Identifying and eliminating areas of non-compliance (e.g. channel incentive programs, inaccurate or excess discounts and rebates, and gray market activities) with your channel partners can be a daunting task. Making this harder is the fact that many organizations today lack the necessary processes and tools to effectively assess compliance and pricing program effectiveness as well as to assess the appropriateness of claims and program participation.
Monitoring and Analytics to the Rescue
One strategy many OEMs with mature “Channel Compliance Programs” is to develop ongoing monitoring and analytics using various data sources such as POS reporting, claims, OEM shipments, credits and or payments issued, etc.
Based on the results of this monitoring, our experience indicates that most incentive claims programs are infiltrated with gray product and non-compliance issues. Both of which result in overpayments to the channel partner and reduced margins for OEMs.
Common findings include:
- Channel partners receiving end-user specific incentives on transactions to other non-related parties.
- That product procured outside of authorized channels flow into claims and additional incentives are given to the channel partner.
- And that lack of controls and lack of monitoring partner claims data allows for duplicate claims, overstated quantities and erroneous transaction receiving incentives.
- Test internal systems and processes relating to the receipt of POS reporting and claims processing from partners on a periodic basis. Perform a review of transactions for the previous quarter, semi-annual or annual period to ensure that controls have remained turned on. Any new programs or processes are tested. That changes that were implemented did not have unplanned for and unexpected consequences. Proactively try to exploit the system and determine how you could inflate claimed incentives and deploy solutions and/or controls to combat the abuse.
- Update Policies & Contractual Terms – as issues are identified that affect contractual terms or program policies, ensure there is a process to update such the relevant programs and documentation.
- Perform analytics on POS & Claims Data – using channel partner reporting and look for sales spikes, unusual partner activities. Look at POS data and compare against claims data to see if they reconcile. As testing is developed you can automate the process using data analysis platforms and tools.
Based on the results of internal processes and controls testing and analytics of POS reporting and claims data, perform audit activities of specific channel partners identified. Audit activities could include OEMs requesting specific supporting documentation relating to questionable claims/transactions through to a full scope audit of a specific channel partner.
Partnering with Experts to Develop Enforcement Strategies
Connor is re-imagining channel compliance with a globally distributed team of consultants with deep Big 4 and industry experience, and local expertise. Our technology-first approach is tailored to your specific channel environment and is powered by our dedicated team of passionate compliance experts.
With customized support from Connor Consulting, your channel audit program can pay for itself within 12 months. In fact, past channel programs have historically exceeded 10x ROIs.
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