The February Reconciliation: Deductions Hiding in AP
- The HRG Team
- 10 hours ago
- 3 min read
February can feel… quieter.
No holiday promo chaos. No year-end close panic. Just a brief window where you can finally look up.
And that’s exactly when a lot of suppliers discover the problem: deductions have been stacking up in the background, hiding in offsets, short pays, and messy remittance detail.
One industry paper from the Return Value Chain Federation (RVCF) put it bluntly: depending on the industry, customer deductions can reach 5%–15% of revenue, and even “typical” deduction rates can amount to tens of millions for large suppliers.
That’s not an accounting nuisance. That’s a margin event.
Why deductions hide so well
Deductions love complexity. And retail has plenty of it.
They hide in places like:
partial payments that look “normal” unless you match at the line level
offsets bundled into one remittance number
deduction codes that mean different things depending on the retailer
portals that don’t reconcile cleanly with your enterprise resource planning (ERP) data
trade spend confusion (“Was that promo approved? Measured right? Funded once—or twice?”)
So AP sees “paid,” AR sees “short,” and everyone assumes someone else is handling it.
A fictional February moment you’ll recognize
Fictional example (not a real company): An AP manager finally pulls a quarter-to-date report and sees 1,900 deduction line items under $500. Most were never assigned. The team’s logic was: “We’ll chase the big ones later.”
But later became February. And those “small ones” totaled $214,000—spread across dozens of reasons and multiple retailer portals.
No one made a bad decision. They just never had a system.
The February Reconciliation Framework
This is the simplest structure I’ve seen work reliably.
Step 1: Create a single “deduction register”
Not a spreadsheet graveyard. A living log that includes:
Retailer
deduction reason/category
amount
invoice/PO reference
received date
status (new/researching/submitted/closed)
owner
If it’s not in the register, it doesn’t exist.
Step 2: Bucket by intent (not by emotion)
Every item goes into one of three buckets:
Valid → close it fast (don’t waste cycles)
Invalid & winnable → pursue with a proof packet
Invalid but not worth it → document why, then move on
That third bucket matters. You need permission to ignore the right things—on purpose.
Step 3: Run a weekly “reconciliation huddle” (45 minutes)
Agenda:
10 minutes: new items + assignments
15 minutes: top repeaters this week (same reason keeps showing up)
10 minutes: stuck claims (what’s missing?)
10 minutes: one prevention action (process fix)
You’re not trying to solve everything. You’re trying to build momentum.
The proof packet rule
If your team can’t pull proof within 15 minutes, you don’t have a documentation problem.
You have a system problem.
Create a shared folder structure (or indexed repository) where evidence lives by claim type:
pricing authorization
promo agreement + ad proof
proof of delivery (POD)
warehouse receiving confirmation
label/routing compliance artifacts
This is boring work. It also stops cash leakage.
The February “find money fast” checklist
If you need quick wins this month, do these in order:
Sort deductions by repeat reason (not just total dollars)
Pull the top 20 repeaters and check for duplicates/double dips
Identify aged items approaching dispute deadlines
Close valid items aggressively (reduce noise)
Pursue “invalid & winnable” with standardized proof packets
Assign one prevention fix to each top reason
Where HRG fits
Many teams don’t need motivation. They need bandwidth and a clean process.
HRG is useful when:
your deduction register is a backlog monster,
your win rate is low because proof is inconsistent,
or your team is stuck fighting symptoms instead of fixing root causes.
If you’re using February as a reset month, that’s smart. And it’s also the best time to find the deductions that slipped through while everyone was busy “winning Q4.”
