Best Practices for Deduction Management and Prevention
To survive and thrive in today's intense, ever-changing marketplace, Canadian companies know they must implement and maintain an operating model that will not only serve their clients but also optimize results. And since organizations are continually seeking to improve financial and operational results, one of the best strategies to accomplish this is to focus on the core business practice's. So, it's no surprise that outsourcing is one of the most significant trends in business today.
In 2000, the Canadian Federation of Independent Business released A study of Outsourcing Trends in Canada. Among its findings: outsourcing is a business strategy adopted by nearly 80% of the nearly 2,000 Canadian businesses surveyed. According to Dun & Bradstreet's Barometer of Global Outsourcing, 2000, outsourcing expenditures are estimated at more than $1 trillion a year worldwide. And, in a 2004 report entitled A Fine Balance: The Impact of Offshore IT services on Canada's IT Landscape, PriceWaterhouseCoopers states "a leading research firm, Meta Group, believes outsourcing within North America is growing at an average of 10 to 15% annually.
Any company that has a complex pricing structure or has problems with order fulfillment will experience numerous "unexplained deductions" through their credit department. The challenge of effectively and efficiently managing these deductions is subject to “economics” and specifically the cost of personnel and their respective work time. The questions that senior management has to ask are:
- How much do you want to spend on labour costs to process adjustments for deductions?
- How much training is needed to get the job done correctly?
- How much time is actually spent by the employee on this task?
Moreover, there are two additional hard-to-quantify issues to consider, namely:
- If you rarely challenge these deductions, then the customers may become bolder in taking more deductions and for higher dollar amounts in the future.
- If these deductions are not promptly cleared from the accounts receivable ledger, you risk overstatement of revenue, profits and assets while at the same time understating promotional expenses. This could also create a problem with the Sarbanes-Oxley laws.
The solution to these problems facing the credit manager has three options that are not mutually exclusive.
- First, there should be a process for handling deduction costs efficiently
- Second, to record all post-audit deductions separately and then focus on maximizing the repayment of invalid deductions.
- Third, to make recommendations for improvements in trade spending- deal sheet information within the client’s company to reduce the number of deductions incurred.
The "how-to" part of implementing these solutions involves all of these techniques:
- Efficient Processing – involves thorough line-by-line research of both the type of deduction and its validity before clearance to trade spending/sales accounts
- Prevention - full analysis of the types of deductions by customers to pinpoint the root causes of deductions.
Claims Recovery Group Inc.
Toronto, Ontario - Canada
416-409-8640
philip@claimsrecoverygroup.com
http://claimsrecoverygroup.com/
https://claims-recovery-group.business.site/
Thanks for the Informative and Interesting Article. I would like to add something for them who look up for any legal services. Our aim is to give single tick access to people and organizations for all their legitimate and expert needs.
ReplyDeleteclaims recovery services