Tariffs Up, Margins Down: Fix Promo Deductions

Tariffs don’t always appear as a clear line item you can point to and say, “There’s the problem.”

They show up as pressure. Pressure to hold price. Pressure to fund deeper promotions.

Pressure to “make it up on volume.” And then—quietly—pressure inside your deductions file, where promotional and allowance deductions pile up while everyone’s busy fighting the bigger fires.

That’s where a lot of Consumer Packaged Goods (CPG) suppliers get clipped in a tariff-heavy economy: you pay for the promo twice. Once in the deal. And again, in deductions you didn’t expect, didn’t reconcile, or didn’t have time to dispute.

Why does this get worse in 2026?

Food inflation is expected to keep moving—just not at the extreme rates we saw in prior years. The U.S. Department of Agriculture (USDA) Economic Research Service (ERS) projected that overall food prices would rise by about 2.7% in 2026, with food-at-home prices around 2.3% (forecast ranges vary).

That sounds “manageable” until you live it.

When shoppers feel squeezed, they trade down, cherry-pick promotions, and retailers lean harder on promotional tactics to drive trips and baskets. Promotions go up. Complexity goes up. Deductions go up.

And allowance deductions (especially the ones tied to promo funding) are some of the easiest for a retailer to take—and some of the hardest for a supplier to unwind without airtight documentation.

The codes that quietly eat your promo margin (50–66)

Many suppliers recognize the allowance deduction family immediately—because it’s where the money disappears even when the product is shipped fine.

In one major retailer’s deduction framework, Code 50 is an Advertising Allowance, 51 a Promotional Allowance, 52 a Volume Allowance, 53 a Truckload Allowance, 54 a Warehouse Allowance, and 55 a New Location Allowance, among others.

Here’s the part that trips teams up:

• These deductions are often generated when the invoice “does not reflect” the allowance rate or structure in the supplier agreement or the purchase order.

• And for many of these, payback typically requires buyer approval and a properly documented buyer payback request—meaning you can’t brute-force your way through them with a generic dispute template.

So the win condition changes. It’s less “prove the deduction is wrong” and more “prove the agreement says X, the invoice complied, and the deduction logic misfired—or prove the buyer authorized a deviation.”

A fictional (but very real-feeling) scenario

(Fictional example for illustration—not a real company.)

You’re a mid-sized grocery supplier. Tariffs raise packaging costs, so you negotiate a tight promo plan: one big display window, one ad event, and a modest off-invoice allowance to keep retail price sharp.

The promo runs. The sell-through looks solid.

Then your remittance advice hits, and you see:

• A promotional allowance deduction was taken twice (once at invoice and once as a lump sum).

• A “new location allowance” applied to stores that weren’t part of the agreement.

• A volume allowance taken at an outdated rate that was replaced mid-quarter.

Nobody panics at first. “We’ll clean it up at month-end.”

But month-end becomes quarter-end. And now the deductions aren’t just numbers—they’re a budget. The promo you thought you funded at 8% ended up costing 11% after deductions.

That’s the trap: when allowance deductions aren’t governed, they turn trade spend into a margin leak.

What’s actually at stake (with numbers)

Retail deductions can be materially large relative to sales. In a Credit Research Foundation benchmark, respondents reported customer deductions accounting for up to 10% of sales, and the average time to resolve a deduction was 105 days.

And even when deductions are invalid, recovery isn’t automatic. A customer deductions survey found that the median invalid/disallowed deduction rate was 5.1–10%, and the median recovery rate was 60%.

So if your organization casually treats allowance deductions as “part of doing business,” you’re effectively agreeing to:

• Let a meaningful portion of revenue sit in limbo for months, and

• Only recover part of what you could have won.

That is not a rounding error. That is a strategy problem.

The dispute strategy that wins codes 50–66

Think of allowance disputes as a three-layer proof stack:

Layer 1: The agreement truth

• Supplier agreement (current version)

• Promo agreement/marketing contract (if separate)

• Any written buyer approvals for exceptions (email counts when it’s explicit)

Layer 2: The execution truth

• Purchase order (PO) and line details

• Invoice (with allowance correctly applied)

• Proof of performance where relevant (ad proof, display confirmation, endcap dates, digital placement documentation)

Layer 3: The math truth

A simple reconciliation worksheet:

• Expected allowance rate and basis

• Units and dollars shipped/invoiced

• What was already netted off in the invoice

• What was deducted after the fact

• The exact over/under amount

This is where many teams lose time: they bring documents but don’t bring the story.

Retailers move fast. Your dispute needs to make it easy for the reviewer to say “yes” quickly.

Prevention beats disputing (especially in Q1)

In a tariff-heavy economy, you want fewer promos to run “manual.”

Here are practical guardrails that reduce allowance deductions before they happen:

Promo & allowance guardrails

• Lock promo rate tables to a single system-of-record (not a shared spreadsheet plus email threads).

• Require written buyer approval for any mid-promo changes (timing, rate, store count, SKU swaps).

• Tie every allowance to a unique promo ID used on the purchase order and the invoice.

Invoice hygiene

• Validate allowance rates at invoicing against the effective date (old rates are a common cause of “correct deduction, wrong timeframe” disputes).

• Spot-check the first invoices of every promo window.

• Create an “allowance exception queue,” so the team doesn’t discover issues 45 days later.

Where HRG fits (without the hype)

One reason allowance deductions keep winning is simple: they’re tedious, document-heavy, and never-ending.

HRG frames it bluntly: every invoice is a new opportunity for a deduction, retailer rules change constantly, and post-audit activity can show up months—or years—later.

HRG recovered more than $1 billion for our clients to date.

If your team is already stretched thin, the practical question isn’t “Do we want to dispute more?” It’s: Do we have the bandwidth and discipline to run allowance recovery like a program—not a scramble?

If you want a low-lift starting point, run a 60-day lookback on allowance deductions (50–66 family) and ask:

• Which codes repeat?

• Which buyers/programs generate the most friction?

• How many deductions lack a complete proof stack within 72 hours?

That will tell you, fast, whether you’re dealing with a few one-offs—or a margin system that needs tightening.