The 5 Most Common Retail Recoveries During a Tariff-Aware Audit

Millions are recovered annually from missed rebates, chargebacks, and contract gaps. With tariffs back on the table and impacting more categories than in the last cycle, retailers are once again exposed to cost shifts, contract complexity, and hidden financial leakage that put margins at risk.

Safeguarding against margin erosion in this environment will ultimately depend on going beyond a traditional retail recovery audit scope. At FlexTecs, we refer to this as conducting a tariff-aware recovery audit. It’s one that considers alternative data sources, such as customs broker records, freight bills, and emails, to look for recoveries.

Taking this approach enabled us to find and capture recoveries for our clients during the last tariff cycle, such as a $378,000 rebate claim we uncovered for a DIY retailer. So, what are some recoveries you can expect to find by conducting a tariff-aware audit?

In our experience, here are five common ones you can expect.

Agreement Violations

Most retail recoveries come from auditing supplier-buyer agreements that have not been updated in the ERP. Instead, they’re buried in emails or spreadsheets. Without insights into the agreement terms, a supplier can send in an invoice for the full, tariff-inflated cost, with the AP team processing it as if it were correct.

Auditing for this type of recovery requires reviewing your buyer-supplier communications and verifying whether the terms are reflected in your contracts or ERP. Cross-checking supplier invoices against your vendors’ trade terms can also help pinpoint any discrepancies you'll want to address.

Cost Overcharges

Another tariff-related recovery you may encounter is when cost concessions or pricing adjustments don’t match the agreed-upon terms. For example, you negotiated a 5% reduction for shoes to offset the impact of landed costs. Yet the invoice price is the same. Over time, incorrect cost concessions can lead to material overpayments or missed chargebacks.

In this case, the cause of the error can come from outdated terms in core systems, manual entry, or unclear negotiation terms. Shifting buyer-supplier agreements further complicates matters by increasing the risk of financial leaks. To find the gaps, review supplier-buyer communications against your ERP.

Missed Supplier Funding

Some retailers may negotiate lump-sum deals or credits for future payments to offset the impact of tariffs. A supplier may apply a 10% credit toward a future shipment if you purchase a certain quantity today. However, if it's never updated in the system, you can quietly lose funds for months until the issue is corrected.

Looking for this recovery is similar to the last two, but you'll also want to factor in supplier statements and vendor trade agreements as part of your data sources. Note any tariff-specific clauses or cost-sharing agreements to identify discrepancies.

Misapplied Tariffs

A product's duty rate is determined by its Harmonized Tariff Schedule (HTS) code. With duty rates constantly in flux, it can be challenging for AP teams to keep up. However, an incorrect HTS code can result in cost fluctuations that impact several categories or SKUs, inflating costs for months before detection.

To determine whether this is the case for your organization, review your item master file to identify misclassified items. Additionally, review customs declarations and the country of origin to identify inconsistencies between the two. Finally, review customs broker records to find the actual tariff rate applied at the border.

Double Billing

You could be paying double for freight or duties and not even know it. A supplier can pass off the duty rate by including it in both product costs and invoices as miscellaneous fees. For example, a supplier can pass the cost of building a product onto the final product price and also include it as a separate line item on the freight bill.

The challenge with identifying double billing as a financial leak is that it may not always be clear that this is happening. When auditing for this recovery, review your freight bill or third-party logistics (3PL) invoice to note any duplicate charges, unexplained miscellaneous fees, duty handling surcharges, and cost absorption discrepancies.

Closing the Tariff Gaps in Your Retail Recovery Audit

The best way to navigate uncertainty is to prepare. Tariffs are no different. Putting guardrails in place now ensures your next recovery audit doesn’t miss what matters most. Doing so can help you improve compliance, reclaim profits, and gain insights that inform stronger supplier negotiations going forward.

Want more tariff-related insights? Then we encourage you to take a look at our latest guide: Margins at Risk. We know how important this topic is for our industry, so we wanted to compile all of our insights from our prior experience during the last tariff cycle into one resource.

Get your copy today to learn the focus areas to include in a tariff-aware audit and questions to leverage if you're looking to collaborate with a recovery audit partner with tariff-specific experience.