For growing CPG brands, trade spend is one of the biggest and most unwieldy cost centers on the P&L. And where there’s complexity, there’s margin erosion. One of the common blind spots we see at nDepth? Not understanding the difference between trade spend and trade deductions.
The terms are often used interchangeably, but they mean very different things. Failing to distinguish between them can have real financial consequences: inaccurate forecasting, delayed collections, margin leakage and strained relationships with retail partners.
The nDepth team works with CPG founders to bring structure and visibility to the messier parts of the business. Trade promotions and deductions are near the top of that list. Here’s how we help brands move from reactive to proactive.
Think of trade spend as a planned investment. It covers the discounts, slotting fees, promotions and co-op advertising you negotiate with retail partners to increase sales and visibility. These strategic choices are a key part of any go-to-market playbook.
Trade deductions, by contrast, are what happen after the fact, often without notice. These are the amounts retailers subtract from their payments to you, sometimes in connection with a promotion, and sometimes for reasons that have nothing to do with sales strategy: short shipments, pricing discrepancies, chargebacks, missing documentation. Some deductions are valid. Many aren’t.
The trouble starts when these deductions aren’t tracked separately from authorized trade spend, or when they aren’t tracked at all. That’s when brands lose the ability to analyze what they spent, what worked, and what simply leaked out of the system.
When you blur the lines between planned and unplanned spend, you also blur your ability to forecast, analyze ROI, or reconcile promotions against actual sales performance. We often hear founders say things like, “We’re spending too much on promotions,” or “Retail isn’t profitable for us.” The real issue, however, is often that trade deductions are distorting the numbers.
Clarity here matters for more than just financial reporting. It affects how you:
Most importantly, it affects your ability to protect margin. Trade spend is already one of the biggest line items for a growing CPG brand. Left unchecked, deductions can quietly push costs higher than anyone realizes until cash runs tight or margins collapse.
Unauthorized deductions don’t come out of nowhere. They’re often symptoms of preventable misalignments between your operations, your retail partners and your finance stack. The most frequent triggers include mismatched pricing on invoices and purchase orders, short shipments or delivery delays, late or missing proofs of performance, and expired or unapproved promotions.
While every brand’s deduction landscape is unique, we’ve found the crux of the problem usually comes down to two things: lack of documentation and lack of automation.
The best way to reduce deduction volume—and to successfully dispute the ones that shouldn’t have happened—is to close the loop between trade agreements and invoicing. That means using tools like EDI and automated matching, maintaining airtight trade promotion agreements, and making sure finance and sales are speaking the same language when it comes to compliance.
Brands that adopt these practices tend to recover more deductions, prevent more chargebacks, and spend less time sifting through paperwork weeks after the money’s already gone.
Even when trade spend is planned, it’s not always strategic. Many early-stage CPG brands approach promotions opportunistically and say yes to retailer requests without analyzing the true lift or impact on margin.
That’s understandable, especially in a growth environment where velocity and shelf space are top of mind. But over time, this can lead to a distorted cost structure, where discounts outpace performance and retailers expect more support than your unit economics can sustain.
Instead, we encourage brand leaders to take a portfolio view. Start by reviewing historical promotions and analyzing ROI, not just on sales lift but on net margin contribution. Consider how spend breaks down by sales channel and customer. Not every retailer deserves the same level of investment. And when you do say yes to a particular promotion, make sure it’s tied to performance metrics with clear proof of execution.
Accrual-based accounting also plays a critical role here. Recognizing trade spend when it’s earned—not when it's deducted—helps you connect promotions to the periods and products they impact. That clarity makes it easier to course-correct in real time and to forecast with confidence.
Some of our clients build a cross-functional trade committee that includes sales, finance and operations, and these teams work together to approve spend and track outcomes. It doesn’t have to be bureaucratic; it just needs to be consistent. When your teams review trade spend as a unit, patterns emerge faster, and bad spend gets cut sooner.
You don’t need a full ERP to bring order to trade spend. Many brand leaders use a flexible, modular finance stack built around their accounting system, combining trade promotion management tools with deduction management software and light ERP functionality:
Platforms like Vividly, Blacksmith, AFS and BluePlanner can help plan and monitor promotions. SupplyPike and HighRadius offer deduction tracking and dispute workflows. QuickBooks can be integrated to ensure transactions stay aligned across your system.
But accounting tools alone aren’t enough. What matters is how consistently they’re used, and how well they work together.
The most successful brands we work with centralize their trade spend planning, reconcile against actuals monthly and automate as much of the deduction-matching process as possible. When sales, finance and ops all have access to the same source of truth, it becomes easier to spot trends, escalate issues and drive accountability with retail partners.
One of our clients was no stranger to trade promotions. But as the brand scaled, the leadership team began noticing a growing number of deductions, many of which weren’t tied to any agreed-upon spend. Disputes were slow. Documentation was scattered. And no one had a clear view of what was working.
nDepth helped to overhaul their process. By implementing a trade promotion management system, they standardized their agreements, centralized documentation and focused internal controls around spend approvals and proof of performance.
The results: A 40% reduction in unauthorized deductions. Better visibility into promo ROI. And a 3-point improvement in gross margin over the course of a year.
That’s what happens when you move from reactive to proactive financial management. You don’t just stop margin leakage, you build a more scalable, more confident operation.
Trade spend is complex, but it doesn’t have to be a black box. When you separate what’s planned from what’s not, build guardrails around your agreements and equip your team with the right tools, trade spend becomes what it was always meant to be: a strategic investment in growth.
nDepth helps CPG operators make sense of their data, build better systems, leverage inventory accounting and move faster with confidence. If your deductions are hard to monitor, or if your team’s still guessing what promotions actually cost, it’s time to take a closer look.
Let’s get your margins working as hard as you are.