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Bectran Product Team
I
December 5, 2025
7 minutes to read
A vendor shows you their cash application system matching a payment to an invoice with a small, clean discrepancy. The system highlights the difference, suggests a reason code, and posts automatically. They call this handling short pays with AI.
Your reality looks different. You have customers sending single payments covering 400 invoices with 65 distinct line-item deductions: damaged goods, unauthorized returns, promotional allowances, freight compliance violations requiring three-way matches between BOLs, carrier invoices, and original POs.
The demo handled a simple math error. The question that matters is whether the system can handle a true deduction with multiple variables. There is a massive chasm between identifying that payment doesn't equal invoice and resolving a complex business dispute. Vendors conflate the two. Credit Managers know better. If your solution can't distinguish between them, you're buying an expensive exception queue.
Credit teams evaluating Cash Application technology share the same concern: the system might handle simple short pay invoices, but when it comes to true deductions with multiple variables, the skepticism is warranted.
The market is flooded with tools that can read a check amount and match it to an open invoice. That is table stakes. The real pain comes from the variables.
A true deduction isn't a missing ten dollars. It signals a breakdown in the supply chain, a pricing error, a master data disconnect, or a strategic trade agreement. When a system claims it can handle these variables without showing exactly how, healthy skepticism is the only appropriate response.
The disconnect between what technology providers demonstrate and what Credit Managers actually need lies in the architectural difference between a transaction and a dispute.
To a basic OCR (Optical Character Recognition) engine, a short pay is simply: Amount Owed minus Amount Paid equals Variance.
To a Credit Manager, that variance is a story. Is it a Trade Deduction (an agreed-upon marketing spend)? Is it a Non-Trade Deduction (shortage, damage, pricing)? Or is it a Compliance Fine?
Most out-of-the-box ERP and Cash App solutions treat the variance as a math problem. They want to force the math to balance. However, the Credit Manager needs to capture the reasoning (the variable). If the system cannot parse the remittance advice to extract the specific reason code provided by the customer and map that customer-specific code to an internal reason code, the automation fails. You are left with a generic Partial Payment status that requires manual intervention to classify.
The variables often live outside the payment file.
A system that only looks at the bank feed cannot handle true deductions because it lacks half the data. If the software cannot triangulate these three data sources automatically, it can only flag problems, not solve them.
Even if an external Cash App solution identifies the deduction correctly, the ERP system might reject the nuance. Many legacy ERP configurations force users to clear the invoice and create a new debit memo, or leave the invoice open with a residual balance.
If the Cash App software tries to push a complex deduction (splitting a $500 short pay into $300 tax variance and $200 damage) into an ERP that only accepts a single reason code per transaction, the integration breaks. This forces the AR team to manually key in the split, negating the promise of automation.
If you are evaluating a new system, or stress-testing your current one, you need to move beyond the demo. You need a framework to test the variables.
Does your system operate at Level 1, or is it ready for Level 4 complexity?
To ensure your system can handle a true deduction, you must test it against these specific variables:
A single payment line item might reference an invoice, but the deduction applies to multiple SKUs.
Test: Can the system apply the cash to the invoice header but split the deduction into three separate dispute cases (one for price, one for quantity, one for tax)?
Sometimes a customer deducts a lump sum from a check that isn't tied to a specific invoice. They simply pay $10,000 less and say "Q3 Rebate."
Test: Does the system force you to short-pay a random invoice to balance the check? Or can it create a standalone deduction on the customer account while fully paying the invoices listed?
Global companies often face deductions where the invoice is in USD, the payment is in EUR, and the deduction is calculated on the exchange rate difference.
Test: Does the system handle FX gain/loss automatically, or does it flag the exchange variance as a short pay?
Customers often cite a "debit memo" number on their remittance that doesn't exist in your system.
Test: Can the system recognize that this reference number is the customer's internal document, not yours, and create a placeholder dispute attached to the payment?
Solving for true deductions protects revenue and improves operational efficiency.
Short pays that are not categorized correctly sit in a generic bucket. By the time the team gets around to researching them, the window to dispute the claim (often 30 to 90 days) has closed. The company is forced to write off valid revenue simply because the process was too slow. Handling the variables upfront prevents profit leakage.
If a customer owes you $1M, but $200k of that is valid trade spend that hasn't been processed, your credit exposure is actually only $800k. If your Cash App system leaves that $200k as past due on the aging, you might hold orders unnecessarily. True deduction handling cleans the aging, allowing Sales to keep selling.
Nothing frustrates a customer more than being dunned for a deduction they have already explained. If the Cash App system fails to capture the variable (the reason code) and the collector calls the customer asking why they didn't pay, the customer will resent the incompetence. They provided the data. Your system ignored it.
If you are currently reviewing Cash Application technology, do not settle for the standard demo. Use healthy skepticism to drive your evaluation.
The "True Deduction" Checklist:
Automation is supposed to handle the complexity, not just the easy stuff. If a system can only handle the happy path, it's a tool, not a solution. To truly modernize, you need a partner that understands that in B2B credit, the exception is the rule.
Don't look for a system that balances the check. Look for a system that understands the story behind the numbers.
Evaluating cash application automation? Bectran's deduction management handles multi-line disputes, customer-specific reason code mapping, and autonomous validation of claims against your ERP data. See how Bectran's AI Cash Application works.
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