Deduction Management
Deductions are amounts that a customer owes but does not pay. For example, if a customer has been invoiced for $1,000, and a payment of $900 is sent, that customer is said to be taking a $100 deduction.
Customers commonly take deductions when they do not feel the amount they are expected to pay is appropriate. If a customer places an order for 10 cases of an item, and 5 of those cases were damaged or spoiled upon receipt, the customer may pay only half of the original invoice amount.
Customers will also take deductions in lieu of expected rebates. For example, a customer participating in a marketing program is due a rebate of $100. Rather than wait for a credit, the customer may take a $100 deduction on an open invoice, and instruct the company to use the expected rebate amount to make up the difference.
Depending on the company, the volume of deductions that are claimed by customers can be large. For example, a company that distributes fresh produce (and is therefore subject to numerous customer claims of spoiled product) may handle many deductions on a daily basis. If a company feels that a customer's deduction is not valid, there may be additional discussions between the two parties before a resolution is achieved. As a result, the process of handling customer deductions can be a significant part of a company's accounts receivable procedures.
Although the standard cash receipt tools in Microsoft Dynamics NAV provide some basic capabilities such as the ability to apply a customer payment to a partial invoice amount, these features do not address more complex deduction scenarios. For companies that require a greater level of flexibility when dealing with deductions, the deduction management functionality is better suited to assist users in entering, managing, and resolving deductions.
The following table describes a sequence of tasks, with links to the topics that describe them. These tasks are listed in the order in which they are generally performed.
| To | See |
|---|---|
| Get an overview of the principles and definitions that govern the deduction management functionality in Microsoft Dynamics NAV. | About Deduction Management |
| Configure a special customer record for the purpose of managing unallowed deduction amounts, and learn about how the program uses this customer in the deduction management process. | Deduction Management Customer |
| Learn more about the way deductions are posted towards G/L accounts | Deduction Posting |
| Apply a payment to one or more customer ledger entries, and create deductions when the payment is less than the amount of the selected ledger entries. | How to: Apply Payments |
| Enter values and settings for deductions that are created during payment application. | How to: Enter Deductions |
| Record the results of discussions between you and a customer as to how disputed deduction amounts will be resolved. | How to: Resolve Unallowed Deductions |