EDI Chargebacks Explained

Retailers depend on accurate, timely EDI data to keep their supply chains running smoothly—and when something goes wrong, suppliers often feel the impact in the form of chargebacks. These deductions can quickly erode margins, strain operations, and create frustration for teams who are already juggling tight shipping windows and complex retailer requirements. For some suppliers, recovered deductions can even represent the difference between a low-margin season and a profitable one.

What are EDI chargebacks?

At the most basic level, EDI chargebacks (also called deductions) are fees retailers charge suppliers when suppliers’ EDI documents and/or shipments are wrong, late, or missing. Retailers rely on EDI to know exactly what’s shipping, when, and how. If the info isn’t transmitted correctly, it creates work, delays, or errors on the retailer side—so they issue a chargeback to recover their costs.

Chargebacks are commonly issued for:

• late advance ship notices (ASNs)
• incorrect labels
• routing violations
• quantity errors
• invoice mismatches
• and many other reasons

Chargebacks signal areas in your supply chain that are costing you time and money—and fixing these root causes not only reduces deductions but also improves fulfillment accuracy and overall supply-chain performance.

How much are deductions costing my business?

Deductions can have a major impact on your bottom line, the true cost of which is often hidden from suppliers. Every deduction requires an investigation—to find the root cause of the issue—as well as an operational rework and increased warehouse labor costs and carrier costs. These extra hours add up fast, but rarely show up in the deduction report.

Chargebacks can also have an impact on a business’s cash flow. Disputing deductions takes time and money that could be otherwise used to fund core operations, inventory, and growth initiatives.

Here’s a quick way to measure the real cost of deductions:

Deduction rate = Total deductions ÷ Gross sales shipped
True cost ≈ Deduction rate × (1 + investigation labor % + reshipment cost %)

Even well-run operations see 1–2% in preventable deductions when processes aren’t fully tuned.

Preventing chargebacks

To reduce the chargebacks you receive, organizations need to coordinate across three spheres:

1. People: Start with clear ownership. Issues causing deductions can’t be fixed without understanding who is responsible for each step in the process and where breakdowns are occurring. Assign someone to track deductions and run root cause analyses. Then build scorecards that reward the behaviors you want to encourage, such as on-time ASNs, label accuracy and invoice match rates.
2. Process: Document each step of your pick, pack, scan, and label process, and make scan verification of serial numbers mandatory before sealing any cartons. Use cutoff-aware timing so ASNs are sent within the retailer’s required window, before the carrier picks up. Build exception workflows for situations like partial shipments, split POs, backorders, and substitutions—these edge cases are where most errors occur.
3. Technology: Run pre-send validations against each retailer’s EDI requirements for the purchase order (EDI 850), ASN (EDI 856), and the invoice (EDI 810) before any documents leave your system. Integrate labeling with ASN data so GS1-128 barcodes and SSCC-18 serial numbers always match what’s being transmitted. Set up monitoring and alerts for missing documents or failed acknowledgments. Make sure master data—such as GTINs, units of measure, and ship-to codes—is accurate before purchase orders and labels are generated.

Disputing chargebacks

Even with strong processes in place, deductions will still occur. A complete revenue recovery strategy includes both preventing invalid chargebacks and disputing the ones that were incorrectly issued.

Not every chargeback is accurate, and retailers understand that mistakes can occur on both sides. If you have documentation showing the issue wasn’t on your end or that you met the requirements, you should submit a dispute and hopefully recover some of your lost funds.

Here are a few ways to improve your chances of a successful resolution:

Perform a root-cause analysis

It’s difficult to successfully dispute a chargeback if you don’t know the root cause as to why the issues causing deductions occurred in the first place. It’s often best practice to perform a root-cause analysis to determine the evidence for disputation, trace the timeline of the events, and classify the cause to help prevent it in the future.

Know the dispute window

Many retailers have strict submission deadlines, which typically range from 30 to 90 days from the deduction date. Miss the window and you lose the right to dispute.

Submit structured evidence

To accept your dispute of the chargeback, the retailer will require accurate EDI documents, scanned verification logs, time-stamped label photos, appointment confirmations, or any other documentation that supports your case.

Provide an accurate timeline

A detailed timeline is far more effective than a general statement of disagreement. Provide clear documentation showing when the ASN was sent, when the carrier picked up, and when the retailer received the shipment.

Close the loop

Once a dispute is resolved, update your standard operating procedures and add validations so the same issue doesn’t occur again.

How can SPS Commerce Help?

Chargebacks are disputable, and they shouldn’t simply be accepted as the cost of doing business. SPS Commerce offers tools and services designed to help you identify, prevent, and recover deductions more efficiently. Recovered deductions go straight back to your bottom line—often representing hundreds of thousands of dollars annually for mid-sized suppliers.

Recover revenue you’ve already lost

Our Revenue Recovery team analyzes your deduction data, identifies which chargebacks are eligible for dispute, and can manage the entire disputation process on your behalf. We handle documentation, retailer communication, and submissions, so your team can stay focused on fulfillment and growth.

Prevent future deductions

SPS helps pinpoint the operational and EDI issues driving recurring chargebacks. With visibility into retailer-specific requirements and automated validations, we help ensure your ASNs, labels, invoices, and master data are accurate before they reach your trading partners.

Gain clearer insight into your cash flow

Our dashboards and analytics show where deductions are occurring, how much they’re costing you, and where to target process improvements. This makes it easier to prioritize fixes, track progress, and protect your margins over time.

Extend your team without adding headcount

Whether you need help disputing thousands of deductions or just a handful, SPS provides dedicated experts who know each retailer’s rules inside and out. We do the heavy lifting, while you get faster resolutions and better recovery rates.

Explore how SPS Revenue Recovery can return lost margin to your business.

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The SPS Commerce Blog Team is your resource for insider knowledge, news, research reports and best practices that will boost your business.

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