Navigating the E-Shift in Deductions Management Over the Decades

What you’ll learn


  • Learn how leveraging automation could help your company reduce DDO
  • Understand the benefits of a single document repository and auto-linking of relevant deduction data
  • Know how technology could enhance internal and external collaboration and provide faster dispute resolution
  • Learn how prioritizing critical deductions over low-priority deductions could help improve your bottom line

Being in the midst of a technological revolution where technology gets updated at a moment’s notice, the A/R departments could either have an adverse reactive approach or a more proactive approach towards the change. Talking about deductions, in most cases, deductions occur because of invoice inaccuracy and inconsistency. Resolving these deductions occupy a great span of an analyst’s time. This makes it necessary to have a structured environment that could act as a driving force for a systematic, hassle-free deduction resolution. But how to achieve that? Let’s dive into the data and processes and how incorporating proper technology in deductions management could help your company save both money and time.

Deductions Volume Across Industries

Let’s have a look at some data to get a rough idea of what companies have to deal with. The data given below represent different industries, and the volume of deductions they typically have to handle:

Deductions volume across industries

Apart from the huge deductions volume, SOX compliance adherence & multiple touchpoints due to business expansions are some common issues across industries. Let’s try to understand some of the nitty-gritty of deductions management.

Traditional Deductions Process VS Current Deductions Process

The traditional ways of managing organizational data and people have always been extremely manual and time-consuming. Most of the work related to deductions research was usually done by collectors in the absence of a separate deductions management mechanism. The deductions process has always been an essential step in the order-to-cash cycle. However, like any other business process in the order-to-cash cycle, traditional and manual deduction management process also involves a lot of challenges that lead to a loss of significant resources and time value for the company.

Process change

The deductions management process might lead to a loss of resources and lower profit, but it is very important in maintaining good brand value and customer relationships. In today’s day and age, companies are leveraging artificial intelligence to automate their business processes that could easily solve daily problems related to dispute management and deduction claims. Let’s look into the key differences between the traditional and current processes related to data and people management, and how technology plays an important role in making the deductions management process more effective and better streamlined.

Data Management in the Deductions Process

1. Traditional Process

Customers claim a deduction that demands data be checked from internal records, which include paper records of promotional deals, printed copies of POD, BOL, shipping information & disparate data on spreadsheets and other tools. These require a lot of time and effort to search every document needed to determine the validity of the claim.

2. Current Process

The current process might involve:-

  • Maintaining 1000s of deductions for 1000s of customers
  • Customer preference to send data via emails, portals
  • Backup documentation up to 5 years due to SOX
  • Multiple access required by Sales, external brokers
  • Data from internal teams such as Collections, Cash Application

As is evident from the points mentioned above, this requires catering to complex compliance issues & providing easy access, lack of which can cause a hindrance in deductions research, and the server’s ability to process more data.

3. Role of Technology in Enabling Data Access

There are primarily 2 main ways in which technology plays an important role in enabling data access:-

  • Maintaining a single document repository to store & index data
  • Establishing a system that enables automatic capture & linking of relevant deductions data

These steps ensure saving processing costs, easier access to data & availability of research-ready deductions.

People Management in the Deductions Process

Usually, A/R analysts involved in the deductions process, are involved in clerical tasks such as internal communication and dealing with snail mails. Hence, making their work easier using other pillars viz., data & technology becomes a priority.

1. Traditional Process

A typical deductions process involves FTEs managing multiple accounts as well as multitasking within various departments. This is not only manual but also time-consuming, apart from these, there is usually an increase in headcount to deal with huge deductions volume.

2. Current Process

The current situation involves the creation of large team sizes with different responsibilities within deductions, to cope with the ever-growing customer base. This means the already complex process of deductions, which involve – Non-Trade, Post-audits, Compliance related claims, tends to face increased time & effort in processing deductions.

3. Role of Technology in Managing People

Two of the most effective steps that one could take for optimizing this particular pillar are as follows:-

  • Ensuring the storage and gathering of all backup documentation
  • Automating low-priority deductions

This will allow focussing more on critical deductions, reducing headcount even with an increase in deduction volume, enable better visibility & reallocate resources to high-value tasks.

Collaboration in Deductions Process

Often at times, it becomes necessary for deductions analysts to collaborate with the customer or third-party vendors to resolve the claims. The technology used, if at all, plays a vital role in determining how fast resolution will take place. Better technology will result in better customer experience.

1. Traditional Process

A deductions analyst will most likely have to work in an ad-hoc collaboration model, dealing with a lot of to-and-fro communication through snail-mails and having multiple touchpoints in the process. This translates to a slow deductions process, which results in poor customer experience. The use of disparate tools such as excel, pdf, notepad & increased to-and-fro communication with internal stakeholders increases the probability of errors and inaccuracies. Using dysfunctional technology won’t do any good either. As a result, lack of synergy between deductions teams, sales & logistics combined with poor customer experience, is pretty common.

2. Current Process

Some challenges that a deductions analyst is likely to face include:-

  • An increasing number of stakeholders in external collaboration
  • Lack of proper records of communication with brokers or third party stakeholders
  • Increasing stakeholders in internal collaboration
  • Putting more effort into prioritizing the customer experience
  • Partial integration with internal stakeholders

This results in less visibility and poor strategizing for better customer experience.

3. Role of Technology in Enhancing External Collaboration

The Traditional way of doing things might not be optimized for the new reality. Hence, it becomes quite necessary that processes and technology are optimized to meet the new requirements, such as:-

  • Having automated correspondence for common scenarios
  • Fast-tracking deductions process with technology such as Web Push
  • Establishing electronic workflows to improve visibility
  • Automating correspondence for internal synergy & communication

Deductions Process Overview: Post Automation

Deductions process overview- post automation

The flowchart demonstrates that there is always room for improvement, and every process involved in deductions could be better optimized. As compared to the pre-automated deduction process, the latter results in a faster resolution process & reduction in DDO, creating a much better customer experience. The world will keep evolving both in technology and in technique. To stay relevant, constant change is the only way forward. Deploying relevant technology timely, always serves well, especially in the long run.

The E-shift in Deductions Management

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HighRadius Deductions Software acts as a powerhouse for proactive deduction management to prevent bottom-line erosion. It provides automation, process standardization, and a platform for cross-departmental and customer collaboration. It supports deduction management by providing some key features like back-up document capture which captures deduction data from customers and supplies the information required for resolution; auto-capture proofs of delivery (PODs), bills of lading (BOLs) from carrier portals & emails; structured deduction resolution, collaboration & approval workflows to streamline the communication and approval process; along with automatic deduction correspondence, and automatic data push to customer portals. The result is a proactive deduction management operation that recovers revenue normally lost to invalid deductions.