AR Deduction Management Best Practices to Improve Your Bottom Line

Deductions, in the form of discounts, short payments, and chargebacks, are a fact of life when doing business. The challenge for AR is distinguishing between authorized deductions, for which the company has budgeted, and customer deduction claims that are overstated, double deducted, for non-applicable markets or dates, or otherwise in error.

Impact on Bottom Line

The cost of not managing deductions includes lost profits, delayed cash flow, distorted AR, inaccurate accounting, damaged customer relations, and even regulatory noncompliance. Recapturing incorrectly taken deductions can improve the bottom line of your company by between 1 percent and 2 percent of annual revenue, a very significant amount, according to AR solutions provider, Smyyth.

The Credit Research Foundation 2012 survey, Customer Deductions: Impact on Receivables, based on responses from 498 companies across 30 industries, concludes: “The ability and willingness of a business to manage customer short payments has a significant impact on its competency in controlling expenses, increasing revenue and improving its customer relationships.”

Deduction Reduction Best Practices

Jessica Butler, founder and principal at Attain Consulting Group, a deduction and chargeback management advisory firm, outlines the following best practices for reducing and controlling chargebacks and ...

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