The 6 Step Framework to Improve Deductions Management

What you’ll learn


  • Learn some of the best practices to prevent deductions from eroding the bottom line of your company
  • Understand the various impacts of deductions management on business
  • Unearth the benefits of creating a policy, tracing deductions status and other such actionable measures for better deductions management
  • Discover the importance of artificial intelligence in the field of deductions

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Deductions- A Dilemma To Manage

THERE IS STRESS MANAGEMENT AND THEN, THERE IS DEDUCTIONS MANAGEMENT

Imagine if there could be something heavier than tension? Well, there can be one – the weight of deductions. From resolving trade promotion deductions to post-audit deductions, a deduction analyst has to go through a lot of inevitable hustle-bustle. The good news is, this chaos can prevent the erosion of the bottom line of any business.

“For a $1BN+ annual revenue firm, deductions leak based on invalid deductions not recovered could total $4m!
-Jessica Butler
, (Founder) Attain Consulting

IMPACTS OF DEDUCTIONS MANAGEMENT ON A BUSINESS

Well there’s no end to the count but let’s start with :

    1. Poor Customer Experience: A customer’s experience gets highly affected due to improper deductions management. Analysts have to repeatedly contact customers thereby affecting both the parties.
    2. Working Capital Trapped in Disputes: A lot of potential capital is stuck in disputes which could have been invested in so many important areas of the business. They’re not very easy to recover and hence, leads to a decreasing bottom line.
    3. Expensive Resources Spent on Low-Value Tasks: Imagine spending 80% of one’s income on an investment that will return only 20% of the profit. Doesn’t sound fair, right? Similarly, a huge number of potential FTEs and other external networking, when spent on low-value tasks leads to unproductive use of time and resources.
    4. Bottom Line Erosion by Invalid Write-Offs: Naturally, invalid write-offs can lead to a reduction in the final total of an account which will result in a huge dip in income or surge in expenses.

    Nevertheless, there’s nothing to worry about because Pauline Kael once said, “Where there’s a will, there’s a way.”

    THE 6 STEP FRAMEWORK TO IMPROVE DEDUCTIONS MANAGEMENT

    Here are specific benchmarks set by six elements that will help to assess the process :

    1. Create a Policy

    A good policy is the one approved by everyone. Enlist cross-functional teams for better ROI and align with the internal controls who deal with the deductions first-hand to establish a common ground.
    Sometimes, analysts waste time researching valid deductions and there are cases when they have to approve invalid deductions due to weak policies. Focus on how to handle deductions in your organization.

    2. Get a Jumpstart

    Managing deductions after receiving a claim is already too late. So you have to be prescient about the dispute to accelerate the process. Access information about the raised disputes and start research pro-actively. Know your customers to understand their behavior regarding deductions policy and identify trends.

    3. Track the Deduction Status

    Be perceptive about the type of action to be taken when you receive a deduction in the payment. Maintaining tabs during the process will help. Understand the status of the deduction to know what you are trying to accomplish and how will you proceed to achieve that.

    4. Dispute the Dispute

    If you want to enhance decision making, have a clear idea of what to do on what type of dispute. Take timely action on raised disputes and research as soon as possible. Be updated to get that ‘pre-deduction’ and send it to the other departments to help them in their research.

    5. Collaborate & Educate

    Effective communication with the customers on the disputes makes the process easier for both parties. Instead of multiple teams working independently, design a process for cross-team collaboration.

    As per a survey conducted by Attain Consulting Group, “41% of the respondents cited cross-team collaboration as the major challenge in controlling deductions.”

    6. Leverage Automation

    Taking advantage of technology will always keep you ahead in the competition. Footprints left by the automation are:

    • Easier & faster processing: Automation eliminates repetitive, manual processing such as cash application pre-processing, pull customer pre-deductions and claim and POD retrieval.
    • Increased efficiency: Automation reduces dispute resolution time while improving accuracy which automatically increases efficiency and output.
    • Better analysis: Automation focuses on dispute research and root-cause analysis.

    So what’s the next step? Taking automation to the next level.

    ARTIFICIAL INTELLIGENCE: THE KNIGHT IN SHINING ARMOR

    Artificial Intelligence is the one manned army which solves all the problems single-handedly.

    THREE PROBLEMS
    • Analysts spend most of their time resolving valid deductions.
    • This produces no bottom-line value.
    • It also causes capacity constraints resulting in high write-offs.

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    ONE SOLUTION

    AI for Deductions Management predicts the validity of deductions without any research and saves manual effort by 70%.

    “Deductions are a company wide issue. Organizations need to streamline cross-team collaboration for faster resolution.
    -Jessica Butler
    , (Founder) Attain Consulting

    Concluding, proper deductions management plays a huge role in the upliftment of a business’s bottom line as well as branding in the market and it can be very easily achieved through human and Artificial Intelligence.


    Prevent_Deductions_from_Eroding_Your_Bottomline

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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.