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Effectively managing invoice deductions is difficult

What if it didn't have to be?

Learn how technology can help make the process efficient, predictable, transparent, flexible, and timely.

February 12, 2019

A blog post by Jason McClain, managing director, Deloitte Risk and Financial Advisory and Ed Johnson, principal, Deloitte Consulting LLP.

What if the deductions process wasn't such a headache? What if your business could maximize employees' time and efforts while simultaneously bettering your bottom line with a more efficient invoice deduction process? Advanced technologies are changing the game, but let's talk about why this process is so time-consuming, expensive, and difficult in the first place.

Deductions routinely involve little to no supporting documentation. The process of reviewing those deductions is labor-intensive and lacks any type of analytical insight. Unpredictable and inaccurate invoices are all too common, and even worse, they slip through the cracks frequently. Detecting fraud and errors is even more difficult. Companies might write-off the deductions without gaining accurate information because it isn't worth damaging the relationship with the customer by addressing what seem to be erroneous claims. Lastly, in a recent study, we found that employees working with invoice deductions spend over 50 percent of their time completing mundane, administrative tasks that take away their energy from where it should be focused: selling.1

Each reason mentioned above—and there are others that we didn't mention—is a real challenge in regard to the invoice deduction protocol of today's businesses. Effectively managing deductions is critical to maximizing margins. And each of those challenges is a direct hit to your margins.

Let's speed things up!

Let's create smarter solutions and increase productivity.

Let's streamline the process by having machines do the tedious, automated work and humans focusing solely on the strategic tasks.

What does that look like?

A deduction claim is received from the customer. Immediately after receiving the claim, any missing information is automatically requested rather than your employee looking it over and manually requesting it. The validity of the customers' claim is analyzed automatically, and probability thresholds are assessed. The majority of the claims that meet the criteria are approved instantly and automatically with little to no human intervention. Cognitive-engine validation technology flags deductions that need further review and sends them up the line to be reviewed manually. This same technology provides data-driven insights that assist the operator in making the right decisions via dashboard alerts. In turn, this culminates into avoiding surprises with a proper reserve and accrual methodology in place.

So, not only does the process of managing invoice deductions become simpler and more effective immediately, but this technology can also help prevent future deductions by actions taken upstream.

Here is some more insight into solving the problem, and how:

  • Automation: By using advanced algorithms to predict, or "score," the validity of a deduction, it is possible to determine right now how many claims could auto-clear with minimal human interaction. Those that don't are passed along for further review.
  • Intelligence: Artificial intelligence (AI) capabilities strengthen fraud detection based on prior experience and current parameters. Then they identify unmerited deductions and predict future occurrences, significantly reducing margin leakage.
  • Integrated forecasting: Built-in analytics and scenario planning can improve the forecast accuracy of deductions and help create an initial hypothesis of product/customer/store hotspots to see where the root causes of your problems are.
  • Customer relations: New operating models identify process inefficiencies, which clear up bottlenecks and help maintain the best relationship with your customer as deduction validity becomes increasingly clear.
  • Cost-efficient: Achieve more accurate results at lower manpower costs. Employees are more productive and work smarter, more strategically, with dynamic, transparent thresholds and sophisticated auto clearing.
  • On-going advantages: Identify the root causes of a deduction penalty and prioritize fixes, and then issue action items that can prevent them from happening in the future.

This can lead to better efficiency, predictability, transparency, flexibility, and timeliness. You can find out today how much this approach can affect your business. Commercial terms, logistics, transactional data, and policy data can be put into an assessment engine. Using analytics and the insights they garner, we can size the issue by determining the expected deductions as a percentage of sales and what could be saved.

Reach out to us and start a conversation. Let our team of data scientists, industry specialists, auditors, and technologists—all under one roof—help your organization save time and money, and create significant sustainable value.

Effectively managing invoice deductions can be difficult, but it doesn't have to be.

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