Summary: Many CPG brands unknowingly bleed cash due to poorly managed trade spend, a hard lesson the author learned firsthand as a founder. Trade promotions often fail to deliver ROI, deductions go unvalidated, and cash flow takes a hit, threatening a brand’s survival. Without visibility and control, brands end up paying for ineffective promotions, inaccurate retailer charges, and lost dollars in deduction disputes. The solution? Ditch spreadsheets, centralize trade spend data, validate promotions in real-time, and implement a structured deduction management process. By taking accountability, brands can stop the financial drain, protect margins, and secure long-term profitability.
Ask me how I know.
I was once a CPG founder. Now, as a recovering founder, I can look back and see exactly where I went wrong. One glaring lesson: trade spend is often a brand’s largest expense after cost of goods sold (COGS). But here’s the uncomfortable truth, most of that spend isn’t tracked, measured, or validated properly.
That was my experience. And now, after working with hundreds of brands through Promomash, I can confidently say that about 90% of brands share the same story. The result? They hemorrhage money and chalk it up as “the cost of doing business.”
If you’re a CPG founder or team member, you might think, “We’re investing in growth; this is just how it works.” I thought the same, until unaccountable trade spend started eating into my margins, derailing profitability, and ultimately putting my brand out of business.
Let’s unpack the hidden cost of unchecked trade spend, and how you can avoid the mistakes I made.
The Illusion of ROI
Trade promotions often start with good intentions, to drive velocity, attract new customers, and build retailer relationships. But without proper measurement (remember, you can’t manage what you don’t measure), here’s what really happens:
- Promotions cannibalize full-price sales. I’ve seen brands where 70% of their sales come from promo periods. Ouch.
- Retailer deductions are inaccurate. Even worse, brands end up paying for activities that were canceled or never executed.
I’ve seen brokers copy entire promo calendars from the previous year without checking what worked or didn’t. The result? Lift is abysmal, velocity dips, and you’re left questioning your strategy.
Without visibility into ROI, profitability, or spending, you’re essentially throwing darts in the dark. And let me tell you, throwing darts in the dark sucks. For me, it drained my brand’s lifeblood and led to its extinction.
Lost Dollars in Deduction Black Holes
Every year, brands lose millions to deductions that go unchallenged. Think about it: invalid charges like shortages, damages, duplicate fees, or even slotting fees that were never promised add up fast.
Here’s why:
- Deduction invoices often lack proper documentation, making them hard to dispute.
- Backup documentation can be hundreds of pages long and thousands of lines deep, making validation impossible for a small team.
When you don’t have a system in place to handle deductions, you’re basically handing retailers a blank check.
Strained Cash Flow
Cash flow isn’t just king in CPG, it’s survival. Run out of cash, and it’s game over. I learned that the hard way.
Overspending on ineffective promotions or paying off unvalidated deductions doesn’t just hurt your margins; it puts a chokehold on your working capital. That means:
- No budget for new product launches.
- No room for marketing campaigns.
- No chance to expand into new retailers.
Cash flow isn’t optional. It’s oxygen. And if you run out, your brand won’t survive the climb.
Eroding Trust with Retailers
Retailers expect brands to be on top of their promotions, not just to fulfill agreements but to actively collaborate on strategies that drive velocity and mutual success.
When you can’t validate trade spend or reconcile deductions, it signals disorganization and a lack of sophistication. Over time, buyers lose confidence in your ability to deliver results. And guess what? They’ll replace you with a brand that can work side by side with them to build smarter, more effective promotions.
The Ripple Effect on Team Resources
Managing trade spend manually, or worse, ignoring it, drains your team. Finance, sales, and operations spend endless hours chasing missing documents, reconciling spreadsheets, and disputing deductions.
What’s worse is when founders like me step in to do the job themselves. If there’s one thing you take away from this blog, it’s this: Stop managing trade spend and deductions yourself.
I was that founder. I thought I could juggle it all, until it killed my business. Founders need to focus on bringing products to life and growing their business, not drowning in the weeds of deductions and trade spend. Let someone else take it on so you can do what you do best.
The Solution: Accountability and Visibility
- Centralize Your Data: If you’re still relying on spreadsheets to manage trade spend, let me save you some time and headaches, they’re not cutting it. Spreadsheets, as versatile as they are, simply can’t handle the complexity of trade spend in today’s CPG world. Don’t believe me? Go ahead and create a spreadsheet that brings in your promo plans, contracts, all sales data from your ERP (shipments), your indirect warehouse shipments from your distributors, and all your consumption data from SPINS, IRI, and Nielsen. Then layer on your granular deductions by line item, store, and SKU, and match those up with your actual spending. Oh, and while you’re at it, crunch the numbers to create profitability statements by direct/indirect customer, SKU, region, channel, and promotion. Now try to visualize all that by week, quarter, year, or any other date range with a few clicks. If you manage to pull that off, congratulations, you might have another business on your hands and you might consider applying for the Microsoft Excel World Championship. But for the rest of us, there’s a better way: use a trade promotion management (TPM) platform. A TPM platform integrates all your data sources into one place, giving you a single source of truth. It aligns marketing, sales, and finance teams, so everyone knows where the dollars are going and what’s coming back. You get real-time visibility, streamlined processes, and insights that spreadsheets simply can’t provide. If you’re serious about trade spend accountability, ditch the spreadsheets and invest in a system designed to handle the complexity of CPG. It’ll save your sanity, and your bottom line.
- Validate Promotions in Real-Time: Don’t wait until the end of the quarter. Code and validate deductions daily, reconcile monthly, and always align deductions to your budget and plan.
- Get Serious About Deductions: Build a process for coding, validating, and disputing deductions. Most ERPs aren’t designed for granular deduction management, so make sure you have the right tools in place.
Why This Matters
Cash flow is king, but without accountability and visibility, your trade spend will keep bleeding you dry. Every dollar saved is a dollar you can reinvest in your brand’s future.
By holding trade spend accountable, you’re not just protecting your margins, you’re ensuring your business has the cash flow, profitability, and growth it needs to thrive.
If you have questions, need support, a shoulder to cry on, or just want a good kick in the ASS, I’m here for it. Let’s make sure your trade spend works as hard as you do.
