Amazon has two main buckets of fines that can be assigned to suppliers. The first of these is deductions. An Amazon deduction is a payment deducted from the supplier’s invoice due to supply chain defects. These deductions occur in the five main focus areas listed below.
These deductions occur in the five main focus areas listed below.
- Missing invoices
- Invoices that can’t be processed
- Potential shortages
- Remaining shortages
- Supply chain, invoicing, and catalog defects
Missing Invoices
What Are Missing Invoices?
Missing Invoices happen when Amazon cannot find an invoice matching the delivered products. There can be several reasons why a given invoice cannot be matched. Besides being rejected for non-compliance or not having the correct information, the invoice may have never been sent at all or simply hasn’t been received yet.
How to Avoid
The first step to avoid Missing Invoices is to understand the time frame. If the supplier invoice is sent recently, wait a few days for Amazon to process the invoice. The next step is understanding Amazon’s Invoice statuses, which are listed below.
If the invoice still appears to be missing and there is no update on the invoice status, suppliers can start by comparing their list of invoices with Amazon’s missing invoices, which can be found on the Financial Scorecard. Finally, if the missing invoice is still left unmatched, resubmit the invoice.
Amazon Invoice Status Meanings
- Queued for payment – We have approved your invoice for payment. Payment will be sent according to the due date.
- Canceled – Our system auto-canceled your invoice (normally after nine months of inactivity).
- Credit memo required – You must submit a credit note with your invoice. See the Submit a credit memo Help topic for more information.
- Incomplete – You have begun to create an invoice, but it is incomplete. You must complete and submit the invoice.
- In review – There are some issues with the invoice that we are working to resolve, and will contact you if any further information is needed.
- On hold due to matching issue – The invoice is placed on hold, so we can process matching invoices. Once the items are matched, the invoice will be paid in the next payment cycle.
- Paid (last 3 months) – We have sent you the payment on this invoice within the last three months.
- Price discrepancy identified – We have identified a price discrepancy in your invoice. If you believe this discrepancy was in error, you can Review and dispute a price discrepancy.
- Price discrepancy dispute in progress – We are processing your dispute. No action is currently required.
- Price discrepancy dispute closed – Your dispute has been processed and is now closed.
- Proof of delivery required – You must submit a Proof of delivery (POD) along with your invoice. Go to the Submit proof of delivery Help topic for more information.
- Proof of delivery rejected – We found errors in the Proof of delivery submitted with your invoice. You must review and fix any errors, then resubmit the POD.
- Processing proof of delivery – We are processing the POD you submitted with your invoice. No action is currently required.
- Processing credit memo – We are processing the credit note you submitted. No action is currently required.
- Rejected – Your invoice was rejected because of an error or duplicate was found. You must review and fix any errors, then resubmit the invoice.
- Submitted – We are processing the invoice. If delayed longer than a week, check in the Financial scorecard for any issues.
Invoices That Can’t Be Processed
Why Are There Invoices That Can’t Be Processed?
If you’ve ever stood in front of a vending machine attempting to force a crumpled dollar bill into a slot in exchange for a snack, you’ll understand something about the frustration that arises when invoices fail to be processed. Although the reason is unclear, suppliers are often still responsible for finding a solution. If the fine is valid, it is often attributed to errors or inconsistencies in the documentation or duplicate invoices.
How To Avoid
To avoid a deduction is to understand the wrinkle in the supply chain that needs to be ironed out. Amazon has made it relatively simple to get to the bottom of these issues. An investigating supplier can explore two pathways on Vendor Central to get to the bottom of the issue, depending on the available actions:
Navigate to Payments > Financial Scorecard > View Details > Select and Invoice Number.
Navigate to Payments > Invoices > Review Rejected Invoices.
Each of these applications can drill down into the rejection details of each invoice; however, the information and actionability will vary.
