Naturally you hate the thought of leaving any money on the table. But at times it’s smarter to write off a customer deduction.
It’s a standard cost/benefit analysis: Devoting staff time and effort to reclaim a nominal deduction just doesn’t make sense. Major efficiency drain.
But how do you know where to draw the line?
There’s no magic number, but the average “nuisance” deduction companies write off is between $30 and $40.
Finding your threshold
To determine whether that’s a good threshold for your business, consider these factors (besides the time and money it takes to fight the deduction and adjust your bookkeeping) according to credit expert Michael Dennis:
- how long your current backlog of outstanding deductions is
- how long it’ll take before staffers can get to the deductions
- your current staffing levels in Credit and Collections, and
- how helpful other internal departments are in researching deductions.
And remember this reality check: The odds aren’t in your favor. More than half the time deductions are taken, the customer is at least partially correct.