RETAILERS TAKE BILLIONS OF DOLLARS IN UNAUTHORIZED DEDUCTIONS

Deductions Management Helps Companies To Recover Their Bottom Line

Dun & Bradsreet RMS-- Lehigh Valley, PA ---At $50,000 in unauthorized deductions—a drop in the bucket in the world of high stakes retailing, a business with a typical profit margin of 5% would need an additional $1 million in sales just to break even. Double the deduction, double the break even figure—a staggering $2 million. And it often doesn't stop there.

Not surprisingly, unauthorized deductions, once written off as a bothersome cost of doing business, are no longer being ignored. With cash flow and Day Sales Outstanding (DSO) often at stake, manufacturers are turning to companies such as Dun & Bradstreet with expertise in deductions management and recoveries, to help resuscitate their bottom line.

"It is not uncommon for mass retailers to take unauthorized deductions," said Michael Kronenfeld, chief financial officer, Dun & Bradstreet Receivable Management Services (D&B RMS). "It cuts across industries. Clothing; food; entertainment; health and beauty; and toys and games all experience unauthorized deductions."

"By our estimate, 6% to 10% of business to business deductions are unjustified," said Steve Parks, director, D&B RMS. "It adds up pretty quick." Types of deductions taken include: discounts, proof of delivery, price protection, concealed shortages, co-op, freight, returned merchandise and post audit.

"We recommend companies stick to the terms of their contract," said Parks. "In addition, we recommend they establish a strict authorization process for their segment, maintain a clearly defined advertising allowance and create an ongoing communication process with customers. Time is also extremely important where deductions are concerned."

According to Kronenfeld, at a client's request D&B reviews their deductions portfolio and provides a detailed statement listing outstanding deductions. "Our goal is to assist our customers in the timely resolution of the deductions and equally as important, provide customer service in reconciliation issues with their customers," he said. "Both will usually increase cash flow."

"Often, deductions can effect a company's overall receivables process," said Rich Kramer, RMS assistant vice president, outsourcing. "If not properly managed, they snowball." ###

Dun & Bradstreet Receivable Management Services Dun & Bradstreet RMS is the largest business-to-business receivable management company in the world. For more information visit our website, www.dbrms.com