Heightened Awareness
Like so many other companies that sell to mass merchants and department stores, Heyman Corporation, an apparel manufacturer that produces branded clothes like OshKosh B'Gosh, Disney and Warner Brothers, had its fair share of deduction issues. The investigation process of tracking deductions at the company was draining resources and continuing to climb at an alarming rate.
In order to properly handle and heighten the awareness of its deduction issues, Heyman created a new position titled Compliance Coordinator, responsible for reviewing all compliance manuals and Web sites, communicating the customer requirements to each department within the organization and maintaining a customer compliance database. The Compliance Coordinator is also responsible for alerting top management when a requirement cannot be met and working with a customer to secure a mutual resolution. John Kuhn, chief operating officer of Heyman Corporation says this is the first critical step to addressing deductions because it generates similar attention that other business areas receive, like the management of inventory or receivables. "Companies that cannot look at the overall profitability of a customer relationship, including the impact of deductions and the cost of compliance, and do something about it, are at a significant disadvantage," says Kuhn.
Cashing Out
Soon after creating the new position, Heyman took a long, hard look at its cash application time and realized it was spending eight to 16 hours applying one day's cash. Like most accounting systems, Heyman's accounts receivable software could not effectively handle the barrage of customer deductions and because of these deductions, the company could not properly process electronic lock box or EDI payments. In response, Heyman tapped into a Cash Application Module from 9ci in order to reduce its cash application time to just two hours per day. Eighty percent of the electronically received remittances require no human intervention and automatically feed the accounts receivable software and deduction control system.
Each deduction Heyman receives might contain multiple reason codes and department responsibilities. After briefly using another deduction system, Heyman once again turned to 9ci, this time utilizing its iTradeVision solution, a fully integrated suite of applications that includes cash application, deduction management, promotion planning/trade fund management and a business intelligence analysis suite. Now, a coding system from 9ci's Deduction Control Module segregates deductions by department. As deductions are received they are properly coded and automatically entered and passed on to the respective department for research and approval.
Final Analysis
Once Heyman reeled in its cash application time and found a way to properly track its reductions, the company needed the ability to find the root cause of its deductions and view the information they gathered in an easy to understand format. 9ci's Business Intelligence system provides Heyman with accurate figures on customer profitability, customer deductions as a percentage of sales, shortages and claims as a percent of sales by customer and other "what-if" scenarios Heyman devises. After one year with the system being fully operational, the results started to show immediately. The amount of staff required to handle the deduction process was significantly reduced. Deductions are now processed and categorized within 24 hours of receipt. Monthly meetings to review reports and benchmarks are now attended by all departments and managers to discuss current and future issues. In addition, Heyman has reduced its cash application time by 85 percent, increased its invalid deduction collections by over 300 percent and now boasts a 41 percent reduction in customer compliance deductions across all departments.
As these results indicate, scrutiny of the deduction resolution process streamlines internal and external communications that ultimately yield financial rewards. G CG