Accounting Best Practices, Fifth Edition

7–4. Base Deduction Management on Transaction Volume

The collections staff may be experiencing a flood of payment deductions or just a trickle. If there is a considerable volume of deductions, then the accounting manager will have a difficult time allocating deduction resolution work among the staff, which will resist the extra workload that is added to their other chores. Conversely, if there are just a few deductions, the common response is to let them pile up until a sufficient volume exists to keep someone busy for a longer block of time—which results in deductions lingering on the accounts receivable aging report.

The best approach for managing these deductions varies based on the incoming volume. For instance, if the collections staff is inundated with deductions, it makes more sense to assign deduction resolution work to people who specialize in a particular type of deduction, such as problems with shipment damage, pricing complaints, or product returns. This means that if a customer takes multiple types of deductions on one invoice, it may receive calls from a different clerk for each of the deductions. This may not seem efficient from the customer’s perspective, but works well for the company.

A different approach is used when there is a low volume of deductions. In this scenario, it makes more sense to leverage the collection staff’s personal knowledge of each customer to resolve items on a case-by-case basis. Further, there is not enough deduction volume to make it cost-effective ...