Deductions volumes have been growing over the years, making it more challenging for companies to handle the work with existing resources. A Credit Research Foundation survey observed that more than two-thirds of polled credit managers did not see any decline in the volume of deductions over the last 12 months. Automating deductions identification, research and collaboration is yet another low hanging fruit to refocus resources from deductions operations to higher value operations including credit and collections.

8.1. Top Challenges in the Deductions Process

Figure 16: Manual Steps in Resolving Deductions

Typically, a deduction proceeds through a set of stages for resolution handled manually by the analysts.† Some of the major challenges they face while going through these manual steps include:

• Cross-department collaboration is one of the most complex issues. Although deductions are a company-wide problem, the major responsibility to resolve a deduction remains with the credit and A/R department. This creates a complex scenario because the investigation responsibility is with the A/R team while the investigation execution may include one or more different teams. To solve this contention, companies have been experimenting with increased accountability for different teams. Cross-functional teams and vendor compliance groups have been deployed by many large firms to improve communication, both internal and external, and resolve deductions.

• Access to information: Deduction research has to be backed by documentation. But collecting all the documents and keeping them in order incurs significant costs. The rapid retrieval and association of backup documentation in a timely manner is a game-changer for deductions.

• Lack of resources: Data from a deductions survey by the CRF suggests that while 30% of companies saw an increase in deductions, only 17% of the companies deployed additional resources to handle the uptick in deductions.

8.2. How Top Organizations Automate Deductions Operations

Deductions analysts spend a significant amount of time downloading and aggregating back up documents and collaborating with different stakeholders while research and resolution. This is where the top companies leverage technology to auto-aggregate all claims and PODs while providing a structured workflow for the analysts to research, catalog and amass all their collaboration at a single source of truth.

Figure 17: Two Steps to Automate the Deductions Process

Automating the deductions back up aggregation for claims and proof of delivery and attaching these to open deductions could significantly reduce the time take in backup retrieval and research. With this, the deductions become reasearch ready for analysts. Going one step further and providing a structured workflow platform for analysts to take care of all internal and external collaboration enables smooth and fast resolution. Faster deductions resolutions, in turn, result in faster collections, thereby lowering DSO.

8.3. Deductions Automation Success Story: Keurig Dr Pepper

Land O?Lakes, one of America’s premier agribusiness and food companies, received more than 100,000 deductions per year with 50% being contributed by the top 12 large customers. Handling all these deductions manually required huge commitments from the analysts in terms of time and effort. With automation, Land O?Lakes was able to increase ~$2 Million in closed deductions (dollars) while reducing the Deduction Days Outstanding (DDO) by 23%.