All 23 Cash Application questions
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Accounts Payable & Receivable › Cash Application

What are customer deductions (chargebacks) and how are they managed?

Intermediate

Answer

Deductions are amounts customers withhold from payment for claimed reasons—damaged goods, pricing errors, promotional allowances, or shortages. They're managed by logging each deduction, categorizing valid vs invalid, resolving with the customer (credit if valid, collect if invalid), and analyzing root causes to reduce recurrence.
Real-world example A retailer deducts $2,000 for a promo allowance; AR validates it against the agreement, approves a credit, and closes the deduction.

Common follow-ups: How do you distinguish valid from invalid deductions? | Why do root-cause analysis on deductions?

Collections & Bad Debts Credit Control Cash Application
All 23 Cash Application questions