Blog · KeHE finance
For CPG finance and operations teams managing KeHE wholesale accounts.
The specific math: trailing deduction rate by category, the ratio of contractual vs. disputable, and how to forecast net cash from shipped purchase orders.
Direct answer
Your KeHE deduction rate is the percentage of gross invoiced dollars that arrive as deductions on the remittance. For most CPG brands selling through KeHE, this ranges from 5-15% of gross sales. The number itself is less important than understanding what it contains.
A 10% deduction rate where 88% is contractual passthrough tells a very different story than a 10% rate where half is preventable compliance fees. The rate is a starting point. The breakdown by type is where the actionable insight lives.
The formula
Pull both numbers from the same time period. Use remittance-level data for deductions and your EDI 810 invoices (or KeHE invoice records) for the gross amount.
Total deductions
$15,167
Gross invoiced
$151,671
Deduction rate
10.0%
Worked example from a verified Sky & Sol audit. These numbers represent a 90-day trailing window across all KeHE DCs.
Breaking it down by type
The percentages below come from a verified audit of Sky & Sol’s KeHE deduction data. Your specific mix will vary, but the pattern is consistent across CPG brands: the vast majority of deduction dollars are contractual passthrough.
CN, MCB, placement fees, promotional allowances
These are agreed-upon costs of doing business through KeHE. They are deducted from remittance, but they are not errors or disputes. Trying to reduce this category means renegotiating your trade terms, not filing disputes.
SLF (service level fines), FF (freight fees), case cuts
These are preventable. They result from operational breakdowns: late shipments, short fills, routing errors, wrong packaging. Every dollar here is a dollar your fulfillment process left on the table.
IA (invoice adjustment), KC (KeHE credit)
These are potentially disputable. They represent KeHE adjusting what they owe you based on their records. If your records disagree, this is where evidence-backed disputes live.
Lines that cannot yet be tied to a PO, agreement, or category
These require investigation before any action. They are not automatically recoverable and not automatically acceptable. The honest answer is: you do not have enough information yet.
For a full breakdown of all 111 KeHE prefix codes: see the KeHE prefix code library →
Trailing rate vs. spot rate
Any individual remittance can be distorted by one-time events. The trailing rate smooths those out and gives you a number you can actually forecast with.
A holiday promotion period means higher CN (chargeback/promo) pass-through on the remittances that follow. If you look at a single January remittance, the deduction rate might be 14%. But Q4 promotional pass-throughs are contractual and expected. The trailing 90-day rate absorbs this and shows the underlying trend.
When you launch a new item into KeHE, the first few remittances often carry placement fees, free-fill charges, and introductory promotional allowances. These are real costs, but they are not recurring. A spot rate during launch month overstates your ongoing deduction exposure.
A single DC might have a receiving error that creates a large shortage on one PO. That one event can make a single-remittance rate jump by several points. The trailing rate distributes that anomaly across the full window and reveals whether it is a pattern or an outlier.
If you fix a routing issue that was causing freight fees, the improvement will not appear on the next remittance. It takes 30-60 days for shipped POs to settle. The trailing 90-day rate is the first window where an operational improvement is reliably visible.
Practical application
This is where the deduction rate becomes a planning tool. If you know your trailing rate, you can convert your shipped PO pipeline into an expected cash number — not the number you invoiced, but the number you will actually collect.
PO pipeline (shipped)
$50,000
Trailing deduction rate
10.0%
Expected cash
~$45,000
The missing $5,000 is not lost revenue. It is the predictable cost of trade terms, compliance, and settlement adjustments. Knowing the number in advance lets finance plan around it instead of discovering it on the remittance.
For the full PO lifecycle treatment, from open order through settlement: see the demand planning guide →
Benchmarking
The total rate is less telling than the composition. Here are three scenarios and what they suggest about your operations.
5-8%
Mostly contractual passthrough. Compliance fees are minimal. Disputable items are caught and addressed promptly. This range is typical for brands with mature 3PL relationships, clean EDI, and active deduction monitoring.
8-12%
Contractual passthrough plus some preventable compliance fees. Common when a brand is expanding into new KeHE DCs, onboarding new items, or growing faster than their operations infrastructure. There is likely recoverable money here.
12-15%+
Elevated compliance fees, unmonitored promotional pass-through, or uncontested shortages. At this level, the brand is almost certainly losing money to preventable causes. An audit will usually reveal 2-4 specific, fixable patterns.
Reducing your rate
Most brands skip step one and try to dispute their way to a lower rate. That does not work when 88% of deduction dollars are contractual. Start with classification.
Separate contractual from non-contractual
Do not try to reduce your contractual passthrough through disputes. That 88% is the cost of your trade terms. The remaining 12% is where your leverage lives. Conflating the two wastes dispute capacity and erodes credibility with KeHE.
Prevent compliance fees upstream
Every SLF, freight fee, and case cut has an operational root cause: a late shipment, a short fill, a routing error. Fix those causes in your fulfillment process rather than disputing the symptoms after the fact.
Dispute genuine errors with evidence
When KeHE adjusts an invoice and your records disagree, file through K-Solve within 180 days with the BOL, POD, pick confirmation, and applicable documentation. One verified dispute in the Sky & Sol audit was worth $9,300.
Monitor the trailing rate monthly
Track your trailing 90-day deduction rate by category. A sudden spike in compliance fees means something changed in your fulfillment. A drift upward in unknown items means your classification process is falling behind.
Frequently asked
For most CPG brands selling through KeHE, the total deduction rate falls between 5% and 15% of gross invoiced dollars. The number itself matters less than the composition: a 12% rate that is 11% contractual and 1% compliance is healthier than an 8% rate with 4% in unmonitored compliance fees.
No. Contractual passthroughs (CN, MCB, promotional allowances) are part of your trade terms with KeHE. They will always be deducted from remittance. The goal is to minimize preventable and disputable deductions, not eliminate all deductions.
Ninety days is the sweet spot. It is long enough to smooth out single-remittance anomalies and short enough to reflect recent operational changes. If you need a longer view for budgeting, use a trailing 12-month rate alongside the 90-day rate.
Directly. If your trailing deduction rate is 10% and you have $200,000 in shipped POs awaiting settlement, your expected cash is approximately $180,000, not $200,000. The deduction rate is the conversion factor between revenue-on-paper and cash-in-hand.
The inputs are your KeHE remittance advices (for deduction amounts and codes) and your invoices or EDI 810s (for gross invoiced amounts). K-Solve provides a downloadable export of deduction detail. EasyOps connects both sources automatically and calculates the trailing rate by category.
Evidence boundary: This guide provides a calculation framework, not a guarantee that any specific deduction rate is achievable or that any specific deduction is recoverable. Deduction rates vary by brand, category, trade terms, and operational maturity. Always verify current terms and evidence against KeHE source documents.
Next step
