What is a Deduction?
Ever get a check back from Walmart with big, fat negative numbers and some mystery codes attached to them? What do they mean? Walmart will sometimes subtract deductions from your invoiced amount for various infractions and label them with corresponding reason codes.
A deduction is a reduction or withholding of payment by a buyer—such as a retailer—from the invoice amount they owe to a supplier. The term deductions is often used interchangeably with chargebacks and claims, but there are differences between the terms.
According to Walmart, each term is defined as follows:
For simplicity and clarity, we will refer to all payment adjustments—whether they are claims, chargebacks, or other types—as deductions throughout this guide.
There are many reasons why Walmart might not pay the full invoice total, ranging from price discrepancies between the invoice and purchase order to invoices submitted for more products than were received at the warehouse.
However, not all deductions are valid. In fact, suppliers frequently receive deductions in error, and these can usually be disputed successfully.
In this edition of Walmart Deduction Code's Explained, we’ll cover:
The Key Categories of Revenue Loss: Breaking down the primary ways suppliers encounter deductions.
A Deep Dive into Common Codes: Understand each code's meaning, root causes, and effective strategies for disputing them.
A Comprehensive List of All Deduction Codes: Your go-to reference for navigating Walmart's deduction landscape.
How to Dispute Deductions
The platforms to view and dispute Walmart's Accounts Payable Deductions are within Walmart's supplier portal, Retail Link. The Accounts Payable Dispute Portal is where most AP deductions can be disputed. This app is where you will submit disputes and proof documentation for each claim. The app also offers a Mass Dispute Creation functionality that can be used for the following codes: 13, 21, 22, 24, 25, 28, 30, 87.
In some circumstances you can also dispute via your buyer. In scenarios where APDP rejects a deduction or dispute, you may request payment from your buyer. Here are some tips for approaching buyer disputes:
Consider your relationship with your buyer and the social capital/goodwill cost of approaching them for payback.
Only request payback for deductions you know to be invalid.
Compile all proof documentation showing why deductions are invalid.
Whenever possible, bundle similar deductions together and present them all at once to your buyer for approval, instead of addressing them one-by-one.
Key Categories of Revenue Loss
Invoice Deductions
These deductions occur when there are issues or discrepancies between the invoice, purchase order, and goods received. They can impact the payment a supplier receives and often require quick resolution to avoid cash flow disruptions. Below are the key types of invoice deductions:
Shortages: These occur when the quantity of products received by Walmart is less than the amount listed on the invoice or purchase order.
Damages: These deductions apply when products arrive damaged and cannot be sold, often resulting from improper handling during transit or packaging issues.
Substitutions: Substitution deductions occur when a supplier delivers a different product than what was ordered, without prior approval.
Pricing Discrepancies: These deductions happen when there is a mismatch between the invoice price and the agreed-upon price on the purchase order.
Duplicate Billing: Duplicate billing deductions are applied when multiple invoices are submitted for the same order or goods.
Negotiated/Expected (Allowances)
Allowances 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.
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.
The most common Off Invoice Allowances are:
New Warehouse Allowances (NW)
Defective Merchandise Allowances (DM)
New Location Allowances
The most frequent Off Invoice Allowances that suppliers receive deduction claims for are:
Code 46 - Freight Allowance (FA)
Code 51 - Promotional Allowance (PA)
Code 52 - Volume Allowance (VA)
Code 54 - Warehouse Allowance (WA)
Code 55 - New Location Allowance (New Store SA) (New Warehouse)
Code 57 - Quantity Discount (QD)
Code 58 - DSDC Allowance (DSDC)
Code 59 - Defective Allowance (DM) and Swell Allowance (SW)
Code 150 - Soft Goods Defective Allowance
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 on a quarterly or yearly basis, there is a diminished chance of 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). Agreed upon allowances are not eligible for payback.
Compliance Fines
It is important to note that Walmart’s other compliance program fines can stack on deduction fines. The On-Time, In-Full (OTIF) and Supplier Quality Excellence Program (SQEP) fines can apply to the same PO as a deduction.
OTIF
OTIF fines occur when suppliers fail to meet Walmart's strict delivery performance metrics. This program ensures that suppliers deliver products on time and in full quantities according to Walmart's expectations. Failing to meet these standards can result in fines, regardless of whether the shortage or delay was caused by warehouse, transportation, or supplier issues.
Supplier Quality Excellence Program (SQEP)
SQEP fines are designed to hold suppliers accountable for following Walmart’s packaging, labeling, and shipping requirements. The goal of SQEP is to reduce inefficiencies in the supply chain by ensuring that all shipments meet Walmart's precise standards.
OTIF and SQEP fines can significantly erode supplier margins. To avoid these overlapping fines, suppliers must carefully manage their logistics, documentation, and compliance protocols to meet Walmart's standards across the board. For more resources on OTIF and SQEP compliance, visit SupplierWiki.com.
Audits
Walmart generates post-audit claims, typically identified by nine-digit claim numbers. These claims are based on reviews of transactions, email correspondence, and supplier agreements to recover any funds Walmart believes were lost during business operations.
Post-audit reviews occur after Accounts Payable and Accounts Receivable processes are complete and can extend up to two years from the original transaction date. Suppliers may receive multiple claims within this period, as Walmart enlists two external auditing firms to ensure all recoverable funds are identified.
Once a claim is created, the auditor sends the supplier a claim package with the details. Walmart recommends that suppliers establish a generic post-audit email address to receive these notifications and manage internal distribution efficiently.
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
Deduction Codes Deep Dive
When deductions start to erode your profits, it’s crucial to understand not only what the deductions are but also why they happened and, most importantly, how to prevent them in the future. In this section, we’ll dive deep into 30+ deduction types, providing insights into the root causes and actionable steps for reducing or disputing these claims.
According to Walmart, 80% of all filed claims fall under just 16 codes:
Code 10: Price Difference as Documented
Code 11: Price Difference Between PO and Invoice
Code 13: Substitution Overcharge
Code 21: Concealed Shortage Claims
Code 22: Merchandise Billed Not Shipped
Code 24: Charton Shortage, Freight Bill Signed Short
Code 25: POD No Merchandise Received for Invoice
Code 28: Carton Damage - Frt. Bill Signed Damaged
Code 30: Duplicate Billings
Code 51: Promotional Allowance
Code 52: Volume Allowance
Code 54: Warehouse Allowance
Code 57: Quantity Discount
Code 59: Defective Merchandise Allowance
Code 87: Other
Code 150: Soft Foods Defective Allowance
By focusing on these high-impact areas, you can address the most common issues affecting your bottom line.