A Primer On Deduction Processing Via Order To Cash Software
Deduction Process In Accounts Receivable
With the rapid digitalization of business, there has been an increased integration of order-to-cash (OTC) digital solutions into accounting processes. OTC automation tools provide comprehensive digital solution for companies, especially in accounts receivable: from orders, to invoicing, to payments, to customerservice. One of the powerful functions of an OTC Softwaresolution is its centralization of data within companies deduction process.
A deduction is reduction of existing amounts due from customers, as result of returned goods, discount prices, or any other agreed-upon fom of compensation. The deduction process can be complicated and difficult to manage because it requires multiple teams, such as sales, accounts receivable, operations, customerservice and finance, to get involved. OTC software can be boon to this multifaceted effort. When in place, the OTC technology provides safe central location to compile data related to deductions, allowing companies to boost bottom lines with better visibility into deduction payments.
This article offers OTC practitioners step-by-step guide to implementing deduction processes, so they can more accurately record, apply, and analyze deductions as they navigate their accounts receivable systems.
Step 1: Map Invoices and Sales Orders
The most basic step in establishing deduction process is to match invoices and sales orders. This process is key for accurate deduction tracking and applying customer credits, which allow the company to quickly identify the proper deductions for customer or product. The OTC software allows company to “map” customer invoices to sales orders using customer and product data. This mapping process creates continuity in the customer experience, as it automatically generates accurate deductions so customer credits can be correctly conferred.
Step 2: Create Deduction Argument
Once the invoices and sales orders have been matched and credits have been assumed by the customer, it is necessary to determine the actual cause of the customers deduction payment. The OTC Softwareshould include “Create Deduction Argument” function. Here, users can enter information about the cause of the deduction and attach supporting documentation, as required. Creating deduction argument for each deduction payment ensures data accuracy and enables efficient management.
Step 3: Identify Deductions
In this step, companieshould review the customer deduction claims to make sure they are identified, accurate, and valid. OTC software allows the customer to enter dedicated deduction records for each deduction, along with its own reference ID, giving the business greater control over the deduction payment process. dedicated customerservice team should review the claim records to ensure they are compliant with company policies.
Step 4: Resolve Deductions
To resolve deductions, customerservice must reconcile customer records with the customers deduction claim. OTC software helps facilitate this task, by providing comprehensive platform to capture and keep customer deduction data, while identifying the route of the discrepancy. The company can then resolve the customers deduction payment in just few clicks, if the data proves valid.
Step 5: Review Deduction Report
As each deduction is either approved or denied, the OTC software produces deduction report, allowing users to review the payments, along with associated documents. This report can be used to quickly identify discrepancies in the deduction data. It also tracks substantiation for all deductions by customers, which proves useful for further reconciliation.
Step 6: Collect Full Payment
If customers deduction is approved, the customers full payment must be collected for that invoice. OTC software allows for collection of such payments, as well detailed payment tracking. Thus, users can keep running total of their accounts receivable, as every deduction payment is accurately recorded.
Conclusion The use of an OTC software provides an efficient and effective way to implement deduction process in accounts receivable. It ensures that deductions are properly identified, evaluated, and recorded. It also ensures that companies have visibility into all customer payment information, and can make well-informed decisions based on customer payment data. By using OTC technology, companies can make deductions part of their normal accounts receivable process, while safeguarding customer data accuracy, customerservice portfolios, and financial statements.
