Wednesday, January 9, 2013

Unauthorized Deductions or Short Pays

Unauthorized Deductions or Short Pays

There are numerous excuses why a customer short-pays an invoice. Some are legitimate such as defective product. Other deductions are not legitimate – taking discounts outside of the discount period is the most common example. Other reasons include:

-          Returns not accounted for;
-          Incorrect invoices, prices, discounts, and potential allowances
-          Customer having cash flow, sales, or financial problems
-          New staff at customer’s business, and
-          Quantity or weights of goods

The challenge businesses face when dealing with unauthorized deductions or short-pays is that many departments become involve – sales, credit, customer service, shipping-and that the responsibility for solving the problem, which usually ends up being your company’s problem, rests with no on in particular. Therefore, when a customer complains to a sales representative for instance, about an invoice, and the sales representative doesn’t tell anyone and credit department gets involved 60 days later, a relatively small problem may become much larger. Another common occurrence is a discount deducted from the payment. How much time and effort can be expended chasing $100.00? The customer, however, who is doing this purposefully, gets away with it once, which becomes habit-forming.

Through our affiliate, Credit Process Advisors (, PCR maintains a staff of trained credit and contract professionals to help manage this process, therefore freeing your own staff to be much more productive. PCR will work with you to develop a policy for unauthorized deductions.

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