Corporate Deduction Policy Statement
August 7, 2022
August 7, 2022
A written corporate Accounts Receivable Deduction Policy is needed to avoid problems with customers that take deductions without providing proof of their validity and sinking your profits as a result. The policy must be clear, and consistent policy enforcement is important.
Depending on the type of deduction, customer error rates can be as high as 10%. Consequently, they must be properly researched, charged back to the customer if invalid, and followed through to successful recovery of the monies rightfully owed to you. Managing high volumes of deductions also requires automated deduction software that reconciles and identifies invalid A/R deductions. Timeliness of processing is key to solving them before they age out and end up as write-offs.
The policy needs to be communicated to customers, which then serves as your notice as to what proof you require to review deductions. Your policy document needs to be signed by your President or CFO, clearly referenced on your website, and sent to your customers.
The template below should be customized for your company and industry as step #1 in developing your own corporate deduction management policy. It puts you in a stronger position when a customer takes advantage of your policies. In addition, with retailers implementing new charges and penalties during difficult economic times, trade promotions, shortages, returns, and other allowances must be closely audited before approval.
Note. “Post Audit” deductions, (with invalid rates sometimes as high as 50%) are a very important deduction category, are covered in a separate Post Audit Deduction policy statement to be shared not just with the customer, but also with the outside post-auditors.
These guidelines are meant to help our customers better understand our policies and process for deduction review, documentation, and acceptance procedures for trade promotions or other charges
We honor deductions for trade performance allowances submitted within the following rules:
Deductions for purchase order compliance, pricing errors, allowances, etc., will be accepted if you meet all backup documentation requirements, including invoice and purchase order copies, detailing the specific reason(s) for each deduction.
Subject to our review, we will accept deductions for the quantity, quality, or transportation claims if you meet the following requirements, providing proof for such charge.
NOTE. If the shipping terms are FOB-Origin or your carrier is used, it is YOUR responsibility to pay us in full and then file a claim for shortage, damage, or loss with the transportation carrier, as you have the title and responsibility from the point of pickup. These deductions will not be allowed.
Returns are subject to verification and chargeback, as follows.
Please e-sign as confirmation that you have received these business terms. Thank you.
Your Company’s Executive
Remember, that by partnering with Carixa, you can collect 100% of the revenue rightfully owed to you, eliminate problem reconciliations and write-offs of invalid deductions, and be in the best shape when it’s time for an audit. Clean receivables, accurate billing accounts, and properly matched credits and debits help keep the financial accounts on track for any sized business.
If you want to learn more about automating your AR, contact our experts today.