For any business looking at simplification, particularly before a meaty project like an ERP implementation, one of the most neglected goldmines is credit notes. Often they’re forgotten about or dismissed as a customer moaning, but that’s far from the truth.
Last time I simplified a Warehouse process flow, I asked the team about mis-picks. They proudly paraded their barcoded system around, and declared that it would be impossible to mis-pick with their setup. I also asked about returns and was told there were a few but they were mostly because customers changed their minds.
This was a genuine staff perception, that if listened to during the ERP spec, would have totally overlooked what was really playing out.
We decided to review credit notes with the accounts team who had been diligently logging and categorizing every single one. First impression was that the number of credit notes was high. This surprised the warehouse team, but was only the beginning.
The notes were split into four categories, each of which told us something valuable:
40% were discrepancies in what had arrived to the customer. Despite a bulletproof system which couldn’t mis-pick, somehow it was still happening
30% were returns, but when root-caused, the majority were not customers changing their minds. They related, once again, to mis-picks where the wrong product colour was mistakenly despatched
20% were invoicing errors due to customer service billing product that hadn’t even been manufactured. As they hadn’t been shipped, this pointed to a system problem which needed to be looked at in detail before the ERP was implemented
The final 10% were genuine customer returns
This was an enlightening discovery, but still didn’t cover the full business impact. Alongside additional workload in the warehouse, think about the ripple effects for customer on-time delivery, revenue recognition, financial accruals for returns, and time spent in customer service managing incorrect orders.
With the eye-opening data in hand, we encouraged the team to do a full end-to-end process map. The team saw the light and the outcomes helped make changes to their ERP to minimise mis-picks, while also instigating a monthly review of credit notes to “keep the workflow honest.”
Imagine the kind of ERP implementation if we hadn’t picked into credit note data. Have you reviewed yours lately?
Credit note policy cuts through stories and “gut feel” assumptions, to get a true picture of what’s going on. Think of each credit note as a “non-conformance” or “failure” in the system, once you do this you’ll start to ENJOY seeing them as they’re pointing you toward holes in your business that you didn’t even know existed.
Fortunately, credit note control and management is a native feature in MS Business Central. It’s incredibly simple to manage with some basic set up of return reason codes and an approval workflow. Then with your data, you can report on credit note activity to see how you’re getting on.
Sounds like a much better use of time compared to hosting a meeting where Warehouse blame Production, Production blame Supply Chain, and Supply Chain blame Customer Service.
Facts can set you free, wouldn’t you agree?
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