Deductions Mastery Framework: Maximizing Profitability
Our framework is designed to help you manage and understand deductions in a structured way, ensuring that you can implement tangible strategies to improve your business's profitability. The three components that make up the Deductions Mastery Framework include: categorization, insights, and root cause analysis. This post will take a closer look into the "Insights" portion of the framework.
Deductions are a common challenge in the industry. You receive purchase orders, send invoices, and expect a certain payment amount, only to find deductions that you didn’t anticipate. This often leads to confusion and time-consuming processes to understand the reasons behind these deductions. Once you have efficiently categorized deductions, the next step is understanding the data in order to gain actionable insights.
Four Keys to Success in the Insights Phase
1. Review Trends
Identifying trends and outliers is critical. Highlighting areas of focus helps in understanding what's going on in your business. For example, if logistics fees are a significant portion of your deductions, that’s an area to investigate.
2. Drill Down into the Data
Using a deduction list, filter and sort data to drill down into specific categories and months. This helps you apply the 80/20 rule, focusing on the biggest drivers of deductions.
3. Analyze the Data
Identify the deductions that are driving the numbers. Review the backup documents to understand the reasons behind these deductions. This deep dive allows you to gain insights into what's causing the costs.
4. Diagnose
Add notes or subcategories to your deduction list to better understand the specific reasons behind deductions. Create folders to save backup documents for future reference. This will help in performing a root cause analysis.
To illustrate the framework, let's consider a report showing monthly trade deductions. By highlighting significant deductions and categorizing them, you can start to see patterns. For instance, if a logistics fee is a major deduction, drill down to find out if it's due to late fees or other issues. By understanding the root cause, you can take action to reduce these non-working trade dollars and allocate them to revenue-driving activities.
Implementing this framework can provide immediate benefits. However, it does require time and effort. As your business grows, managing these processes manually can become overwhelming. That's where TrewUp comes in. We digitize and categorize backup documents, providing you with detailed reports and best practices by category.
By following this framework, you can gain valuable insights that will help you maximize profitability in your business. Our hope is that you can implement these strategies right away and start seeing results.
Looking to streamline and automate your deductions process? Connect with us at TrewUp to discover how our software system can transform your approach, saving you time and boosting your business's profitability.
Stay engaged, stay informed, and let’s master deductions together!
