Terminology
Deductions vs. chargebacks vs. short-pays
These words get used interchangeably, but they're not the same thing. Getting them straight makes it much easier to know what you're looking at — and what you can dispute.
Ledger Deduction Recovery Team · Deduction recovery specialists working with emerging & mid-market CPG brands
Last reviewed: August 4, 2026
Educational content — not legal, tax, or accounting advice. Verify deadlines and fee details against your current distributor agreement before disputing.
A deduction is the umbrella term: any amount a buyer withholds from what it owes you. A short-pay describes the mechanism (the buyer pays less than the invoice), and a chargeback is a deduction taken as a penalty or pass-through charge. Every term below is a specific kind of deduction.
The terms, compared
| Term | What it refers to | Typical example |
|---|---|---|
| Deduction | Any amount withheld from payment | A shortage on a KeHE remittance |
| Short-pay | Paying less than invoiced | $21k paid on a $30k invoice |
| Chargeback | A penalty / pass-through deduction | MCB, labeling violation, OTIF fine |
Deduction
The umbrella term. A deduction is any amount a buyer withholds from what it owes you. Every term below is a specific kind of deduction.
Short-pay
A short-pay describes the mechanism: the buyer pays less than the invoice. In practice "short-pay" and "deduction" are often used for the same thing — the buyer short-pays the invoice by the deduction amount.
Chargeback
A chargeback is a deduction taken as a penalty or pass-through charge — for a compliance violation (labeling, routing, EDI), a fine (like OTIF at retailers), or a discount the buyer extended and billed back. A manufacturer chargeback (MCB) is the classic distributor example.
What matters in practice
Whatever it's called, the question is the same — is it valid, and can you prove otherwise before the deadline? See valid vs. invalid deductions.
See how much of your deductions you can recover
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Analyze my deductions — freeFrequently asked questions
What is the difference between a deduction and a chargeback?
A deduction is the umbrella term for any amount a buyer withholds from what it owes you. A chargeback is a specific kind of deduction taken as a penalty or pass-through charge — for a compliance violation, a fine like OTIF, or a discount the buyer extended and billed back to you.
Is a short-pay the same as a deduction?
Short-pay describes the mechanism — the buyer pays less than the invoice — while deduction describes the reason. In practice the terms are used interchangeably: the buyer short-pays the invoice by the deduction amount.
What is an MCB?
An MCB (manufacturer chargeback) is a promotional discount a distributor gives a retailer and then bills back to the manufacturer — the classic distributor chargeback, often with a processing fee on top.
Which terms are recoverable?
Whatever it's called, the question is the same: is the amount valid, and can you prove otherwise before the deadline? Pricing discrepancies and shortages are the most recoverable; valid spoilage and authorized promotions generally aren't.