The deduction management process consists of two phases: payment application and deduction resolution.
Payment application
Deductions are initially generated when you apply payments to customer entries in the Payment Application page. If you indicate that a payment should not be applied to the full ledger entry amount, a deduction is automatically generated for the difference. For example, if you select a $500 invoice for payment application but indicate that only $300 will be paid, the program automatically creates a $200 deduction line.
When a deduction is created, you must assign a type to it. A deduction's type determines the record to which posting occurs. There are three deduction types:
Unresolved deductions: deductions for which a dispute over the deduction's validity exists between the customer and the company. These deductions are resolved at a later time after further discussion between the two parties. You can post them to a special customer record set up for unallowed deductions, or leave them on the original customer record and tag them as "unresolved."
Writeoff deductions (typically taken because a customer believes the full invoice amount should not be paid. They are posted to general ledger accounts.
Accrual plan deductions) taken in response to accrued rebate amounts due to the customer. They are posted to accrual plan records.
You must also indicate whether you want to allow Anywhere Mobility Solutions writeoff or accrual plan deductions created. You cannot allow unresolved deductions.
When the payment is posted, deduction amounts are posted to different accounts depending on their type. You can transfer unallowed deductions to the ledger for a customer record set up solely for the purpose of storing unallowed deduction amounts. Although not an actual customer, this record is necessary so that the unallowed amounts can be posted to customer ledger entries. This could create the issue that the actual disputed amount is moved away from the original customer for the time being. Payment reminders do not reflect this movement.
You can also leave all unresolved deductions on the original customer. On payment reminders, these amounts are then flagged as "unresolved" and can be filtered out when creating the reminders.
Deduction resolution
Depending on the circumstances surrounding a disputed deduction, it can take time before the company and customer reach a resolution. If a deduction amount is particularly large, resolution may be achieved for partial amounts of the total deduction.
Reconcile unallowed deduction amounts in the Deduction Management - Resolution page. Select an existing unallowed deduction entry, then indicate the type of resolution you want to apply. If the company decides to allow the deduction, post it to either a writeoff G/L account or an accrual plan. If the company decides that the customer must pay the deduction amount, return it to the customer's ledger as a regular open amount.
You can enter resolution lines for a partial amount of an unallowed deduction. This lets you resolve different parts of a deduction amount in different ways. For example, if the customer pays half the deduction amount and the company writes off the other half, create two separate resolution lines for the unallowed deduction.