Growth Is Back. So Are Deduction Risks.

In the second half of 2026, many Consumer Packaged Goods (CPG) suppliers are feeling more hopeful. Retailers are looking for fresh ideas, there are more ways to distribute products, and brands that managed inflation, shifting demand, and supply chain problems are now getting more purchase orders.

Suppliers have been focused on growing their businesses. Adding more retailers, expanding distribution, and getting larger purchase orders can increase market share and strengthen customer relationships. However, growth also brings new operational challenges, which many companies only notice when cash flow is affected.

Every new customer brings extra compliance rules, promotions, invoicing steps, shipping needs, and dispute processes. As shipments increase, so do deductions in accounts receivable. If deduction management falls behind, suppliers may discover that higher sales do not always lead to higher profits.

Growth Expands More Than Revenue

Growth is usually tracked by shipment reports or monthly sales figures. These numbers matter, but they do not tell the whole story.

When suppliers move into new retail channels, they add more steps that all need to work well together. Sales runs promotions, customer service manages orders, warehouses get shipments ready, carriers deliver products, retailers receive them, finance handles invoices, and accounts receivable deals with deductions after payment. If any part of this process fails, it can cause shortages, pricing mistakes, chargebacks, deductions, freight claims, returns, or post-audit problems.

As a business grows, these problems become more common. This does not always mean there is poor execution; it often happens just because there are more transactions.

Every Retailer Brings a Different Set of Rules

A major challenge during growth is that every retailer handles deductions in their own way. Club retailers often create risks through too many defectives, markdown support, freight claims, and seasonal returns. Mass merchants may focus on compliance chargebacks, advance ship notice accuracy, and post-audit claims. Drug retailers often have deductions tied to promotions, discontinued items, returns, and planogram resets.

Many types of deductions seem similar at first, but the paperwork needed to prove or dispute them can be very different. Each retailer has its own process, timeline, portal, and requirements, so managing deductions becomes more complicated as suppliers add more customers.

Growth does more than just boost sales activity.

It also brings more administrative and operational complexity to the whole company.

A Fictional Example

Consider a fictional beverage company called Summit Springs.

For years, Summit Springs worked with a few regional grocery chains and had a straightforward deduction process. The finance team knew the retailers, could easily find documents, and kept deductions under control.

Then, within eighteen months, the company started distributing to Walmart, Kroger, and Sam's Club.

From a sales point of view, the expansion seemed like a big success. Revenue went up by more than 30 percent, production grew, warehouse staff increased, and new trucks left the distribution center almost every day. Leadership celebrated the progress because every report showed ongoing growth.

But when the finance team finished its quarterly review, they saw a different story.

Walmart shortage deductions went up as shipment volume increased. Kroger's promotional claims needed documents from several departments. Sam's Club had freight deductions and too many defective claims after seasonal promotions. Each deduction seemed small on its own, but together they added up to hundreds of thousands of dollars that had not been collected.

The company's retail business had matured faster than its deduction management process.

Collected Revenue Is Still the Score That Matters

One of the easiest mistakes growing suppliers can make is assuming that increasing gross sales automatically improves profitability. In reality, gross sales show what was shipped, but collected revenue shows what the business actually kept after deductions, chargebacks, returns, allowances, shortages, and other claims.

Industry estimates show that deductions can be 5 to 15 percent of gross sales for many Consumer Packaged Goods suppliers. As shipment volume grows, even keeping the same deduction rate can put much more money at risk.

This is why leadership teams should track collected revenue as carefully as they track sales growth. If a business grows from $10 million to $20 million a year, it does not just double its revenue opportunity. It also doubles the risk from deductions if internal processes do not keep up.

More Deductions Don't Necessarily Signal Poor Performance

A rise in deduction volume should not always be seen as a sign of worse operational performance.

In many cases, it simply reflects the reality of doing more business.

Additional purchase orders create additional invoices. More shipments create more receiving transactions. Expanded promotional activity generates more allowance deductions. Larger seasonal programs increase exposure to returns, markdowns, and post-audit. The better question is not whether deduction volume has gone up.

Instead, leadership should ask if unauthorized deductions are being found, if recurring problems are being fixed, and if the company is recovering the revenue it has earned.

Answers provide a much clearer picture of financial performance than deduction counts alone.

Deduction Management Should Mature Alongside the Business

Companies that consistently protect margins recognize that deduction management isn't simply an accounts receivable function. It's an operational discipline that brings together finance, sales, logistics, customer service, supply chain, and executive leadership. Instead of looking at deductions one by one, successful organizations track trends by retailer, distribution center, deduction type, recovery rate, and root cause.

They compare promotional deductions to signed agreements, check shortage claims with shipment documents, measure collected revenue along with gross sales, and look into recurring patterns before they turn into regular write-offs.

This broader view transforms deduction recovery from a reactive exercise into a proactive strategy for protecting margins.

Questions Every Leadership Team Should Be Asking

As suppliers move through the second half of the year, leadership should periodically step back and evaluate whether operational controls are keeping up with growth. They should ask whether collected revenue is rising as fast as gross sales, which retailers have the highest deduction rates, whether promotional deductions match agreements, how much cash is tied up in unresolved disputes, and which problems keep causing repeat deductions. determine long-term profitability.

As HRG's suppliers grow into more retailers and ship more products, protecting the revenue collected is just as important as making new sales. HRG is a leader in retail deduction recovery and has helped suppliers recover over $1 billion by identifying, validating, disputing, and recovering unauthorized deductions across grocery, big-box, club, drug, home improvement, and other retail channels.

Besides recovering revenue, HRG helps suppliers spot the patterns behind recurring deductions. This lets leadership teams improve internal processes and cut future margin losses, instead of just recovering money after the fact.

Final Thoughts

Growth brings new opportunities, but it also adds complexity. Each new retailer, expanded distribution program, and extra purchase order increases the number of steps that affect collected revenue. Suppliers who treat deduction management as an afterthought often find that profits do not keep up with shipment growth. Those who build strong recovery and prevention processes are much better able to turn higher sales into better financial results.

As the second half of 2026 picks up, suppliers should celebrate new business and growing distribution. But they should also make sure their deduction management is keeping up, because real growth is not just about what ships out. It is about how much revenue actually reaches the bottom line.