The Invoices application is suited for taking action on the specific invoice, whereas the Financial Scorecard is better suited to find detailed data at the ASIN level. Navigate to the section titled a User’s Guide to Vendor Central for more information on best utilizing the Vendor Central Applications.
Once the needed information is found, a supplier can explore the details of the claim to determine the validity of the deduction. If the claim is valid, the invoice can be resubmitted once the issues are corrected.
Understanding the Differences Between Potential Shortages and Remaining Shortages
The type of Amazon deductions that consistently affect suppliers the most are shortages. Teasing out the difference between potential and remaining shortages is key before disputing.
Potential Shortages
What are Potential Shortages?
Amazon’s system is built to detect when the quantity of an item does not match the quantity said to be received at the facility; however, the timing of the shipments is the key factor in determining a potential shortage from a remaining shortage. A potential shortage is usually an unmatched invoice from when it is created to 2 months old.
How To Avoid
This type of deduction can be easily avoided altogether.
Unlike other deductions, this type of deduction is not final. Suppliers can be alerted to investigate the issue if the invoice will match or if there are real issues in the process that will result in unmatched invoices or remaining shortages.
Remaining Shortages
What are Remaining Shortages?
A remaining shortage is the result of an unresolved potential shortage. Amazon matched a portion of the invoice to the quantity received at their facility, and the remaining amount is charged back to the supplier. Amazon changes unresolved potential shortages to remaining shortages once the invoice is roughly 2-2.5 months old. The reason this status change is fairly consistent is that Amazon makes these updates/recategorizations on a 15 days basis or in other words, bi-monthly.
Supply Chain, Invoicing, and Catalog Defects
What are Supply Chain, Invoicing, and Catalog Defects?
This category serves as a catch-all for the supply chain defects from A to Z in Amazon’s system. This means from the set-up process of the item to the customer receiving the product (or lack thereof), the supplier can be held responsible for any and all errors.
Often, these defects end up causing shortages rather than being standalone defects. The list below highlights areas to explore if there are chronic shortage claims and tips for avoiding these defects.
How to Avoid These Defects
Catalog Setup
- Ensure accuracy by double checking UPCs and other identifying information after setup.
- Ensure case pack quantities are accurately reflected in Vendor Central. Advanced Shipment Notification
- Every shipment needs an ASN. Make sure to send it by the time the shipment leaves for Amazon FC!
- Check that the ASN matches the PO and the invoice.
Invoicing
- Implement EDI Invoicing.
- Make sure the Invoice matches the ASN and PO in currency, cost, units, PO, ASIN, and EAN.
- Never send the invoice before shipping out the product.
- Send the invoice out 1-4 days before the delivery date.
- Do not duplicate invoices when there are multiple shipments for a single PO.
Labeling
- Have one label on your carton/master pack.
- Read the Pan EU Vendor Manual for barcode and label requirements.
Vendor Lead Time
- Use your demand forecast and current inventory levels to plan for upcoming orders.
- Ship inventory ASAP, even if that means splitting POs.
- Use a separate vendor code for each warehouse.
- Talk with your carrier about MABD expectations or work with one of Amazon’s preferred carriers.
Delivery Compliance
- Read about Amazon’s load quality guidelines by visiting Support > Resource Center > Operations > Manual.
- Understand the expectations of On Time and In Full Delivery.
Inbound Receive
- Understand License Plate Receive, the implementation of scanning a single carton label with a Serial Shipping Container Code (SSCC).
- Avoid transfers by shipping directly to the receiving FC.
Loss Prevention
- Audit your carrier’s performance.
- Invest in technology that reduces theft or loss
How to Dispute
The second fine that Amazon suppliers will face is chargebacks. Chargebacks at Amazon are defined as payments due to Amazon from the supplier for non-compliance to the supply chain standards.
Amazon Chargebacks occur in seven types, outlined below.
- PO-Related
- ASN-Related
- Prep-Related
- Delivery
- Receive
- Packaging
- Direct Fulfillment