Collection Agencies And Deductions And Charge Backs – 3 Of 5

Advice For
In-House
Debt Collection

Col­lec­tion Agen­cies And Deduc­tions And Charge Backs – 3 Of 5

By Dean Kaplan

If your com­pany is deal­ing with more and more cus­tomer deduc­tions, hir­ing a col­lec­tion agency may pro­vide some needed debt col­lec­tion relief to the credit depart­ment.
Every com­pany needs to have a way of mea­sur­ing the mag­ni­tude of deduc­tions being taken by its cus­tomers. Com­pa­nies also need to be able to deter­mine what types of deduc­tions are prob­lems so that inter­nal issues can be iden­ti­fied and improve­ments made. This is the third arti­cle in a five part series about deduc­tions and charge backs, and will focus on how to keep track of deduc­tions and look for patterns.

There is no magic to track­ing deduc­tions. Basi­cally, your com­pany or the credit depart­ment needs to break­down the giant cat­e­gory of deduc­tions into a list of spe­cific types of deduc­tions. Com­ing up with this list will require a care­ful exam­i­na­tion of the deduc­tions that are being applied by cus­tomers. If your sys­tem of track­ing deduc­tions is man­ual, you will need to set up a sep­a­rate file for each deduc­tion type. When a deduc­tion comes in, place a copy of the check into the file. If your sys­tem is auto­mated, you will need to set up stan­dard deduc­tion codes and train all staff that input data into the sys­tem to use the appro­pri­ate code when applic­a­ble. The beauty of the auto­mated sys­tem is that it will enable you to design reports which will pin­point prob­lem cus­tomers and/or prob­lem deduc­tion types which could sig­nal a prob­lem within the company’s oper­a­tions which needs to be fixed.

If you keep all of your records man­u­ally, be sure to set up a well-organized fil­ing cab­i­net or sim­i­lar sys­tem of orga­ni­za­tion for records per­tain­ing to deductions.

Whether you gen­er­ate your reports man­u­ally or auto­mat­i­cally, these data are invalu­able. With­out this infor­ma­tion, your com­pany has no hope of min­i­miz­ing or elim­i­nat­ing deduc­tions. The time spent to develop the track­ing sys­tems and reports is time well spent.

A key to gen­er­a­tion of mean­ing­ful, accu­rate deduc­tions track­ing reports lies with the qual­ity and con­sis­tency of the assign­ment of the codes. This is a train­ing issue, and requires the credit depart­ment to train all employ­ees who assign the deduc­tions codes when cus­tomer remit­tances are received. Most large retail­ers today are very good at iden­ti­fy­ing the deduc­tions they are tak­ing on their remit­tance check. Retail­ers also track deduc­tions so they will likely have a stan­dard set of deduc­tions codes that they use. When the credit depart­ment sets up a new cus­tomer file, this should be one ele­ment that is put into the file. It also might be a good idea to develop a cen­tral note­book within the credit depart­ment which con­tains each customer’s deduc­tions codes. This way, when a remit­tance comes in, the per­son inputting the data into the sys­tem (or into the man­ual track­ing sys­tem) can apply the cor­rect inter­nal deduc­tions code which matches the customer’s deduc­tion type.

One final area can be help­ful when track­ing deduc­tions and look­ing for pat­terns: deduc­tion notes. Cus­tomers may add notes to the remit­tance infor­ma­tion explain­ing deduc­tions. The credit depart­ment may add deduc­tion notes when inputting remit­tance data into the com­puter. These notes can be sent to the cus­tomer when backup infor­ma­tion relat­ing to the deduc­tion is needed or they can be routed to depart­ments within the com­pany for val­i­da­tion. In the case where the deduc­tion is proved valid, the deduc­tion notes can be attached to the credit memo used to clear the deduction.

All of the data gen­er­ated by deduc­tions can be col­lected and ana­lyzed pro­vid­ing the com­pany or credit depart­ment with invalu­able infor­ma­tion. If a goal of your com­pany or the credit depart­ment is to min­i­mize or elim­i­nate deduc­tions, it is essen­tial to set up the sys­tems to col­lect and process these data. In this case, infor­ma­tion is def­i­nitely powerful.

The next arti­cle in this five part series will deal with how to pre­vent deduc­tions. Click here if you are ready to go to Col­lec­tion Agen­cies And Deduc­tions And Charge Backs – 4 Of 5. Click here if you missed the pre­vi­ous two arti­cles Col­lec­tion Agen­cies And Deduc­tions And Charge Backs – 1 of 5.

The Kaplan Group is a bou­tique col­lec­tion agency spe­cial­iz­ing in large (over $10,000) debt col­lec­tions due from busi­nesses. Founded in 1991, the com­pany has a stel­lar rep­u­ta­tion (A+ rat­ing with the Bet­ter Busi­ness Bureau) and is rec­og­nized as one of the lead­ing col­lec­tion agen­cies for results on large and com­plex mat­ters.

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