The challenge with deductions is that at least 95% of them are valid\/non-recoverable. Yet the volume and potential work required to research them all to identify the few invalid\/recoverable ones can be huge. How can you protect your profit margins while optimizing the investment of your time and effort?<\/p>\n
The short answer is by utilizing automation and a proactive approach to deduction management<\/strong><\/a>.<\/p>\n There are two types of deductions: planned, and unplanned. Unplanned deductions are the ones that significantly impact<\/a> profit margins and bottom-lines, and this is where we need to apply more strategic thinking. There can be a decrease of 2-3% of gross margin if deductions are not controlled. In addition, the equivalent of multiple FTEs (and their cost) can be expended on this potentially low value activity.<\/p>\n If deductions are not cleared from the AR Ledger on a timely basis, an overstatement of revenue and the Accounts Receivable<\/a><\/strong> can result. Correction of such overstatements usually is achieved with a substantial, painful write-off with its negative impact on profit.<\/p>\n For most companies, deduction processing<\/a> A Best Practice Process should focus on the high value, higher-probability-of-recovery deductions and drastically minimize effort devoted to deductions with a low probability of recovery or a low absolute value.<\/p>\n
\nmeans high volumes, low proportional and absolute yields, high cost, and pre-empting time from Sales, Customer Service, and Credit & Collections, which can be used in much more profitable pursuits. The demonstrates the need of solutions that include a best practice process, automation, policy, metrics and educating the customers.<\/p>\n