It isn’t unusual to find that rebate agreements cannot be fully represented within ERP systems and spreadsheets, resulting in disparate sources of information being stored within ERP systems, spreadsheets and even people’s heads! This management headache is multiplied when you consider these 3 major risks:
- lack of control over profitability, with poor understanding of true margin at point of sale, and roughly estimated true product costs feeding into profit calculations
- missed revenue opportunities, with sales lost on price due to a lack of true margin visibility at point of sale
- compliance issues (particularly relating to IFRS 15 arising from not having a completely transparent and auditable method of profit reporting).
When we have implemented DealTrack, our own complete solution for rebate management, we have seen our customers move to a situation where they can (at last) clearly identify the rebate income they should claim. Whilst this appears as a major milestone in most implementations, the best is yet to come…
Once the system is in place to record and manage rebate claims, the next phase can begin.
There are three elements to this second phase:
- Procurement, using the detailed information provided by the system, can negotiate smarter deals in the future
- Sales people can be given appropriate* visibility of rebates and margins to avoid:
- missing the opportunity to earn rebates
- charging too low a price because rebates have been estimated leading to reduced profit
- charging too high a price (again because of a lack of visibility) resulting in lost sales
- Financial controllers now have the visibility to be confident about financial audits, accrual calculations and profit reporting
*by “appropriate” we mean that businesses can control who sees which confidential trading agreement information.
For more information about the benefits of a Rebate Management System and how to go about choosing one, read our Buyers' Guide to Choosing Rebate Management Software.