Collection Agencies And Deductions And Charge Backs – 4 Of 5
By Dean Kaplan+
A Collection agency may be able to help you with customers who are abusing their use of deductions. Nowadays, deductions plague many companies, and are such an overwhelming issue that paralysis can set in. Aside from tracking and understanding the deductions issue, and taking action after they have already occurred, a more proactive approach to prevent deductions from happening can be very beneficial. This is the fourth article in a five part series about customer deductions, and it will focus on prevention of deductions.So you have already analyzed your deductions problem, and you’ve identified the types
that are out of control as well as the customers who are for whatever reason using too
many deductions. The next step is to figure out what is causing the deductions problems that you have. Pricing deductions usually happen because the amount your customer thinks he should be paying differs from the amount being charged on the invoice. Clearly, this is a red flag, and the reason for the discrepancy must be determined. Sometimes the discrepancy may be due to the customer having incorrect pricing information in his system. This is a simple problem to solve because the customer’s Vendor Profile likely contains all the information about you, the vendor. At large retailers, the vendor profile contains a wealth of information about you: pricing, packaging specifications, weights, shipment methods, all terms related to the sale, etc. If the customer’s pricing assumptions don’t match yours, this becomes either a training issue of your salesperson if he or she is not quoting the correct prices at the time of the sale or of the customer if the pricing in the profile is simply incorrect. It may also signal it is time for renegotiation of pricing, terms, etc. No matter the reason, it is best to go over the vendor profile with the customer in person.
Aside from pricing differences, deductions come in many shapes and sizes. Sometimes the most efficient way to tackle this complex problem is to create a task force within your company which is assigned the job of making personal customer visits to discuss and understand the deductions issues. The task force should be comprised of representatives from the credit, sales, distribution, customer service, and finance departments (the finance person should be involved with the electronic data interchange). The goal of this task force is to compare the customer’s vendor compliance components with the company’s normal procedures. If areas are identified where the company’s procedures are correct, but violate the customer’s compliance components, a waiver from the requirement needs to be negotiated. Negotiating for these waivers is the easiest way to prevent future deductions.
Once negotiations with customers are complete and your deductions policies and procedures have been established, your company should be in compliance as much is as possible with the vendor compliance components. This is when you should quickly begin to see a reduction in deductions. Of course, ongoing, a cost benefit analysis should be done to see if the time and money necessary to enforce the policies and procedures is in line with the amount saved by fewer deductions. You will never completely eliminate deductions; however, your company must determine what an acceptable level of deductions is and work towards this number.
A Collection agency can be helpful in negotiating with customers. When your task force has visited its customers and has identified the deductions that need to be negotiated, this may be a good time to hire a collection agency. Look for an agency that has experience negotiating deductions. Commercial collection agencies are often very experienced in this type of negotiation. Since they are experts in dealing with retailers and companies in general, they understand the relevant laws and they are armed with many tried and true negotiation strategies. Their debt collectors know how to talk with retailers. They understand the need for deductions, but they also know how to redefine deductions which have become vague and useful as a profit center for retailers. The fee structure of a commercial collection agency is usually a percentage of the amount collected and is contingent on successful debt collection, making it an attractive option for many vendors.
Deductions are not going away. They are a reality for any company selling to retailers. The more significant you are as a vendor, the more likely it is that you will be able to negotiate better vendor compliance components. Regardless of your size; however, the best way to discuss deductions with customers is through regular personal visits.
Click here if you are ready to go on to the final article in this five part series Collection Agencies And Deductions And Charge Backs – 5 Of 5, which will be posted 2/22. This article will further into strategies for managing deductions. Click here if youmissed the earlier articles in this series Collection Agencies And Deductions And Charge Backs – 1 Of 5.
The Kaplan Group is a boutique collection agency specializing in large (over $10,000) debt collections due from businesses. Founded in 1991, the company has a stellar reputation (A+ rating with the Better Business Bureau) and is recognized as one of the leading collection agencies for results on large and complex matters.