While accounts receivable plays an important part in ensuring healthy cash flow within a business, it can be challenging to stay abreast of all customer accounts within a growing enterprise. This is where your accounting software comes in. But, what happens when a client settles their account underpaying by a small amount? Payment discrepancies are unavoidable, but with the right policies in place, your accounting software can take care of this for you. Understanding how deductions and chargebacks work within NetSuite will help your accounting team deal with this efficiently and in a way that doesn’t cause a mess in the financial records of your business.
Understanding NetSuite deductions and chargebacks
NetSuite SuiteApp offers a solution to manage the laborious process of manually following up on payment discrepancies.
Deductions refer to the short settlement of an outstanding invoice. The difference between the amount due and the amount paid is considered an account deduction. Deductions can occur for various legitimate reasons that include rebates for volume sales, but deductions need to be investigated for legitimacy.
Chargebacks refer to the amount that a customer is charged back for expenses that have not been agreed upon. A chargeback can also apply for expenses where the deduction claim has not passed the legitimacy test for being written off.
In addition to deductions and chargebacks, it is important to also understand receivables-write-offs. As its name suggests, write-offs refer to when a legitimate outstanding amount, or deduction, is written off to close the invoice. Write-offs usually take place within the bounds of a predefined small balance threshold.
Accounting teams that rely on manual methods to reconcile and process such discrepancies and transactions run the risk of errors that may negatively impact their books and submissions to the IRS. Fortunately, NetSuite offers the functionality to automate this.
Within the NetSuite SuiteApp you will be able to:
- Efficiently settle payment deduction discrepancies
- Handle chargebacks
- Automate write-offs
NetSuite’s Deduction and Chargeback Management functionality allow you to create a deduction management record where you can track all customer deductions or payment discrepancies, as well as document reasons for the deduction. The software also offers an automated process for chargebacks. When a chargeback occurs, NetSuite will automatically create the necessary invoice, mark it as accounts receivable, and record it in the relevant financial records. The deduction and chargeback feature in NetSuite helps minimize errors and saves businesses time. Whether or not they are tax deductible depends on the nature of the chargeback and the reason for it.
Find out more about how to manage Deduction and Chargebacks in NetSuite.
Setting up internal policies that adhere to regulatory parameters for write-offs of deductions is important to keep your business compliant and to ensure that accounting teams understand the bounds within which deductions may be permissible. Failure to have this set up correctly can cost businesses in revenue and potential penalties.
The best way to approach this is to consult with an accounting expert that understands how to handle deductions and chargebacks and also knows how to set the feature up in the SuiteApp for your business. Once it has been added to your account, it is built-in and automated, which means that your accounting team would not need to be burdened by this going forward.
In addition to handling deductions, chargebacks, accounts receivable, accounts payable, and accurate financial recordkeeping within your business, NetSuite is also highly functional in its ability to provide the insights you need to take growth-focused business decisions.
At Fusion, our NetSuite experts are skilled at setting the software up for businesses in all industries. NetSuite is highly customizable and can be used for businesses that have experienced rapid growth or for those who intend on scaling their business. Consult with one of our experts today.
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