Deduction Management Checklist

Deduction Management Checklist

10-steps you should follow to improve your foodservice deduction balance

Is your deduction balance always increasing? It doesn’t have to.

What are foodservice deductions?

• Reductions for existing invoices applied by customers
• Originally focused on events directly associated with the invoice they were applied against (terms, quantity shipped, corrections, damaged goods, pricing errors)
• Over the past 20 years, customers in all segments now “deduct” any dollar amount they deem to be “due”

Deductions can be a headache when not properly managed! Break the cycle.

Click here: Foodservice Deduction Checklist PDF

Top 10 Tips for an Efficient Deduction Management Process

• Invest in an organized contract management tool
  • Enable easy communication with customers about deals
  • Decrease delays on claim settlement
  • Decrease discrepancies between allowed vs requested

• Create standardization for invoice submission
  • Send a standard letter to customers with details on where to send invoices
  • Letters should request that the customer include contract name / ID for reference
  • Reduce the time you spend chasing down required backup via standard invoice submission guidelines

• Enter deductions in your internal ERP system
  • Enter all information at the distributor house level (this creates an easy flow for matching deductions against billbacks and claims)
  • Reduce time spent researching open deductions

• Set up an automated matching process
  • Match open deductions with claims having the same customer number, invoice number, and invoiced dollar amount
  • Reduce time spent matching open deductions to claims

• Track customers that don’t properly submit invoices
  • Identify the customers and work with them to update their process to submit billbacks
  • Get any outstanding billbacks submitted
  • Increase your speed and claim processing turnaround

• Automate the deduction process
  • Clear authorized deductions in a timely manner (authorized deductions are easy to clear through automation)

• Build a standard repayment letter
  • Ensure you have a way to go after money due to an over-deduction or invalid deduction
  • Provide the customer with details as to what was invalid from the deduction they took
  • Increase your bottom line and decrease the amount of money you’re writing off

• Track rebillable deductions
  • Track invalid deductions – when a repayment letter is sent to you, you have control
  • Request outstanding invalid deductions by sending and resending repayment letter follow ups

• Implement a write-off process
  • A thought out and defined write-off process will help clear aged and invalid deductions that can’t be verified
  • Ensure you have good reporting to keep things on track
  • Increase your ability to correct distributor behavior going forward

• Set a deduction balance goal
  • Identify a balance goal so you can measure your success
  • Identify red flags in your process if your balance goes above limit
  • Increase accountability of your process

Success from Smucker’s ▶ 📽