Deduction management

The Optimized Deduction Management System

Customers may take a number of different deductions from their payments, such as for damaged goods, marketing allowances, and volume discounts. Typically, these deductions are consolidated by customer and assigned to a single collections person.

However, it can be difficult for one person to understand the details of a number of different kinds of deductions. An alternative is to route different types of deductions to subject matter experts (SMEs), each having deep experience with a specific type of deduction.

The use of a dedicated SME system requires that all customer deductions be coded by type when the related invoices arrive. A workflow management system is then used to route the deductions to the deduction SMEs. The workflow management system is also useful for monitoring the time required to resolve each deduction, which can be used to track efficiency levels and adjust work systems.

Problems With the Deduction System

The main problem with the deduction SME system is that several deduction specialists may be involved with the resolution of a single customer invoice, so a customer may end up interfacing with a number of people. Also, deduction SMEs are highly specialized individuals with a great deal of knowledge about the areas for which they are responsible. It may be necessary to go to considerable lengths to retain these people, or at least to document their knowledge.

Implementing the Deduction System

In order to incrementally work your way into a deduction SME system, consider applying its concepts for a single type of deduction to one of the department's best deductions analysts, and work through any issues that arise with that person. Once any issues appear to have been resolved, gradually roll out the concept to other deduction types. It is not usually necessary to have deduction SMEs for all types of deductions - only for the most difficult ones.

Related Courses

Credit and Collection Guidebook 
Effective Collections