Customer deductions require special attention and handling for those who deal with accounts receivables. Until they are credited or refunded to the customer, deductions such as freight, pricing, and sales tax remain on the AR ledger.
Surveys have shown that 80% of deductions are valid and should be credited promptly. Some companies have systems in place for a quick resolution, while others allow deductions to remain on the books too long — resulting in inflated accounts receivables. Also, if a company’s credit-line is tied to its A/R, inflated receivables can adversely affect the amount of money available to the company.