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Avoid Costly Chargebacks with EDI

February 19, 2019
Lynne Berg

Chargebacks (often referred to as “expense-offsets) are financial penalties for non-compliance with your customer’s requirements and can ruin even a successful business. They are annoying and most of the time their fees come without warning. While it may seem like chargebacks are inevitable, there are ways that can help you stop them before they affect your business.

Being aware of potential errors will help in reducing chargebacks which can be up to hundreds of thousands of dollars in lost profit. While your EDI solution may take care of some of the discrepancies through error checking or even automatic validation, if you don’t have accurate data and proper document structure, there will still be errors.

Some of the most frequent causes of chargebacks are:

  • Early/late delivery
  • ASN/EDI violation
  • Improper labels
  • Purchase order violation
  • Shortage of product

Most chargebacks occur when suppliers do not comply with their trading partners’ EDI specifications, when Advance Ship Notices (ASN/856) are not sent on time, or if their UCC 128 labels are in the wrong order. Addressing the ASN issue can eliminate a good portion of your chargeback issues. Dealing with multiple trading partners also means dealing with multiple EDI Guidelines, each with their own ever-changing specifications, adding to the difficulty of avoiding chargebacks.

It is important to have real-time facts on your material in transit. Steps you can take are:

  1. Pre-plan receiving which will reduce labor costs
  2. Recognize discrepancies between your orders and shipments for inventory reallocation
  3. Cross dock freight which will reduce storage costs and speed flow of goods

EDI facilitates visibility of purchase orders, inventory and shipping data – it is the heartbeat of the supply chain. It is essential that EDI technology is kept in compliance to eliminate incorrect ASNs, which are the second largest source of retail chargebacks.  While EDI technology eliminates a significant number of manual EDI tasks, if you are not prepared, you can still be faced with costly “chargebacks.”

By utilizing an EDI solution that has been implemented effectively and offers a direct line of EDI technical support, you can eliminate unnecessary chargebacks.

Here are three ways you can eliminate unnecessary chargebacks:

  1.  Data Accuracy.  It is imperative to properly format your ASNs.
  2. EDI Document Structure.  Proper EDI document structure is a key factor.
  3. Take advantage of knowledgeable EDI specialists.  Our DCS EDI Specialists are knowledgeable EDI consultants and can advise you on the best EDI solution for your company to greatly reduce the number of chargebacks you may face.  Many times, chargebacks can be reversed if you can prove to the trading partner the problem was fixed or did not occur on your end.  Making sure that you have the proper format and documentation will help when needing to dispute a chargeback.

Data Communication Solutions can help you ensure that ASNs work properly between you and your trading partners to avoid excessive chargebacks which will increase your profit margins. Find out more about how to eliminate or avoid costly chargebacks, contact us today via e-mail or call at (952) 941-5466.