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The CFO’s Game Plan: Smarter Strategies, Fewer Deductions, and Millions Back on the Books

  • The HRG Team
  • Jul 3
  • 3 min read
A path to more money

Let’s start with a number that should make every CFO sit up straight:


For every $1 billion in revenue, retail suppliers lose an estimated $3 million to invalid deductions.

That’s not just margin erosion. That’s a runaway leak in your P&L—and if you’re not actively managing it, it could quietly become your biggest unmonitored expense.


This blog is for the CFOs who want to stop the leak.


Because here’s the truth: The finance leaders who win in retail today are the ones who know how to zoom in on the messy, complicated world of deductions—and come out the other side with a cleaner ledger, tighter operations, and a more profitable supply chain.


The First Red Flag? Tolerances That Hide the Problem

Every supplier uses tolerance thresholds—$50 here, $500 there—to avoid the time sink of disputing every minor deduction. But here’s the catch: Retailers know this. Post-audit teams know this. And they sometimes use it.


In one case, a health and beauty supplier tapped HRG to review deductions sitting just under their tolerance threshold. The result? More than $6 million recovered over a two-year period.


That’s the kind of recovery that changes budgets. But it only happens when CFOs are asking the right questions:

  • Where are we most vulnerable to silent revenue loss?

  • What deductions aren’t even being reviewed?

  • Are our thresholds being exploited?


Root Causes Aren’t Always Obvious—But They’re Always Expensive

Every CFO has seen the big chargebacks. But the smaller, fragmented ones? The ones labeled “shortage” or “defective” across hundreds of POs? Those often go undetected—and they add up fast.


Doing a root cause analysis isn’t just a best practice—it’s the only way to understand where your deductions are actually coming from. Are products arriving damaged due to shipping point issues? Is one DC triggering the majority of returns? Does your packaging collapse under retail display conditions?


As Boyd Evert of HRG said, “The large deductions always find their way to the CFO’s desk. But the fragmented ones? Those need to be hunted down. And they often hide the biggest opportunities for recovery.”


The Tightrope Between Cost-Cutting and Customer Loss

Let’s be real: Every CFO has faced the painful decision—cut costs and risk product quality, or maintain standards and erode margin.


One supplier tried to satisfy a retailer’s sustainability push by using thinner cardboard and less glue. The result? Opened packages on the shelf, excessive defectives, millions in deductions… and a complete reversal of the packaging strategy.

In hindsight, they never should’ve changed it. But pressure from retail partners (especially when “everyone else is doing it”) can be tough to resist.


Lesson? If you’re going to cut costs, don’t do it in a vacuum. Loop in your full leadership team. Know your product’s threshold for change. And always calculate the downstream deduction risk.


What About Retailer Relationships?

When retailers push for new terms—longer payment windows, stricter return policies, new warehouse fees—it’s hard to say no. CFOs walk a fine line between protecting margins and protecting distribution.


That’s why data is your best negotiation tool.


If a retailer calls your product a shelf underperformer, do you have the root cause data to respond? Can you prove poor execution at the store level? Or show external drivers—like overstocking or bad promotions—at play?


Without clear, confident insights, you’re left vulnerable to one-time lump sum “make goods” that can cost you both profit and leverage.


Financial Resilience in an Uncertain Economy

With tariffs, inflation, and market volatility constantly reshaping the cost landscape, CFOs are under pressure to build resilience. A few smart plays:

  • Use forward buys strategically to avoid future cost surges.

  • Get aggressive with accrual planning—so you’re not stuck eating one-time write-offs.

  • Look deeper into deduction data. One HRG client discovered a single shipping point was responsible for millions in shortages due to poor documentation. That’s avoidable loss—and preventable next time.


Advice for New CFOs: Get in the Weeds—Strategically

If you’re new to the CFO chair, don’t be afraid to roll up your sleeves and do a deep dive into deductions.


Pick a problem area—excessive defectives, shortage claims, late fees—and study it. What you find may reshape your policy, packaging, or even supplier relationships.


And always question assumptions. When one retailer’s excessive defectives suddenly spiked, the supplier assumed policy abuse. But the real culprit? Packaging changes made to meet a sustainability request that backfired.


The Bottom Line

CFOs aren’t just number-crunchers. They’re deduction detectives, cost engineers, and margin guardians.


The best ones don’t just react—they investigate, analyze, and lead their companies to a better financial outcome.


If you’re ready to see what’s hiding in your ledger—or just need a smarter second set of eyes—HRG can help.


Let’s Find What You’re Missing Schedule a free strategy call with the deduction experts at HRG:



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