The threshold for defining deductions as under-tolerance varies across organizations and is influenced by technological capabilities, data maturity, and analytical competence. Additionally, the deduction team’s geographical location may impact the cost-to-process threshold. Under-tolerance deductions typically range from nominal amounts, such as $10, to higher thresholds exceeding $400. While these deductions may not individually pose significant financial risks, collectively, they can impact operational efficiency and contribute to a cluttered deductions management process. Therefore, organizations must adopt a pragmatic approach to under-tolerance deductions, accepting them as-is to avoid unnecessary costs and administrative burdens.
Deductions within organizations can be categorized into two distinct buckets based on their impact and strategic significance in the deduction management process:
High-value or significant deductions
These deductions are of substantial monetary value and impact the organization’s bottom line. The deduction management team prioritizes them due to their impact on financial metrics and profitability. High-value deductions require meticulous attention and dedicated resources for resolution and closure. The focus is addressing and resolving these deductions to minimize financial losses and optimize cash flow. High-value deductions commonly include: • Instances of pricing discrepancies • Promotional allowances • Large-scale invoicing errors Organizations use advanced analytical tools and dedicated teams to manage and mitigate the impact of these deductions.
Low-value or under-tolerance deductions
Low-value deductions have a lower monetary impact and may not justify the resources and effort required for resolution. These deductions fall within the under-tolerance threshold, where the cost of processing them may outweigh the benefits derived from their resolution.
3
© 2024 Fractal Analytics Inc. All rights reserved
Made with FlippingBook - PDF hosting