For special pricing agreements (SPAs), the process of making claims is one of the most essential stages of the deal’s lifecycle. But in its current form, the SPA claims process is also a common source of friction, costly delays and disputes between businesses and their trading partners. With the state of the supply chain continuing to strain trading relationships, businesses can’t afford to fumble or fall behind on this critical process.
The Current State of SPA Claims
One of the main problems facing the current state of SPA claims is a widespread lack of trust between manufacturers and distributors. Discrepancies, errors or rejections in the SPA claims process can contribute to this erosion of trust. In reality, neither side truly wants to pay more or less than necessary. Both manufacturers and distributors share the same goal of getting to the true margin – but it can be difficult to see that when disagreements arise.
Error-prone processes, disparate systems, inconsistent standards, an overreliance on digital interaction, higher rates of personnel turnover in key departments – these are essential ingredients in the recipe for weak trading relationships with a side of distrust.
What manufacturers and distributors across the supply chain need are clearer, stricter and more streamlined SPA claims processes to ensure the accuracy of every submission. When businesses take the necessary time to cross their t’s and dot their i’s, claims can go through seamlessly.
Entering SPAs into Legacy Systems
Effective collaboration on SPAs is all about working together to get the product out at the right place, at the right time and at the right price – with no surprises. Entering SPA contract data and terms into your ERP or system is an essential part of that process, but one that presents special challenges.
SPAs are complex agreements, with some contracts exceeding 200 program lines. That’s a lot of data to enter by hand, line-by-line, with zero errors. This process is not only difficult and time-consuming – it’s ripe for mistakes. You can also run into trouble with accounting for matrix pricing and product groupings in an ERP or legacy system. Product groups can vary from business to business to business, making it difficult to align them when attempting to capture everything in an inflexible system.
The Complicated Process of SPA Claims
To begin the long and complex SPA claims process, distributors typically use an ERP system or a spreadsheet that states their claim and contains all the POS data that’s necessary to prove that the claim is payable and due. However, using ERPs and other systems that weren’t designed to handle complex SPA claims can affect their accuracy, as businesses frequently attempt to bend functionalities designed for other purposes to fit their SPA needs – often imperfectly.
Some manufacturers have a strict, standardized process for how they receive their claims. Some offer portals for these submissions, but nearly all manufacturers prefer to have their claims in a consistent format. Once your claim has been received in the correct form, manufacturers then need to reconcile the claim by inputting your transactional data into their system or – if they undertake this process manually – make a spreadsheet calculation to validate the accuracy of the claim.
If the claim is validated and accepted, the manufacturer issues a credit to pay out the claim. If they cannot validate your evidence, they will dispute the claim, bringing the whole process to a halt.
SPA Disputes and Reconciliation
Some of the most common reasons for disputed SPA claims include:
- Process breakdowns
- Branches with different price levels
- Cost basis inflexibility
- Pending orders not fixed
- Quoting incorrect price books, costs or contract numbers
- Manufacturer terms vs timing of claim (claims taken before original purchase is paid for)
When some (or all) of your claims are rejected, you may only receive payment for those that have been accepted and validated by the manufacturer. In the event of a lower-than-expected payout, there are several places you can check to see where things went wrong:
- Who was responsible for the SPA?
- Was the data entered correctly?
- Were the start and end date of the SPA correct?
- Did the invoice come through within the timing of the SPA?
Sometimes, fortunate distributors will find that the proof was there all along, allowing them to simply resubmit the claim with the proper evidence. However, if the error was on your side, you’ll likely have to cut your losses on the difference. To avoid repeating the same issue the next month, it’s critical that you quickly resolve any claims related to high-velocity items and thoroughly examine all pending orders in the pipeline.
Difficulties with the Claims Process
There are several common challenges that distributors face throughout the lengthy and complicated SPA claims process:
- Each manufacturer has their own process, rules and terms and conditions, using their own terminology
- Distributors tend to overclaim, resulting in more disputes
- Distributors must provide evidence of sales and pricing quotations to support their claims (required data is manufacturer-dependent)
- Not enough flexibility in the ERP
The unique difficulty in overcoming these particular challenges stems from a lack of immediate answers or options. If every business used the same standardized process, the same costs, the same ERP, the same product groups and terminology – then aligning with your trading partners and making accurate claims would be a breeze. But as it stands, distributors need to remain diligent in their SPA claims and work with their manufacturers to develop as streamlined and efficient a process as possible.
Ensuring Accurate SPA Claims
To ensure their accuracy, standardization and verification of your claims, establishing and maintaining a strict SPA process is critical. To begin, it’s essential that you standardize and centralize your data – this way, you can seamlessly exchange pricing, transaction and claims data from a single source of truth that both manufacturers and distributors can trust.
Implementing EDI standards and collaboration portals for your trading partners can ensure a faster and more reliable claims process. You should also leverage automation wherever possible, particularly in calculations, data flow, claim submission and reporting.
The best way to manage your SPA claims is with a dedicated software solution. Utilizing a collaborative program build to handle the complexity of SPAs is one of the most reliable ways to ensure the accuracy of your SPAs. Streamline and secure your claims process with an automated software, such as the Enable platform, to prevent errors, delays and costly misalignment.