CHAPTER 5: CASH APPLICATION, DEDUCTIONS, AND DISPUTE MANAGEMENT
Process for Disputes Disputes may be uncovered by a collections person calling the customer on a past due invoice, or by reviewing the customer’s accounts where they see a pattern such as constantly taking unearned discounts. Then there is the deduction, which is a dispute communicated by the customer via a deduction from their payment. In the internet age, when orders can be placed electronically, contact about short payments may be the first person-to-person interface the customer has with your company. Dealing with the customer is a balancing act in which you have to weigh collecting the monies you are due while recognizing the importance of good customer relations. Many companies have a policy that “the customer is always right,” even when they are wrong. You do not want to push so hard that you lose a customer that you do not want to lose— especially when statistics show that in most cases the customer’s deduction was correct.
Addressing disputes involves the following steps:
1. Research: Gather all the documents required for the particular dispute or deduction. The policy and procedures manual should specify what documentation is needed for each type of discrepancy (for example: non-delivery or short shipment would require a proof of delivery; pricing errors would require contracts or the order acknowledgement). Once the documents are gathered, review the information to make sure the invoice was correct in the first place. In an automated workflow system, once the system recognizes a mismatch between the payment and invoice, it will present all the pertinent documents in a package, saving hours of retrieving paper documents. Often the system will also send a message to the customer, notifying them of a short pay and letting them know they will be getting a call to resolve it. 2. Call the customer: Depending on the type of deduction, the customer may need to supply evidence of the dispute. For example, if the product was damaged, send a picture of the damage to aid in deciding if the product should be returned before credit will be issued, or authorization given for the customer to destroy the goods. This can reduce cost by eliminating shipping charges. 3. Escalation: If your documentation proves the customer owes the amount they deducted or the past due invoice, the accounts payable person may not have the authority to approve the transaction. Ask who you need to talk to, which in most cases will be the person who placed the order. At this point you may want to also engage the sales rep. 4. Work with the billing department: If the research proves the customer was right, the documentation will need to be presented to the billing department so they can issue the appropriate credit. If subject to VAT/GST regulations, the billing department will need to void the original invoice in its entirety and issue a new invoice. In the U.S., a credit can be issued for the amount of the dispute. If it is a small amount, it might be company policy to write it off. The only downside to this policy is that it is very difficult to see the audit trail, though it does reduce the cost of doing business. 5. Follow-up: Staying on top of disputes until they are resolved is crucial to the bottom line. Having a system to code, measure, track, and schedule next steps will help resolve discrepancies in a timely manner. Letting receivables age can put financial statements in jeopardy. A short pay that the customer will never pay is not a legitimate accounts
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THE ACCOUNTS RECEIVABLE SPECIALIST CERTIFICATION PROGRAM E-TEXTBOOK
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