Chargeback is amount claimed by Distributor from Manufacturer/Vendor for the accounting difference in the agreed upon price (with customer) and acquisition price (by distributor).
Consider the example – Delta sells earpods for INR 2000. This is their marketplace price. Customer Cook buys the earpod from a new e-commerce website which is offering the same for INR 1500. Distributor Apple acquires the lot from Delta assuming price of INR 2000 and sends a pair to Cook receiving INR 1500 in return. This creates a deficit of INR 500 in Apple’s account. This discount was provided to Cook as the e-commerce website had an agreement with Delta. So, Delta is expected to foot-in this deficit. This is Chargeback Claim for Apple which is submitted to Delta.
Chargeback Lifecycle –
1. creation of Chargeback Document
2. creation of Accural Document to assess company position
3. claim is submitted and parked till further notice
4. interim settlement is done based on mutual agreement
5. internal Review and re-assessment
6. final Settlement and closure.
Please note that the chargeback process starts after the Order-to-Cash cycle.