I am going to focus on a basic sales journey that most organisations will follow to some degree.
This can be broken up into the three following steps.
- 1. A salesman needs to engage with a buyer to sell a product at an agreed price for an agreed quantity. There may be some legal issues around payment terms, and the timing of the product being delivered.
- 2. This is then followed by the seller providing the product to the customer. The customer might receive a service, or a product.
- 3. Once the product has been sent and received, the seller will then invoice the customer and the customer will then pay the invoice according to the agreed terms.
Sounds simple and in some scenarios it can be.
When it goes wrong…
Now let’s put that in to a business scenario where an organisation is shipping 10,000 different shipments per day, to a customer base of over 100,000 customers across a number of regions. You can see that over time mistakes will be made in this process.
When this goes wrong, the customer normally raises a “dispute” against the seller.
Some people see customer disputes as a Finance issue. This is far from the full story. Accounts receivable teams will try to collect unpaid invoices from customers and the customer may raise a dispute. However the finance team in isolation cannot resolve or be accountable for most customer disputes. There is a wider impact to the rest of an Organisation.
Below is a diagram that shows the three basic steps of a customer sale:
- 1. Agreement of product and price
- 2. Receipt of goods
- 3. Payment of invoice.
During the three distinct transactions different business users will inter-act between the supplier and the customer.
Let’s now look at when and why the CAUSE of a customer dispute can take place.
1 – Agreement of product and price
This is where the majority of causes occur. The salesman and the buyer will need to agree a price for a product. There may be some complexity here as there could be a volume discount or the price could vary from day to day for example. Secondly there will need to be an agreement over the volume of the product that will be supplied. The buyer might insist on the salesman quoting the buyer’s purchase order number and to deliver the product at a certain time or a certain site. The salesman will directly or indirectly create a sales order in SAP, and the buyer will create a purchase order in their system. Ideally they should match.
So when the sales order is created, if the price is wrong, or the discount is wrong, or there is no purchase order number or the special time agreed is not noted, when the sales order is processed the data it will use to create the billing document (Customer invoice) will be wrong – leading to a dispute.
2 – Receipt of goods
Assuming the sales order has been raised by the seller, and the customer has raised its own internal purchase order number the second step can be simple. The product of service is delivered to the location detailed in the sales order for the quantity agreed.
However if the quantity is not the agreed amount, or one of the products is faulty, or the product was delivered at the wrong time or place this will lead to a dispute.
3 – Payment of invoice
If the sales order has been produced correctly, and the delivery took place then in theory the customer should pay the invoice according to the agreed payment terms.
However if the customer wants an invoice sent to the site, and one to their head office before it can be paid, then if the customer master data in SAP does not record this a dispute could be raised.
Within SAP there is a module within SAP FSCM to cope with the logging and processing of customer disputes – “Dispute Management”. Where customers have a high volume of customer disputes, workflow can be used to send disputes to the correct business user. Each client will have their own lists of “types” of disputes however the table below should capture some of the more common dispute types along with the business user.
Hopefully this article provides a clear insight into why customer disputes are raised, and further to this it should now be clear at what stage in the process the dispute was “CAUSED”. When reviewing this business process it is important to get the full backing of all of the various teams, as reducing the volume and value of customer disputes can lead to significant benefits to an organisation. A tool to help achieve this is SAP Financial Supply Chain Management – however the tool itself will not work miracles. The business processes need to be in place to stop disputes being raised, and where they are, an efficient process needs to be in place to record and resolve them in a timely manner.