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Distributor Chargeback Process

What is the distributor chargeback process?

When a supplier sells a product to a distributor at a price higher than the set price for the end user, a distributor chargeback, a type of reimbursement claim, is submitted.

For example, if a supplier sells a medical product to a distributor for $150, but the price set with the end user is $120, the distributor will create a chargeback to the supplier to recover the $30 in lost money.

The process of issuing and receiving these distributor chargebacks is crucial for the financial performance of an institution. When there is a chargeback error, it should be responded to immediately; otherwise, the error will likely continue until it is resolved, lessening the chances of getting paid back.

Sometimes, distributor chargeback processes are completed manually, often at small and midsized organizations, while large organizations may utilize a system for the automatic processing of chargebacks.

Why is it important to have a clear distributor chargeback process?

An easy-to-follow chargeback process ensures that chargebacks are routinely completed, filed, and received. This ensures the distributor is repaid for lost money, which is vital for their financial performance. Furthermore, a clear chargeback process makes it easier to note errors, allowing for prompt correction.