While the industry continues to debate the role of chargebacks, software firms are developing applications to help track, manage, prevent and refute them.
Depending on how big the problem is to start with, such software can reduce the number of chargebacks by as much as 80 percent in the first year, according to users and software vendors.
“Chargebacks can be so voluminous,” said Jessica Butler, consultant and principal of Attain Consulting Group of Ridgewood, N.J., which helps companies reduce and control chargebacks through employee training programs and other means. “Deduction management software helps you keep the codes organized. If you’re not able to identify, track and understand chargebacks, you’ll never be able to reduce them.”
Over the past 10 years, most apparel makers have cobbled together some kind of tracking system, from homegrown applications to, more often, Excel spreadsheets, said the chief operating officer of a $150 million-plus apparel maker based in New York, who requested anonymity. His company developed its own software 10 years ago, and is helping Computer Generated Solutions Inc. of New York develop a chargeback module for its Blue Cherry product life cycle management, enterprise resource planning and supply chain software by consulting on specifications and beta testing the program.
Whether homegrown or off the shelf, specialized software is likely to be easier to use and more efficient than a spreadsheet, said Butler. For one thing, users don’t have to key in as much data.
Commercial chargeback applications fall into two classes: Either they are part of a bigger ERP software package an apparel manufacturer might use to run its financials and other aspects of its business, or they are stand-alone programs that in most cases can be configured to work closely with a company’s accounting system, Butler said.
CGS plans to ship its chargeback application in January. In July, Tradecard added a chargeback feature to its Web-based sourcing software that lets brand owners send invoices to their suppliers for deductions within the system. Jones Apparel recently spun off its own internally developed software, known as EDI Tracker, to a company called HCL Technologies Retail Business Solutions, a joint venture between Jones and HCL located in Harrison, N.Y.
Not all such packages are new: GetPaid Corp.’s receivables collection software, for instance, contains a module for managing disputes. (The company has offered some form of chargeback functionality since 1998, said C.J. Wimley, GetPaid senior vice president of product planning and development.) The software lets a company segregate disputed charges from its collection process, track them until they are resolved and do root-cause analysis of disputes for future improvement. Its reconciliation tool lets a company attach data to support its claim, such as shipping documents and photographs.
The deduction management module helps companies turn around disputes quickly so they don’t remain open for 90 or 120 days, said Wimley. “We’ll knock 30, 40, or 50 percent off overdue receivables — the days sales are outstanding,” she said. Customers can set up scorecards to track the issues that a retailer is having, and also can set up reason codes for deductions that match the retailer’s compliance manual.
Not all manufacturers see a need for specialized software. Portland, Ore.-based activewear maker Columbia Sportswear has devoted a small group of staff to staying on top of its relationships with retailers, but the group doesn’t use chargeback software.
However, Timm said down the road, Columbia might consider adopting software to help manage its chargeback process.
For companies that do use such software, success will depend on other factors, said the New York-based chief operating officer.
“This is a tool,” he said. “It’s only going to be as strong as the management and the team. I’m going to guess that, for an average company with the best of intentions and a reasonable amount of resources, meaning a fair amount of claims specialists and a strong department manager, [chargebacks could be reduced] 30 to 40 percent in the first year.”
The advantage of software is that it lets a company see where to focus first, he said.
“It makes the process very visible. It’s a fun process to go through in the sense that the more success you have, success begets success. As some of the lower-hanging fruit goes away, you can go after stuff you thought you’d never have time to go after. Then you look around and all of a sudden you say we have a pretty good number here. It’s very fulfilling. You’ll have a lot of happy people,” he said.