Deduction management

Deductions are amounts that a customer owes but does not pay. For example, if a customer is invoiced for $1,000 and sends a payment of $900, that customer is taking a $100 deduction.

Customers commonly take deductions when they believe the amount they are expected to pay is not appropriate. If a customer places an order for 10 cases of an item and five of those cases were damaged or spoiled upon receipt, the customer may pay only half the original invoice amount.

Customers also take deductions instead of waiting for 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 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 believes a customer's deduction is not valid, additional discussions between the two parties may be needed before resolution is achieved. As a result, handling customer deductions can be a significant part of a company's accounts receivable procedures.

Although the standard cash receipt tools in Microsoft Dynamics 365 Business Central provide some basic capabilities (such as applying a customer payment to a partial invoice amount) these features do not address more complex deduction scenarios. For companies that require greater flexibility when dealing with deductions, the deduction management functionality is better suited to help users enter, manage, and resolve deductions.

The following table describes a sequence of activities, with links to the topics that describe them. These activities are listed in the order in which they are generally performed.