Vendor rebate module: Requirements specification

Vendor rebate module: Requirements specification

You may be reading this blog for one of a number of reasons, e.g.:

  • Your ERP system doesn’t have a vendor rebate module
  • Your ERP system has a vendor rebate module but before implementing you want to draw up a requirements specification to check on the match to your business needs
  • Your current vendor rebate module needs some work to meet your business needs
  • You have more than one ERP system operating within your company, but need one module that sits across them all to manage vendor rebates across the whole business / group

Those ERP systems that do have vendor rebate modules are generally designed to capture information from deals that clearly impacts the margin and net price of stocked items. But not all trading agreements are that simple. We are seeing marketing agreements whereby a claim can be made for marketing assistance that is not directly related to sales volume. We see deals where rebates are based on selling combinations of product, or the reward isn’t provided by a claim but by additional stock, and many types of rebates that are linked to performance targets. What we often see is that the requirement is not for a solution that is product / price centric but a DEAL-CENTRIC solution.

What do we mean by “Deal-centric”?

A Deal-centric system is one where the entire information contained within the deal is systematised (not just stored as a PDF!) and where that information is used to feed not only pricing information, but financial accruals, alerts for sales when margin is about to be missed, and more. By focusing on the deal, and tracking information at the deal level, we see the following benefits:

  • All transactions related to a deal are visible and can be audited
  • Rebates available within a deal can be monitored, and appropriate alerts put in place
  • Rebate claims are never missed

However, that’s not the end of the story….Let’s take a step back and reflect on why we have rebates in the first place. Rebates are not designed to withhold discounts and cash flow ‘til a later date.

Rebates are a pricing instrument to encourage growth.

Rather than providing favourable prices on the promise of future business, manufacturers use rebates to reward their customers for the ACTUAL sales volume. Your supplier rebate module therefore needs to capture up to date purchases and sales information from all parts of your business in order to calculate the current levels of rebate accruing AND to determine the current net net price at any point in time. Without this management system for rebate accounting, sales people are often left in the dark when it comes to agreeing prices with their customers. We have even seen situations where they have to estimate the impact of rebates before quoting a price to a customer! In summary, then, there are three big questions to ask yourself when considering what you need out of your vendor rebate module:

  • Can I model ALL aspects of every deal and CONTROL and monitor every aspect of every deal?
  • Will the vendor rebate module help me to provide a COMPLIANT process when auditors look to trace how figures for rebate accruals or “rebate in stock” have been derived?
  • Does this supplier rebate module provide functionality to help me secure the best margins and GROW my business profitably?

For a 48 point checklist of the functionality you probably need if you’re dealing with complex trading agreements that involve rebates and retrospective discounts, download our buyers' guide.

Andrew Butt

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