Deductions: The Black Hole Of B2B Finance

Learn how recent technologies benefit A/R in the deductions process

In the B2B world, the fact that businesses lose a huge sum of money in the form of deductions is hard to deny. Keeping in mind what deductions are, the thing that makes it more crucial and time-consuming is that- deductions occur not only due to one, but a varied number of reasons. Based on various surveys and studies, it was found that Trade industries face 90% of the total deductions volume due to “Trade Promotion Deductions”. The other 10% occur due to factors such as- customer dissatisfaction, poor quality of the product- to name a few. Organizations globally invest a lot of time, effort, and money in establishing a Deductions Management System.

A US-based, leading Food Production company was losing a majority of its Accounts Receivables to the Black Hole of finance- Deductions:

Ardent Mills is the industry innovator with over 100 million consumers each day. It has gained its place in the ‘Who’s-Who’ list of companies in food.

With an extensive customer base, Ardent Mills faced multiple challenges in their A/R process. The majority of which existed in the deductions and accounting process. So, what led them to establish faster resolution with an improved resource utilization by 50%?

The answer that you are looking for is Automation. So, let’s go through their deductions journey and how they leveraged multiple strategies to overcome the deductions misery.

Deductions: The Black Hole For A/R

That region of spacetime, with a gravitational force so strong that it is impossible to escape, is the Black Hole. So, what made deductions the Black Hole of Ardent Mills’ A/R?

Similar to the Black Hole, they had little to no visibility of the incoming deductions or short pays. This led to a massive data dump due to ERP Migration and eventually a standstill. Along with a 100% manual approach and no defined team, lack of a standardized process acted as a road-block in the company’s AR strategy.

Journey Through The Black Hole

The journey through the real black hole might still be undiscovered, but the journey through the black hole of deductions for Ardent Mills was successfully implemented with the right strategy.

Ardent Mills embarked on their journey, to successfully tackle disputes, by implementing 3 different approaches:

STRATEGY 1- MANUAL

The scenario at Ardent Mills was such that- the collectors were handling collections as well as deductions, making it 100% manual. Lack of a deduction queue made the whole process more gruesome and time-consuming. This led to multiple concerns such as:

• Zero visibility & no way to track deductions
• Inability to deal with the deductions volume
• Poor Customer Experience
• Inability to focus on collections

The difficulty in dealing with huge volumes of deductions and increasing data dump led Ardent Mills to adopt Strategy 2.

STRATEGY 2- OUTSOURCING

The increasing disputes led Ardent Mills to increase its headcount. Several contractors were identified as Dispute Coordinators and were assigned to the collections team. Increasing the number of employees allowed collectors to focus on tasks that mattered and reduced manual labor. But it failed to provide better visibility of incoming deductions and lacked standardization.

So, hiring contractors did not solve the problem for Ardent Mills. This spurred them to automate their deductions process and led them to their final strategy.

STRATEGY 3- AUTOMATION

Ardent Mills’ decision to automate deductions management was their ticket out of the Black Hole. Time-consuming tasks such as- identifying deductions and reason codes, prioritizing customer accounts, and gathering back-up data from multiple sources were automated. They now had a standardized process and a single repository to refer to whenever needed.

Apart from resolving the general concerns, the company was able to reduce its headcount by 50% as most of the manual work was being done by the system itself. This also led to faster resolution of disputes and better trading.

Automation With AI- The Future

Automation has helped finance in B2B reach great heights in the past decade. From the faster resolution of disputes to better customer-client relations, automating the system has let organizations grow globally.

Enabling deduction management with Artificial Intelligence, fast-tracks the research process and reduces manual intervention. But what makes it the future of B2B Deductions Management is its ability to:

• Automatically resolve low-value deductions
• Predict the validity of an incoming deduction
• Reduce resolution time