New Year, New Playbook: Retail Deduction Targets for 2026
- The HRG Team
- Dec 29, 2025
- 5 min read
There is something about the last few weeks of the year that makes everyone want a reset.
Sales is thinking about a new distribution. Operations is thinking about capacity. Finance focuses on cash, margin, and the alignment of the numbers with the plan.
And deductions?
Too often, deductions get pushed into the same old bucket: “We’ll try to clean that up next year.”
What if, instead of treating deductions as a clean-up project, you treated them like any other strategic lever in your 2026 plan?
That is what this “new playbook” is about—using what you learned in 2025 to set a few clear, realistic deduction targets for 2026. Targets that actually stick.
Why deduction goals usually don’t work
If you have ever heard something like, “Let’s just reduce deductions next year,” you already know why most deduction goals fail.
They are:
Too vague
Spread across too many people
Not tied to anything measurable
“Reduce deductions” could mean a hundred different things:
Fewer retail chargebacks
Faster dispute resolution
Better documentation
Less post-audit surprise
Without clarity, deductions stay in the background. They show up as a line on the P&L and a headache in finance, but not as a defined, owned objective.
To make 2026 different, you do not need a giant transformation program. You need 2–3 good key performance indicators (KPIs) that real humans can act on.
Start with what 2025 taught you
Before you set any targets, take a very quick, honest look in the rearview mirror.
You do not have to build a perfect dashboard. A simple working session with finance, accounts payable (AP), sales, and your deductions or compliance lead is enough.
Look at three things:
Deduction rate by retailer
Deductions as a percentage of gross sales for your top customers
Where the rate is stable, drifting up, or spiking
Top fee types
Shortages
On-time/in-full (OTIF) and routing violations
Pricing/cost differences
Promotional and trade-spend related chargebacks
Returns/defectives/allowances
Post-audit “true ups”
Process pain points
How long it takes to move a claim from receipt to dispute
How often you are missing documentation
Where ownership is fuzzy between teams
You are not trying to solve everything in this meeting. You are just trying to answer one question:
“If we could improve only a few things in 2026, which ones would move the needle the most?”
A fictional example: Harbor Ridge Foods gets specific
To make this concrete, let’s use a fictional company: Harbor Ridge Foods—a mid-sized CPG snack brand. (This is a made-up example, not an HRG client.)
In December, their leadership team looks at 2025:
Total deduction rate: 3.4% of net sales
Retailer A: relatively stable at 2.1%, mostly shortages
Retailer B: spiked to 5.0%, largely compliance and promo-related chargebacks
Average dispute cycle time: ~60 days from deduction to dispute
Only ~50% of claims have complete documentation attached on first pass
They realize three things:
Retailer B is where they are leaking the most margin.
Their team is spending time on everything instead of focusing on the most recoverable claims.
Sloppy documentation is killing their win rate.
So they decide 2026 needs a new playbook, not just a softer version of “we’ll try harder.”
A simple framework for 2–3 deduction KPIs
Here is a straightforward way to design targets that actually stand a chance of sticking.
1. Pick one “where” KPI: focus on a specific retailer
Instead of “cut deductions across all accounts,” choose one key customer as your focus.
For example:
KPI 1: Reduce preventable chargebacks at Retailer B by 20% in 2026.
“Preventable” might mean:
Label, packaging, or routing violations you know are on your side
Repeated promo-term issues you can fix with better setup
OTIF penalties tied to lanes you control
This kind of KPI is powerful because:
Everyone knows which account to watch
You can align goals across sales, supply chain, and finance
You are not trying to boil the ocean
2. Pick one “how fast” KPI: fix cycle time
Speed matters more than people think.
Long dispute cycles mean:
Missed windows
Lost documentation
Claims that quietly expire
Set one target that makes timing visible, such as:
KPI 2: Reduce average dispute cycle time from 60 days to 30 days by Q4 2026.
You can support this by:
Defining who “owns” each deduction code
Setting simple internal expectations:
Example: “All new claims sorted into buckets within five business days.”
Giving your team basic tools or templates for dispute packages
When timing becomes a metric, bottlenecks become visible.
3. Pick one “quality” KPI: improve documentation and hit rate
Finally, make at least one KPI about quality, not just quantity.
Examples:
KPI 3: Increase the percentage of claims with complete documentation (proof of delivery, bill of lading, agreements, screenshots, etc.) from 50% to 80%.
Or: Increase the recovery rate on disputed claims at Retailer B from 25% to 40%.
These two are related: better documentation very often means a better win rate.
This is also where you can be smart about high-win claim types:
Look back at 2025 disputes
Identify which codes or patterns you tend to win
Make sure your 2026 process prioritizes those first
Harbor Ridge Foods, in our fictional story, decides that:
Shortage claims with strong shipping and receiving proof
Certain compliance fines where the retailer has reversed similar claims in the past
…are their best opportunities. So they deliberately shift more effort there.
Turning KPIs into a 2026 deduction “playbook”
Once you pick your 2–3 KPIs, write them down in plain English and treat them like any other part of your annual plan.
For example, Harbor Ridge’s 2026 deduction playbook might say:
Retailer Focus:
Reduce preventable chargebacks at Retailer B by 20% in 2026.
Cycle Time:
Cut average dispute cycle time from 60 days to 30 days by Q4.
Quality & Recovery:
Increase fully documented claims from 50% to 80%,
And improve recovery rate on disputed claims from 25% to 40%.
Then they add three practical steps:
Assign a single deductions owner who coordinates across finance, AP, and sales.
Commit to a monthly 30-minute review of Retailer B’s deductions and KPI progress.
Invest in a simple, shared place to store documentation by retailer and claim type.
Nothing fancy. Just clear targets, clear ownership, and a cadence to keep it alive.
Why this matters more than “cleaning things up”
Treating deductions as a 2026 objective sends a different message inside your company:
To finance: this is not just noise; it is margin.
To sales: deduction behavior is part of the customer relationship.
To operations and logistics: compliance and performance fees are not random—they’re patterns you can influence.
You stop being the brand that says, “Retailer X always hits us with chargebacks,” and become the brand that says:
“Here is where we stand today, here is what we are targeting next year, and here is how we will measure it.”
That is a stronger story—for your internal team and for your buyers.
A quiet next step
If you are in planning mode right now, you do not need a 20-page strategy to get started.
You just need:
One focused look at 2025 deductions
One conversation across finance, AP, sales, and operations
Two or three 2026 KPIs that real people can actually own
Our HRG team spends our days in this world—helping suppliers see their deduction reality more clearly and turn it into something they can act on, not just react to.
Whether you tackle this with your own team or invite a partner into the conversation, the shift is the same:
Deductions are not just a cost of doing business. In 2026, they can be a managed line item with goals, owners, and wins you can point to at year-end.
New year. New playbook. Deduction targets that actually stick.