Glossary of Common Deduction Terms

Accounts Receivable Deduction: A customer deduction, short payment, or claim taken against a supplier’s account, invoice, remittance, purchase order, agreement, or other transaction reference.

ASN / Advance Ship Notice — EDI 856: An Advance Ship Notice (ASN) is an electronic notification sent by a supplier to a customer prior to shipment arrival. In EDI, this is typically the EDI 856 Ship Notice/Manifest, which includes details such as the shipment date, carrier information, purchase order references, item descriptions, quantities, and tracking information. ASNs help customers manage the receiving process and investigate issues related to shortages, compliance, routing, or deductions.

Billback: A customer claim for an allowance, promotion, pricing difference, or other agreed-upon amount billed back to the supplier.

BOL / Bill of Lading: A Bill of Lading (BOL) is a shipping document that confirms goods were received by a carrier for transport and includes key shipment details such as the shipper’s and consignee’s names, carrier information, origin and destination, shipment date, freight terms, item count, pallet count, weight, and any special handling instructions. In deduction management, it is used to validate shortage, damage, and delivery claims by comparing it with invoices, purchase orders, proof of delivery (POD), carrier records, and customer receiving documentation.

Chargeback: A customer deduction or claim, often related to compliance, pricing, shortage, freight, damage, or other issues. Invalid deductions are sometimes coded as chargebacks.

Claim Backup: Documentation provided by the customer to support the deduction.

Closed Deduction Review: A review of deductions that were previously closed, written off, or resolved to identify possible missed recovery opportunities.

Compliance Deduction: A deduction related to failure to meet customer requirements, such as routing, labeling, delivery, ASN, packaging, appointment scheduling, or operational rules.

Credit Memo: A document issued by the supplier to reduce a customer’s balance or clear valid deductions.

Customer Pick-Up / CPU: A freight arrangement where the customer or customer-designated carrier picks up the product from the supplier’s facility or warehouse. In deduction research, CPU shipments may require review of freight terms, pickup records, BOL, carrier documentation, POD, and customer receiving detail to determine where responsibility transferred and whether a shortage, damage, freight, or delivery-related deduction is valid.

Damage Claim: A claim related to product the customer believes was received damaged, became unsaleable, or required disposal, markdown, or return.

Deduction Code: A customer or internal code used to classify the reason for a deduction.

Dispute: A formal, documented challenge to a customer deduction, claim, chargeback, short payment, or adjustment when the supplier believes the amount is invalid, unsupported, duplicate, excessive, partially valid, incorrectly calculated, or already covered by a credit, allowance, agreement, or prior resolution. Disputes are typically submitted through the customer’s required process and should include specific supporting details, such as the claim number, invoice number, PO number, item number, quantity, deduction amount, reason for the dispute, supporting documentation, and the requested repayment amount.

EDI / Electronic Data Interchange: EDI is the structured electronic exchange of business documents between trading partners, such as purchase orders, invoices, advance ship notices, remittance advice, application advice, and other transaction documents. EDI documents can support deduction research by providing transaction detail related to orders, shipments, invoices, payments, and customer responses.

ERP System / Enterprise Resource Planning System: An ERP system is the central business system used to manage financial and operational data. In deduction management, it provides critical information such as invoices, payments, open A/R balances, credit memos, pricing records, shipment references, dispute status, write-offs, and customer account history. ERP data is essential for validating deductions, reconciling customer claims, and supporting deduction workflows, reporting, and resolution.

Invoice – EDI 810: An electronic invoice, known as EDI 810, is sent from the supplier to the customer and includes details such as the invoice number, purchase order reference, item specifics, quantities, pricing, allowances, and the total amount billed. This data is often used to address pricing deductions, quantity discrepancies, and payment differences.

Post Audit: A review performed after transactions have occurred, often months or years later, to identify alleged overpayments, missed allowances, pricing discrepancies, duplicate payments, freight issues, compliance charges, promotional funding issues, or other customer claims. Post audits may be conducted by a customer’s internal audit team or a third-party auditor. In deduction management, post-audit claims should be validated against ERP records, invoices, purchase orders, pricing agreements, trade documentation, credit memo history, remittance activity, and prior deduction or repayment records to determine whether the claim is valid, invalid, duplicate, previously resolved, or unsupported.

POD / Proof of Delivery: Proof of Delivery (POD) is documentation that confirms a shipment was delivered and accepted by the customer or receiving location. It typically includes the delivery date, location, carrier information, recipient signature, and any noted shortages, damages, or delivery exceptions. The BOL verifies what was sent to the carrier, while the POD confirms what was delivered and accepted, so both should be reviewed together for effective deduction research.

Purchase Order – EDI 850: An electronic purchase order sent by the customer to the supplier is known as EDI 850. This document typically outlines the customer’s order details, including items, quantities, pricing, shipping information, requested delivery dates, and order terms. The data included in the purchase order is often used to verify shortages, pricing accuracy, compliance, and any shipment-related deductions.

Purchase Order Acknowledgment – EDI 855: An electronic acknowledgment sent by the supplier confirms whether a purchase order has been accepted, rejected, or accepted with changes. The EDI 855 can be helpful for researching deductions related to changes in order quantity, substitutions, pricing discrepancies, or delivery expectations.

Purchase Order Change – EDI 860: An EDI 860 document communicates changes to a purchase order, including adjustments to quantity, date, item, pricing, or shipping. It helps assess whether a deduction stems from order changes, pricing updates, delivery modifications, or quantity adjustments.

Functional Acknowledgment — EDI 997: An electronic acknowledgment confirming receipt of an EDI transaction. EDI 997 generally confirms that an EDI file was received and syntactically accepted or rejected; it does not confirm that the business content was accurate. It may be relevant when researching whether an invoice, ASN, purchase order acknowledgment, or other EDI transaction was successfully received.

Payment Order / Remittance Advice — EDI 820: An electronic payment and remittance document that may include invoices paid, deductions taken, adjustment details, payment references, and reason codes. In deduction management, EDI 820 data can help identify deductions, short payments, separate remittance line-item claims, and payment application details.

Application Advice — EDI 824: An electronic document used to communicate acceptance, rejection, or errors related to a prior EDI transaction. In deduction management, EDI 824 may be relevant when researching rejected invoices, ASN errors, data mismatches, compliance issues, or transaction-processing exceptions.

Repayment: Money returned by the customer after a deduction is reversed, or a dispute is approved.

Root Cause: The underlying reason that a deduction occurred.

Safety Net Review: A second-pass review of closed, written-off, or previously resolved deductions to identify missed recovery opportunities.

Shared Services Organization (SSO) / Global Business Services (GBS): A centralized operating model that supports functions such as Finance, Accounts Receivable, cash application, deduction management, dispute processing, reporting, and operational support. In deduction management, SSO and GBS teams often handle deduction intake, workflow management, documentation, reporting, and SLA tracking.

Short Pay: A payment that is less than the full invoice amount.

Trade Promotion Deduction: A deduction related to promotional funding, allowances, scanbacks, billbacks, or other sales agreements.  Trade deductions are generally pre-planned, funded transactions.

Valid Deduction: A deduction that is accurate, supported, and owed by the supplier.

Write-Off: A deduction amount cleared from open A/R when it is determined to be valid, unrecoverable, immaterial, or not practical to pursue.

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