What’s that Deduction for?

Author: 8th and Walton

deductions

Tracking deductions can be a headache, but you can reduce the pounding in your temples by following a few simple steps.

First, remind yourself that knowledge is power. Just sighing and swearing and moving on won’t help you avoid fewer deductions in future, but identifying the causes of the deductions can reduce the number of deductions you have to deal with.

Second, take a deep breath. Tighten and relax your shoulders and then roll them a few times. Get a glass of water. Go into the process relaxed and think of it as a chance to stretch your skills, strengthen your position, and get tougher.

In the right frame of mind? Good. Now look at the most common causes of deductions:

  • Cash discount
  • Price Overcharge
  • Substitution Overcharge
  • Concealed Shortage/Damage
  • Merchandise Billed but not shipped
  • Carton Shortage – Freight bill signed short
  • POD – Proof of delivery
  • Carton damage – Freight bill signed damaged
  • Allowance not given

You can see that these causes center on three things:

  • Pricing agreements
  • Shipping errors
  • Damage

Or that’s how it appears. Shipping errors can certainly be a source of deductions, from shipping showing up on an invoice when there was a prepaid shipping agreement or a backhaul deal, to pallets which have been shrinkwrapped and require extra unloading time. Pricing agreements which are not reflected in the invoice can also lead to deductions, and damaged products — whether identified on delivery or later during unpacking — will naturally add costs.

But that’s not the whole story. Sometimes deductions are based not on real differences between the agreed upon pricing and the goods received or the invoices sent, but on accounting errors.

For example, a cash discount can only be applied to an entire order, not to some of the goods delivered. If a shipment includes both goods subject to a cash discount and goods from another order, you’ll end up with a cash discount on the whole order.

Here’s another example: if there is a line item allowance on the purchase order which does not match what’s on the invoice, you can end up with surprise deductions.

In fact, any discrepancy between the purchase order and the invoice can trigger deductions. Tracking down the issue to the source can allow you to resubmit the invoice and settle the issue in your favor.

8th & Walton’s Accounting, Invoicing, and Deductions course gives you all the details on dealing with deductions. You’ll learn to research and resolve deductions, to understand and take charge of the Walmart payables system, and much, much more.

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