10 Common Root Causes of Trade Deductions (and How to Fix Them)

Meta Description: Discover the 10 most common root causes of trade deductions in CPG—and how to fix them. From shortages to late fees, learn practical strategies to prevent costly chargebacks and protect your margins.

Trade deductions are a reality in the CPG world—but too often, brands let them quietly eat away at margins without digging into why they’re happening. The truth is, the same issues come up again and again across most companies.

The good news? If you know the common root causes and how to address them, you can prevent a big portion of deductions before they even show up. Below, I’ll break down the 10 most common types of deductions, along with practical fixes you can implement to protect your bottom line.

1. Promotions

Promotional deductions are usually your largest category—and that’s not a bad thing. Promotions mean your product is moving into the hands of more consumers through trial and repeat purchases.

The fix:
The key is transparency. Keep a clean, up-to-date promotional planner that lists:

• Retailer

• Discount offered

• Dates

• Items included

Store it in a shared drive so sales, accounting, and deductions teams all have access. This reduces confusion and endless questions—freeing your team to focus on selling.

2. Early or Late Fees

Shipping even a few days too early or too late can trigger deductions. Sometimes, it’s not even the delivery timing—it’s how pallets are built, wrapped, or labeled.

The fix:

• Get distributor guidelines on pallet prep and follow them religiously.

• If you know you’ll be early or late, use the distributor’s communication portal to notify them. Many will adjust receiving schedules if you give a heads-up.
  One brand saved tens of thousands of dollars annually just by adopting this simple step.

3. Shortages

Shortage deductions happen when the distributor claims they didn’t receive all the product. Sometimes it’s a forecasting issue, but often it comes down to labeling or warehouse mishandling.

The fix:

• Validate shortages against your bill of lading.

• Double-check packaging and pallet requirements.

• Align forecasts closely with order patterns.

4. Warehouse Spoils

When product expires in the warehouse, the cost usually comes back to you.

The fix:

• Set realistic shelf-life agreements with distributors.

• Watch for unusually large POs—make sure they’re aligned with actual sell-through.

5. Store Spoils

Similar to warehouse spoils, but happening at the retail store level.

The fix:

• Analyze whether you’re in the right stores with the right velocity.

• Flag repeated spoilage issues early to prevent recurring deductions.

6. Audits & Post-Audits

Audits often stem from off-invoice allowances that weren’t actually included on the invoice.

The fix:

• Always align promotions and allowances with accounting and customer service teams.

• Double-check invoices to ensure discounts are properly reflected.

7. Show Deals

Trade shows are exciting, and it’s easy to make on-the-spot promotional deals that never get logged. Later, deductions hit without explanation.

The fix:

• Document every deal negotiated at a show.

• Request a recap from event organizers and share it with your deductions team.

8. Duplicate Deductions

Yes, they happen—and they’re easy to miss if you’re not tracking carefully.

The fix:

• Implement a structured deductions management process.

• Watch for repeat amounts, accounts, or timeframes.

9. Wrong Brand Deductions

Rare, but real—sometimes deductions meant for another brand land on your books.

The fix:

• Maintain clear reporting and spot-check deductions regularly.

10. Placement Fees

These can catch brands off guard if they aren’t factored into forecasts.

The fix:

• Forecast potential retailer wins and related placement fees.

• Update the forecast as approvals come in.

• Share with the deductions manager to avoid surprises.

Final Thoughts

The best CPG brands don’t just react to deductions. They build systems that prevent them, track them, and continuously improve processes to protect margins.

If you’re seeing recurring deductions, start by identifying the root cause—and then implement SOPs so the same problem doesn’t keep draining profit.

At the end of the day, managing deductions isn’t just about recovering dollars. It’s about building the operational discipline that allows your brand to scale profitably.