Figure 6: Resolution Process for Deductions

Typically, a deduction proceeds through a set of stages for resolution (Error! Reference source not found.).† After the deduction arrives, the back-up documentation, including claims, proof-of-deliveries, and others,† need to be collected from different sources. Once all the information and associated proof of documentation† have been compiled, the individual deductions need to be researched and validated. Additional cross-team† research, typically involving the sales teams, needs to be carried out, usually before verifying a trade† deduction. If the deduction is found to be valid, credit is issued or the amount is written off and the† deduction is closed. If the deduction is found to be invalid, the deduction is denied and the amount is sent† back for collections. Deductions teams face several challenges at various stages in the process as outlined below.

1. Identify Types of Deductions

With many different types of deductions arriving from various sources, each deduction needs to be identified and coded for processing either together or separately from other deductions or claims. Customer codes need to be mapped to internal company codes to be sure the deductions are aligning with the correct internal reason codes. Working capital can be used to forecast plausible financial difficulties that may arise. Insufficient levels of working capital might cause financial stress on a company leading to borrowing loans, late payments to banks and suppliers thereby resulting in a lowered credit rating. A low credit rating leads to higher interest rates from banks and obstacles in doing business.

2. Maintain the Document Backups

Downloading, sorting, indexing and linking deduction documentation is an onerous and time-consuming task. The multiple, varying sources from which the claims and POD documents need to be retrieved† (website, email, EDI, mail) make the task difficult to standardize. Additionally, for trade deductions,† significant time is spent extracting relevant promotion and deduction data from the aggregated documents before the research is even able to start.

3. Match Deduction Cases to the Corresponding Trade Promotion

In most manual scenarios trade deductions are a separate business process, and deductions analysts have to toggle between the ERP, trade promotions management and deductions management systems to figure out the trade promotion from which the deduction has been taken. Data from the trade promotion, such as the promotion ID, committed amount, disbursed amount, and so on, need to be carefully matched before approving the deduction.

4. Research the Deduction Cases

Deduction cases may require follow-up with the sales, marketing, operations, and customer relationship teams. Without a systematic way to track the case, scrolling through thousands of deductions becomes extremely difficult. The end result is delayed resolution and poor accountability.

5. Customer Correspondence

Deduction correspondence letters such as denial correspondence or follow-up on invalid deductions need to be composed, scheduled and tracked across thousands of cases. Manual handling of correspondences leads to poor customer relationships, irregular or no follow-up and low deduction recovery.