In this article, learn about:
Why a supplier might receive a post audit claim for allowances
What the claim explanation for these claims looks like
How to prevent and dispute allowance post audit claims
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What Are Allowance Claims?
In its most basic form, allowances are a pre-agreed, contractually defined cost reduction that a supplier provides to Walmart for various reasons, such as advertising, promotions, or helping with operational costs. If a supplier doesn’t follow through on its agreement to provide the agreed-upon allowances, they can be hit with a post audit claim.
Allowances come in a variety of forms. Common allowances that you might see in a post audit include cash discounts, quantity allowances, and defective allowances. Defective allowances represent the most common type, and challenging post audit claims for these allowances is covered here.
Typically, there are two reasons why this might happen:
The allowance wasn’t given off the invoice, but should have been, or;
The allowance was given off the invoice but was transmitted in the wrong segment of the EDI data, leading to Walmart not recognizing it.
As with all post audit claims, allowance claims are instigated and investigated by a third-party auditing firm hired by Walmart. All contact with Walmart and the third-party auditing firm is conducted over email.
Allowance Post Audit Claim Packet Explanation
Below is an example of what a claim explanation for an allowance post audit might look like:
First, the auditor explains which allowance this particular post audit claim is for. In this case, the post audit claim is for an allowance for unsaleable merchandise. This company’s unsaleable products exceeded the amount given on the allowance, leading to an extra cost for Walmart.
The auditor then explains their reasoning: the supplier’s agreement with Walmart stated that any incurred costs exceeding the amount given on the allowance is to be charged to the supplier, resulting in this post audit claim.
How to Prevent Allowance Claims
There are a few methods by which suppliers can help to prevent allowance post audit claims:
Ensure that the EDI Data Is Correct
One of the most common reasons suppliers might be hit with an allowance post audit claim is that their invoices don’t contain the requisite allowances that the supplier previously agreed on with Walmart.
You can prevent this by ensuring that you’re regularly checking your EDI raw data. This data can be compared with the purchase orders and supplier agreements, to make sure that all necessary allowances are being included.
It’s possible that all the necessary allowances are included in the EDI raw data, but that Walmart still issues a post audit claim. In this case, it’s likely that the allowances are given in the EDI raw data, but in the wrong segments. To prevent this, make sure that your EDI system is pulling the data into the correct segments, which can help ensure that Walmart doesn’t miss any allowances that were given off the invoices.
Before sending out shipments, check the vendor agreement to make sure that no allowances were overlooked. Also, make sure that each of the allowances are being applied to the correct purchase orders. If allowances were given for some purchase orders but not others, a post audit claim can result.
Clear and Well-Structured Communications
It's considered best practice to make sure that your email correspondence with Walmart and third-party auditors employs straightforward language and organization. Focusing on the specifics of your communication approach helps minimize preventable mistakes that arise from unclear messaging.
When possible, have a skilled writer within your company review your emails. This can help ensure your correspondence is as comprehensible and precise as possible.
Think about utilizing bold text or UPPERCASE LETTERS for all critical details in your emails to Walmart, the buyer, and the third-party auditing firm. This technique makes vital information more visible to recipients who are quickly scanning through messages.
Employee departures are unavoidable. Unfortunately, departing staff will inevitably leave with crucial expertise that can prove extremely valuable when preventing or challenging post audit claims. To minimize this loss, it might be a good idea to establish a centralized drive, such as Google Drive or Microsoft OneDrive, where team members can log their correspondence with Walmart, buyers, and third-party auditors, along with important documentation.
How to Dispute Allowance Claims in a Post Audit
As with all types of post audits, allowance claims are disputed exclusively over email. Walmart mandates that evidence accompany any claim disputes to be considered valid, so be certain to attach this documentation to your emails sent to the auditing firm.
Required substantiating evidence may consist of:
Documentation in writing, such as email exchanges with your buyer, demonstrating any discussions about allowances, as well as which purchase orders the allowances apply to and any restrictions on their use.
Invoice records (EDI 810) verifying that the allowances were given.
Correspondence from Walmart alerting you to any problems with allowances.
A duplicate of the purchase order modification email, when applicable.
EDI with SPS Commerce
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