Accounting Best Practices, Fifth Edition

7–21. Install Payment Deduction Investigation System

Customers usually deduct payment amounts from invoices they owe because of problems caused by the originating company. Examples of these problems are product returns caused by faulty products or incorrect order processing, product damage due to incorrect shipment packaging, incorrect sales deals issued by sales personnel, and promotional or advertising deductions for deals that were not clearly specified by the marketing staff. Unfortunately, none of the staff in these areas in which the problems originated are likely to hear about the resulting collection problems, because the collection task is placed in the hands of a clerk, in either the accounting or treasury departments, who is thoroughly overworked, and who certainly has neither the tools nor the authority to drive corrective changes back through the organization.

The solution is to give this person the tools to do so, which can then be accessed by a high-enough level of manager to ensure that corrective actions are taken. A properly functioning deduction investigation system requires workflow software in which one can route information about the problem to the appropriate party. The software must be able to shift the action routing to different parties if action is not taken by predetermined dates, thereby ensuring that action is taken to correct deduction-related problems. The system must also allow one to review the linked electronic images of related documentation ...