Most businesses have a choice of 4 types of system to manage their trading agreements, but that doesn’t mean each one is the right fit for every business. We explore all options below.
1 — Your core ERP system
Basic ERP systems do not cope with vendor rebates very well at all. Some ERP systems do have bolt-on vendor rebate modules. They tend to provide some flexibility but in a very complex environment the standard module is often not up to the job and incapable of modelling all the product / price / branch / margin combinations that might be required. As a result, many companies still need to resort to extracting data into spreadsheets so that they can calculate rebates.
An ERP vendor rebate module may be fixed in the types of rebates that can be modelled, requiring extensive configuration or modification to enable all deals to be replicated in the system. That work could be worth the investment, of course, but only there are a limited number of new types of rebate and that new type of rebate or retrospective discount is going to be used often.
The fundamental question is: Should your ERP system control the types of agreement that you can negotiate? Or should procurement have flexibility to agree the most advantageous contracts for the business?
Clearly, it should be the latter.
If you are considering specifying requirements for modifications to your ERP software, you may come across these problems
- Actually being able to specify what is needed to cover all eventualities
- The cost of modifying standard ERP software
- The cost of maintaining the modification and enhancing it as new trading agreements are created
2 — A procurement or contract management system
The second option is a procurement or contract management system that is bolted onto your ERP system. These are often focused on improving processes and providing e-procurement functionality and workflows for approving purchases. As such they have similar problems to ERP systems in that they do not tend to provide functionality to address the complex rebates and retrospective discount structures.
3 — Spreadsheets
Despite being the ultimate flexible tool, spreadsheet avoidance is usually high on the priority list for any head of procurement, IT or Finance, for several reasons:
- Manual processing of data is prone to error
- Lack of visibility across all parties
- Difficult to synchronise inputs from buyers, contracts and accounts
- Difficult to collaborate on decision making
- Easy to have duplicate spreadsheets and lose track of the single version of the truth
- Security and audit concerns
4 — An Integrated Rebate Management System
A specialist Rebate Management System that is integrated with your ERP system(s) is the ultimate approach to managing complex trading agreements.
To find out more about the capabilities of Rebate Management Software, download our buyers checklist. This provides a great review of:
- the need for a systemised approach to rebate accounting
- the alternative solutions
- a buyers’ checklist for choosing a suitable system