The complex buying and selling of products in a B2B environment has many challenges. Manufacturers identify distribution channels, composed of retailers, distributors, dealers, service providers or other manufacturers, to sell their products. Complexities arise due to the following practices:

• The flow of goods and the flow of money have different end-points and cycles as various departments† and teams are involved in bulk delivery, payments, procurement and so forth.
• The unit price of the product varies based on customer reputation, sales, volume, promotions and† seasonality.
• A gap exists between the shipment of goods and the receiving of payments which has to be accounted† for by the receivables team in the form of day sales outstanding (DSO).

Managing deductions, disputes and chargebacks are among the challenges that arise due to this complex† buying and selling process. During the payment process, the customer may pay less than what is outlined in† the invoice due to earned-discounts, faulty deliveries etc. The amount that is short on the invoice in the payment process is termed a deduction. Typically, deduction practitioners divide the incoming deductions into two types:

• The deductions which arise from promotions, discounts, markdowns and advertising are called trade† deductions. Such deductions are easy to investigate and resolve because the promotions and discounts are generally planned in advance and tracking a deduction against a trade promotion is easier to navigate. Even though the vast majority of trade deductions are valid and the process to resolve is clear, they still take significant resources and time due to the highly manual nature of the research involved.
• Non-trade deductions make up all other types of deductions such as shortages, damaged deliveries,† invoice errors, etc. Such deductions might be mixed types and are often unpredictable and complex, requiring collaboration from teams across the organization.

A rise in deductions volume is indicative of a various circumstances. It could mean that retailers and distributors have become more aggressive in claiming deductions. It could also mean that the suppliers and manufacturers have not been able to successfully avoid preventable deductions. Deductions left unaddressed could make a significant dent in the bottom line. But the heavy manual effort required to resolve deductions has traditionally meant that the cost of fixing the issues overruns the benefits. A† deduction takes anywhere from a few days to more than six months to get resolved, depending on the nature of the deduction. Many manufacturers prefer to write-off low and medium value deductions to simplify things and save on resource costs. These write-offs add up over time, leading to significant losses in the long-term. As deduction volumes continue to rise, the problems demand a fresh perspective. Companies have had to increase their efforts on the timely review and follow-up of deductions, and establish cross-functional teams for better accountability. However, all these undertakings are resource-intensive and the costs run high. Therefore, the value to automate processes for deductions management is tremendous, especially for trade† deductions, which account for the largest proportion of all deduction types.