What are credit notes in inventory management and how can I negotiate them?

Leveraging certain terms to trigger the issuance of credit notes can be a negotiation strategy to address specific issues or concerns with the supplied products or services. Credit notes are typically used to provide refunds or compensation for defective or unsatisfactory goods, errors in billing, or other discrepancies.

Here's how you can leverage terms to trigger the issuance of credit notes:

  1. Specify quality and performance standards: Clearly define your quality expectations and performance standards in the agreement or purchase order. Outline the specific criteria that the products or services must meet to be considered acceptable. This provides a basis for assessing whether the supplier has met the agreed-upon requirements.
  2. Implement inspection and acceptance procedures: Establish inspection and acceptance procedures to verify the quality and conformity of the supplied goods or services. These procedures can include pre-delivery inspections, quality control checks, or post-delivery evaluations. If the delivered products or services do not meet the agreed-upon standards, you can use this as leverage to request a credit note for the affected items. Specifically, your third party fulfillment provider or yourself can do a receiving process to track inventory levels of newly received inventory.
  3. Document discrepancies and issues: Maintain thorough records of any discrepancies, defects, or problems encountered with the supplied goods or services. This includes documenting any issues related to quantity, quality, performance, or other contractually agreed-upon terms. These records serve as evidence to support your claim for a credit note. This is where software is especially helpful - leveraging inventory and procurement software like Centro documents every step of the procurement process. Leveraging software like this can embed better practices in tracking credit notes, especially by having a source of truth for purchase orders, and all details in one space.
  4. Timely notification and communication: Promptly notify the supplier about any concerns or issues you encounter with their products or services. Timely communication is essential to ensure that the supplier has an opportunity to rectify the problem and potentially issue a credit note. Make sure to follow any specified notification procedures outlined in the agreement.
  5. Request remedies and resolutions: When you encounter a valid issue or discrepancy, request appropriate remedies or resolutions from the supplier. This could involve requesting replacement goods, rework, or a credit note for the affected items. Clearly articulate the problem, provide supporting documentation, and propose a fair and reasonable solution.
  6. Negotiate credit note terms: During discussions of a new purchase order or a restock, emphasize the need for fair and timely resolution of any issues through the issuance of credit notes. Discuss the terms and conditions for issuing credit notes, such as the approval process, timeframes, and the amount or percentage of the credit to be issued. This credit note quantity tends to factor in the amount that was broken or lost multiplied by the cost of the good to produce. When negotiating, recognize that your goal is to recoup the full amount you found lost however the vendor may negotiate to only credit a portion. The vendor is incentivized to push that only portions were broken from production while others were lost outside of their responsibility (ie during shipment). Seek mutually agreeable terms that address your concerns and align with the supplier's ability to rectify the situation.
  7. Maintain ongoing supplier relationships: While leveraging credit notes can help address specific issues, it's essential to maintain positive relationships with your suppliers. Strive for open and constructive communication, emphasizing the long-term value of the partnership. Balance your negotiation approach by focusing on problem-solving and finding win-win solutions whenever possible.

Remember, the availability and terms of credit notes can vary based on the supplier's policies, industry practices, and the specific circumstances surrounding the issue. Clearly defining expectations, documenting discrepancies, and initiating timely communication are crucial steps in leveraging terms to trigger the issuance of credit notes when appropriate.

Share on social media:

Curious about the new way to manage your operations? Try Centro!

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.