deduction for the part missed from the bottom, resulting in a twice as much revenue loss. 

Walmart will likely keep the allowance that the supplier withheld in the incorrect locations, and remove the allowance in the form of a deduction from a different line of the invoice.  

Applying the Wrong Off Invoice Allowance

Another common error occurs when suppliers apply the wrong off invoice allowance to an invoice line. For example, a defective allowance applied to an order that should have a promotional allowance could similarly result in twice the revenue lost. 

Walmart's line-level matching system cannot match an allowance that is taken off in the wrong area of the invoice. Having high-level oversight into allowance deductions will help give suppliers a sense of how their Off Invoice Allowance performance has been. 

Correcting Allowance Errors

Tracking allowance deductions is the key to doing root cause analysis on your Off Invoice Allowance performance. This can happen at either the EDI or accounting levels. 

By pulling Walmart's raw EDI data, suppliers can see where the allowances were supposed to be taken off invoice. However, it is usually accounting teams that become aware of these errors ahead of time. If there is cohesion between these teams, then allowance deductions can be used as a way of catching Off Invoice Allowance performance errors, resulting in more accurate accounting and revenue loss forecasting.

Getting Repaid for Walmart Allowance Deductions 

To perform root cause analysis on allowance deductions, suppliers will need certain key information on each deduction:

• Invoice Number

• PO Number

• Allowance Deduction Code

• Deduction Amount

• Check Date

• Check Number

To fight an invoice deduction in the form of a dispute will also require the same information as well as proof that the allowance was taken off invoice and on the correct invoice lines. 

Invalid allowance deductions are very rarely invalid, but, when they are, it is important to be able to articulate exactly where the error was made. In the case of an allowance deduction at Walmart, what's more important than trying to dispute immediately is correcting the Off Invoice Allowance process for a supplier's own team. 

Related Reading: Walmart Agreements and Allowances Cheat Sheet

The more information that you provide to Walmart upfront when disputing invalid deductions, the better chance of getting it resolved the first time around. If suppliers are seeing deductions for Walmart allowances, then you would need to dispute these in the Walmart disputes portal explaining the error.  

Related Reading: Walmart's Accounts Payable Disputes Portal (APDP)

Sometimes the accounting team will research this error and pay the invalid deductions back without needing additional information.

Disputing Walmart Allowance Deductions with SupplyPike

Keeping track of allowance deductions in Walmart has never been easier than it is with SupplyPike for Walmart. Our app makes it much easier for teams to communicate about where errors are being made in the Off Invoice Allowance process. 

Our Root Cause feature helps suppliers get a full picture of the allowance deduction, showing the original problem, the agreement associated with the allowance deduction, and possible actions to consider.

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