Collection Agencies And Deductions And Charge Backs – 5 Of 5

By Dean Kaplan+

Photo by Mitmensch0812 (No real name given),

Setting up a digital system to keep track of deductions information will help streamline the process of identifying deduction-causing issues

Hiring a collection agency can be one strategy for reducing deductions. There are other strategies that can contribute positively to dealing with the problem of out of control deductions. This is the final article in a five part series about deductions and will discuss more strategies for getting a handle on this issue.

As we have noted in previous articles in this series, large retailers have vendor compliance requirements. Often these requirements cover a myriad of areas within the vendor’s company making the deductions problems a company-wide problem, not just a credit department problem. Because violations to the vendor compliance requirements can come from various parts of the company, it is paramount that every department affected by compliance requirements be aware of the requirement and if at all possible, be in compliance.

Within any company struggling with deductions problems, there is a definite need for cooperation across departments to ensure compliance. This internal cooperation means that top management must buy-in to the need for compliance and commitment to compliance. We all know that everything starts at the top. If management makes compliance a priority, then departments will make it a priority and cooperation among departments will become increasingly necessary.

Obviously, education is a key to compliance. The reason retailers have vendor compliance manuals is to facilitate this internal vendor education. Whichever department is the keeper of the compliance manuals for customers, should distribute the relevant compliance requirements to departments throughout the company. If the department is aware of the requirements, there is a greater likelihood of successful ongoing compliance. This education falls into the category of deductions prevention. The company is trying to comply so that no deductions will be necessary for that requirement.

Once departments within your company have been properly educated about the compliance requirements, another area which can cause noncompliance is inefficient internal operations. This area could be called controllable errors leading to deductions. Usually, these errors surface in environments which spend lots and lots of time trying to undo deductions after they happen. The key to reducing deductions is to find the underlying cause or problem and make changes to fix the problem or improve the process. Few successful settlements are negotiated on deductions after the fact.

Information is another key to getting a handle on deductions. To manage deductions, timely data is critical. It won’t matter much if you are looking at deductions information months after it happens. Central automation of deductions data is the way to go. Try to avoid each department hand keying data and publishing its own reports. When cash remittances come into the company, someone is already keying in data or it may be input directly at the time of the electronic data interchange. Try to keep the data input in one location, reducing duplication of effort and increased chance for data entry errors. Since it obvious that data needs vary from department to department, no reports should be designed until all internal customer needs have been defined. Try to design reports which can satisfy the information needs of multiple departments. Hopefully, by talking to the users of the data, it will become apparent that a few reports published regularly will provide a wealth of information and improved compliance.

With management buy-in, communication across departments, education of departments and improved information flow, the internal challenges associated with managing customer deductions can be significantly reduced. Deductions will always exist in the complex retail world of today. The key is to be in compliance as much as possible with the vendor requirements, and prevent deductions before they happen.

If certain customers are identified as abusers of deductions, hiring collection agencies may be helpful. A few commercial collection agencies are well-versed in negotiating settlements of all types. Their debt collectors are experts in accounts receivable collections, and therefore, have been exposed to many deductions negotiations. Their experience in dealing with retailers using deductions to reduce their payments gives them a distinct edge in successful debt collection from this type of debtor. With the complex nature of the deductions problem, help with problem customers and resultant accounts receivable collections can free up internal staff to look for other preventable deductions to capitalize on.

Click here if you missed earlier articles in this five part series about customer deductions 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.