Prevent what you can, manage what you can't: the role of technology in deductions and dispute management.(SELECTED TOPIC)

The Holy Grail of accounts receivable (A/R) is generating the perfect invoice. It's an impossible goal in the absolute sense, but a good standard to aspire to. After all, many deductions and disputes that occupy the bulk of collectors' time arise from short-pays that are the result of charges that shouldn't have been on the invoice in the first place. It's not unusual for as many as 40 percent of all outgoing invoices to be either flat-out wrong or inconsistent with what the customer expects, which can have a major negative effect on a company's measured days sales outstanding (DSO).

So how do you structure an environment that is a likely breeding ground for the elusive "perfect invoice"? An automated solution can enable A/R departments to take a proactive, rather than reactive, approach to deductions and disputes. This newfound power has the potential to not only improve cash flow, but to enhance and streamline customer relationships. Technology is only a part of the equation--companies also need the right processes and buy-in in place to find the root causes of receivables disputes. They must make sure that staff are trained properly, so that employees in sales and marketing, order entry or inventory know their actions directly impact the validity of future receivables.

"A/R is the final resting place for all process and procedure problems that may exist in the company." says Chuck Kylander, Director of Credit for Louisiana Workers' Comp. Indeed, bridging the department gap is one of the key benefits of an automated A/R solution that incorporates workflow and business intelligence (BI) features to make sure all departments are on the same page. Technology solutions today promote and facilitate better internal communication, in addition to providing a means to better understand each customer. This kind of company-wide, customer-specific visibility allows A/R to uncover the root cause of disputes and deductions and enables proactive "plans of attack" to address existing receivable issues.

Common examples of preventable disputes are pricing errors, freight and tax issues. Regardless of your industry, you could be open to price-related disputes. There are a slew of factors that can cause price related issues, especially in companies where the pricing structure is very complex. Some of these possible issues are:

* Invalid or blanket purchase orders (POs)

* Invoices sent out twice, accidentally

* Invoices sent for the wrong pricing amount, or for the "right" amount--but accompanying a known short-shipped order