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Microsoft Dynamics AX: Deduction Management Workbench

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Deduction Management in Microsoft Dynamics AX

A common issue that many Microsoft Dynamics AX users face is the inability to keep track of the amounts a customer deducts off an invoice. However, with the new Deductions Management Workbench in Microsoft Dynamics AX 2012 R3, this is no longer an issue. Users can now properly track, record and categorize deductions. Whether you are currently taking advantage of this feature or not yet utilizing it, this short guide will help you gain more value from using Deductions Management in Dynamics AX.

There are many reasons why a customer will deduct from the amount owed on an invoice, and this often happens without any reason being provided at the time payment is received. As you can imagine (or have experienced), this creates a complicated problem for cash management and collections when determining how to deal with short pays. The end result is that companies spend a large amount of time researching the reasons for these deductions. Additionally, uncategorized and unaccounted for deductions create a messy Accounts Receivable (A/R) Aging report.

Some examples of deductions include: 

  • Wrong item shipped
  • Quality issue or defect
  • Incorrect price or price dispute
  • Late arrival
  • Damaged shipment
  • Handling/administrative fee
  • Downtime incurred
  • Inspection costs from quality problem
  • Discount or rebate taken
  • Wrong quantity invoiced or shipped

How Dynamics AX Helps With Deductions Management

The Deduction Workbench within Microsoft Dynamics AX is an optional utility in the Trade Allowance Management module that allows a business to manage deductions by allowing users to appropriately organize, track and record based the Deduction Type. A business can use the Deduction Workbench to match deductions to open credit transactions, split deductions, deny deductions and write off deductions. To get started, each business will need to define the types of deduction journals, reasons for deductions and parameters around approval levels. For example, one parameter could be to allow for write-offs less than $25, but require approval for anything over this amount.

The deduction journal is a ledger posting. Effectively, this posting moves the deduction off of the A/R for the customer and into a balance sheet account. This balance sheet account serves to provide the company a list of deductions in question that are pending review. The utility itself provides the detail behind these deductions and the reason why any deductions are pending review and approval. This helps to keep the A/R clean and current, while offering a utility to organize deductions and track the status of customer payment for unauthorized deductions.

Tracking Deductions in Dynamics AX

Deductions can be tracked by Sales Order, Invoice, or Reason Code. This information is often not known until research is completed. Since a deduction can come in one large lump sum, Microsoft Dynamics AX allows the user to fill in this information at a later time. A lump sum deduction can be split into smaller parts to approve some deductions while denying others. Denied deductions will return to the customer account for payment. Approved deductions can be written off to a specific ledger account based on the type of deduction. Microsoft Dynamics AX also enables the user to process and update many deductions at once, which helps to control active deductions and avoid having to spend time reconciling each one individually.

The ability to process a deduction and monitor the status of a deduction gives managers beneficial visibility into the history of a customer account. Deductions can also be offset to “End of Period” promotions related to trade allowance management agreements.

Why use the Deduction Workbench in Dynamics AX?

The Deduction Workbench within Microsoft Dynamics AX 2012 R3 provides businesses with the flexibility needed for capturing deductions, organizing them in a way that facilitates collections and minimizing the time required to process deductions. This helps to keep the A/R clean and current, while offering a utility to track reconciled deductions as well as the unauthorized deductions that still require payment.

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