Collection Agencies And Deductions And Charge Backs – 4 Of 5

Advice For
In-House
Debt Collection

Col­lec­tion Agen­cies And Deduc­tions And Charge Backs – 4 Of 5

By Dean Kaplan

Putting together a task force to address deduc­tions can be a pow­er­ful tool for ven­dors to reduce these deduc­tions, and col­lec­tion agen­cies can be very help­ful for nego­ti­at­ing with customers

A Col­lec­tion agency may be able to help you with cus­tomers who are abus­ing their use of deduc­tions. Nowa­days, deduc­tions plague many com­pa­nies, and are such an over­whelm­ing issue that paral­y­sis can set in. Aside from track­ing and under­stand­ing the deduc­tions issue, and tak­ing action after they have already occurred, a more proac­tive approach to pre­vent deduc­tions from hap­pen­ing can be very ben­e­fi­cial. This is the fourth arti­cle in a five part series about cus­tomer deduc­tions, and it will focus on pre­ven­tion of deductions.So you have already ana­lyzed your deduc­tions prob­lem, and you’ve iden­ti­fied the types
that are out of con­trol as well as the cus­tomers who are for what­ever rea­son using too
many deduc­tions. The next step is to fig­ure out what is caus­ing the deduc­tions prob­lems that you have. Pric­ing deduc­tions usu­ally hap­pen because the amount your cus­tomer thinks he should be pay­ing dif­fers from the amount being charged on the invoice. Clearly, this is a red flag, and the rea­son for the dis­crep­ancy must be deter­mined. Some­times the dis­crep­ancy may be due to the cus­tomer hav­ing incor­rect pric­ing infor­ma­tion in his sys­tem. This is a sim­ple prob­lem to solve because the customer’s Ven­dor Pro­file likely con­tains all the infor­ma­tion about you, the ven­dor. At large retail­ers, the ven­dor pro­file con­tains a wealth of infor­ma­tion about you: pric­ing, pack­ag­ing spec­i­fi­ca­tions, weights, ship­ment meth­ods, all terms related to the sale, etc. If the customer’s pric­ing assump­tions don’t match yours, this becomes either a train­ing issue of your sales­per­son if he or she is not quot­ing the cor­rect prices at the time of the sale or of the cus­tomer if the pric­ing in the pro­file is sim­ply incor­rect. It may also sig­nal it is time for rene­go­ti­a­tion of pric­ing, terms, etc. No mat­ter the rea­son, it is best to go over the ven­dor pro­file with the cus­tomer in person.

Aside from pric­ing dif­fer­ences, deduc­tions come in many shapes and sizes. Some­times the most effi­cient way to tackle this com­plex prob­lem is to cre­ate a task force within your com­pany which is assigned the job of mak­ing per­sonal cus­tomer vis­its to dis­cuss and under­stand the deduc­tions issues. The task force should be com­prised of rep­re­sen­ta­tives from the credit, sales, dis­tri­b­u­tion, cus­tomer ser­vice, and finance depart­ments (the finance per­son should be involved with the elec­tronic data inter­change). The goal of this task force is to com­pare the customer’s ven­dor com­pli­ance com­po­nents with the company’s nor­mal pro­ce­dures. If areas are iden­ti­fied where the company’s pro­ce­dures are cor­rect, but vio­late the customer’s com­pli­ance com­po­nents, a waiver from the require­ment needs to be nego­ti­ated. Nego­ti­at­ing for these waivers is the eas­i­est way to pre­vent future deductions.

Once nego­ti­a­tions with cus­tomers are com­plete and your deduc­tions poli­cies and pro­ce­dures have been estab­lished, your com­pany should be in com­pli­ance as much is as pos­si­ble with the ven­dor com­pli­ance com­po­nents. This is when you should quickly begin to see a reduc­tion in deduc­tions. Of course, ongo­ing, a cost ben­e­fit analy­sis should be done to see if the time and money nec­es­sary to enforce the poli­cies and pro­ce­dures is in line with the amount saved by fewer deduc­tions. You will never com­pletely elim­i­nate deduc­tions; how­ever, your com­pany must deter­mine what an accept­able level of deduc­tions is and work towards this number.

A Col­lec­tion agency can be help­ful in nego­ti­at­ing with cus­tomers. When your task force has vis­ited its cus­tomers and has iden­ti­fied the deduc­tions that need to be nego­ti­ated, this may be a good time to hire a col­lec­tion agency. Look for an agency that has expe­ri­ence nego­ti­at­ing deduc­tions. Com­mer­cial col­lec­tion agen­cies are often very expe­ri­enced in this type of nego­ti­a­tion. Since they are experts in deal­ing with retail­ers and com­pa­nies in gen­eral, they under­stand the rel­e­vant laws and they are armed with many tried and true nego­ti­a­tion strate­gies. Their debt col­lec­tors know how to talk with retail­ers. They under­stand the need for deduc­tions, but they also know how to rede­fine deduc­tions which have become vague and use­ful as a profit cen­ter for retail­ers. The fee struc­ture of a com­mer­cial col­lec­tion agency is usu­ally a per­cent­age of the amount col­lected and is con­tin­gent on suc­cess­ful debt col­lec­tion, mak­ing it an attrac­tive option for many vendors.

Deduc­tions are not going away. They are a real­ity for any com­pany sell­ing to retail­ers. The more sig­nif­i­cant you are as a ven­dor, the more likely it is that you will be able to nego­ti­ate bet­ter ven­dor com­pli­ance com­po­nents. Regard­less of your size; how­ever, the best way to dis­cuss deduc­tions with cus­tomers is through reg­u­lar per­sonal visits.

Click here if you are ready to go on to the final arti­cle in this five part series Col­lec­tion Agen­cies And Deduc­tions And Charge Backs – 5 Of 5, which will be posted 2/22. This arti­cle will fur­ther into strate­gies for man­ag­ing deduc­tions. Click here if youmissed the ear­lier arti­cles in this series 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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