Chargebacks
Why stablecoins for retail supply chain chargebacks? Automated execution of payment flows. Seamless AR working escrow capital. Instant zero-fee 24/7/365 global payments. Streamline accounts receivable and accelerate payments.
PROBLEM
Late payments. Late payment fees (1% to 1.5% monthly). Credit/debit card fees. Slow legacy payment rails. Post-delivery
Idle working capital. Prepayment idle capital. Cash is sent to pay for goods. Goods arrive in 90 days. Cash sits idle for 90 days.
7 days for meat and poultry, 10 days for dairy and perishables, and 15 days for ‘fast pay’ terms aimed at SMEs.
Packaging violations
Retailers are very specific in the way that they want their products packaged. Missteps here on the part of vendors can result in costly chargeback fines that can add up quickly. Common violations include non-compliance with purchase orders (e.g., the product was supposed to be configured in 12-pack cases, but it shows up at the retailer in 6-packs), failure to include labeling or barcodes on individual polybags, failure to pack individual polybags into a larger box, failure to remove banding from boxes prior to retail pickup, unscannable ticket barcodes, and incorrect ticketing (e.g., UPC, item number, description, color and/or size codes).
Purchase order violations
As exemplified by Walmart’s OTIF policy, retailers don’t take kindly to orders that deviate from the original purchase order. If the order arrives looking different from what the retailer expects in any way, you can expect a chargeback for each violation. Additional purchase order ‘NO-NOs’ include failure to acknowledge receipt of the order in a timely fashion, failure to ship the right product or product quantity, and failure to abide by the purchase order ship windows set by the retailer.
Transportation violations
Another key area in which vendors may fall short of retail compliance requirements is transportation and transportation routing. If an order is shipped to the retailer too early or too late, a chargeback will ensue. Chargebacks will also apply if the pallet configuration is smaller or larger than specified by the retailer purchase order (such issues make it more difficult for the retailer to optimize freight on its own trailers) or if the wrong product is included in an order.
Late/Missing/Invalid ASN
This violation garners a charge of anywhere from a few dollars per carton up to hundreds of dollars per ASN. When retailers are reliant on their 856 for notification and receiving of products, a late, missing, or invalid ASN is assessed a penalty quickly. The ASN provides a productivity benefit by keeping the inbound handling and receiving processes moving swiftly throughout the retailer’s DC.
Order Fill Rate
Violations attributed to fill rate shortages or unauthorized item substitutions can be assessed a penalty of 5%-15% of the merchandise cost. On the flip side, shipping an overage against the ordered quantity doesn’t warrant a financial penalty but the vendor has basically given the retailer additional product at their expense.
SOLUTION
Stablecoins for automated execution of payment flows. Instant payment settlement. XFT escrow advance payment facility.
In purchasing
CIA
Cash in advance
Before receiving a product or service, the buyer must pay for it.
COD
Cash on delivery
At the time of delivery, the buyer pays for the item or service.
LOC
Line of credit
An agreement with a financial institution that permits borrowing up to a specific amount.
Net 7/ Net 10/ Net 30/ Net 60/ Net 90
Net payment terms
The number of days the buyer has to pay after an invoice is issued.
X/Y Net Z
Net terms with discounts
The buyer gets an X% discount when paying within Y days. If not, they pay the full amount by day Z.
CND
Cash next delivery
When the next product is delivered, the buyer pays in cash.
In international trade: Buyer responsible for shipping costs
EXW
Ex works
The seller makes the products ready for pickup, then the buyer takes care of logistics entirely.
FCA
Free carrier
The seller gives the products to a delivery company, then the buyer takes over.
FAS
Free alongside ship
The buyer is responsible for putting the goods onto the ship and transporting them once the seller delivers them to a designated port.
FOB
Free on board
The seller loads the products onto a designated ship, then the buyer is accountable for the transportation cost and risk.
In international trade: Seller responsible for shipping costs
DAT
Delivery at terminal
The seller delivers the products to a designated terminal, then the buyer takes responsibility from that point.
DAP
Delivery at place
The seller delivers the products to a specified location, then the buyer is in charge of unloading or extra costs.
DDP
Delivery duty paid
The seller pays for costs and handles the delivery.
Laws
The Prompt Payment Act is federal law governing payment terms from government agencies. In general terms from the government are limited to 30 days, with 7 days for meat and poultry, 10 days for dairy and perishables, and 15 days for ‘fast pay’ terms aimed at SMEs. The act also covers federal government construction projects requiring payment to the prime contractor within 14 days and further payments to the sub-contractors by 7 days after this payment. Each state has enacted its own laws covering public construction contracts and in most cases private construction as well.
United States Department of Agriculture – ‘Packers and stockyards act 1921’ requires livestock sold on a grade-and-yield basis to be paid by the end of the next business day after the final purchase price is determined. Live poultry obtained under a poultry growing arrangement must be paid for by the close of the 15th day following the week in which the poultry is slaughtered.
Californian Food and Agricultural Code 56302 states that if no payment period is agreed in contract between a dealer and the producer of a farm product the due date is 30 days from delivery.
PAYMENT TERMS
Standard terms include Net-30, CIA (Cash in Advance), and COD (Cash on Delivery).
Construction often uses Net-90, while food services may require immediate payment.
INVOICE
COUNTERPARTIES
Walmart Cargill Visa debit
FLOW OF FUNDS
1 Walmart sends Cargill USD 2 Cargill ships food to Walmart 3 Food arrives a week late 4 Walmart charges fee for late delivery 5 Cargill sends Walmart USD
RETAIL SUPPLY CHAIN CHARGEBACK FLOW
1 Cargill ships $100,000 food to Walmart
2 Food arrives week late
3 Walmart owes Cargill $100,000
4 Walmart calculates $3,000 OTIF penalty
5 Walmart deducts $3,000 from payment owed
6 Cargill receives $97,000 payment
7 Cargill disputes with evidence
8 Walmart credits $3,000 back OR chargeback stands
RESOURCES
Food supply chain payment laws Walmart payment processing guide Payment terms SupplierPay Pledge How retail chargebacks work Restaurant payment terms law
Net-7/30/60
Payment due in 7/30/60 days
COD
Cash on delivery
CIA
Cash in advance
EOM
End of month
1MD
Monthly credit payment
CWO
Cash with order
PIA
Payment in advance
Rebate
Refund sent after purchase
Trade-in
Discount for returned items
What are chargebacks?
A chargeback is the reversal of a credit or debit card transaction initiated by a cardholder’s bank or card issuer (such as Visa, MasterCard, Discover, or American Express) when a customer disputes a charge. If the dispute is resolved in favor of the customer, the funds are returned to their account, and the merchant may lose the sale amount, as well as incur additional fees.
What are payment terms?
Payment terms are the conditions that define when and how your customers must pay.
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