Missing out on claiming manufacturer’s rebates is like negotiating a higher price with your suppliers. It simply shouldn’t happen!
There are many examples in the building materials business where, instead of agreeing an up-front discount, discounts are given in the form of rebates based on actual volumes purchased. For the supplier, this fosters brand loyalty and means that margins are given away only in return for true purchase volume. For the buyer this gives the potential to drive up margins — but only if their sales forecasts can be achieved.
Having agreed to a contract that includes a rebate for volume purchases, the buyer (eg the builders merchant) has a number of things to keep track of, including:
- Are sales matching the agreed volume over time in the contract? Do we need to increase sales of particular items in the current period in order to meet agreements? Or, have we already met our target for this period and would rather push sales into the next period if at all possible? Are there opportunities to up-sell and cross-sell in order to meet targets?
- Have we accurately recorded sales across all channels and claimed the rebates that are due?
- Have we recorded accounting accruals appropriately? Where the rebate is in the form of “free” product are we recording stock-holdings correctly?
- Do we have an audit trail to prove purchases against contract in support of our claim?
We can see just from the examples above, that there are at least three different parties within the builders merchant who need to work together in order that the company profits from the agreements they have in place:
- The buyers who negotiate the agreement
- Sales people, account managers, counter staff and website managers who have the power to influence sales
- Financial and administrative staff who ensure that records are maintained and rebates claimed
Added to that, is a layer of complexity in terms of the variety of rebate agreements that can be in place at any one time.
- To encourage more sales there may be tiered incentives for higher volumes.
- To launch a new electrical item or other piece of equipment, there may be incentives for product swaps.
- As new packaging is introduced, multi-buy discounts and other incentives can be used to shift the old product and launch the new version.
The number and complexity of different deal types is limited only by the imagination of those who negotiate contracts.
But the ability to replicate all of those different types of agreement within your contract management system or the vendor rebate module of your ERP system may in fact be limited. As a result, many building materials businesses we have spoken to resort to monitoring sales and rebates in spreadsheets. In a multi-channel, multi-site business collating and acting on information in spreadsheets is clearly a huge challenge, open to error and reconciliation problems.
Is there an alternative for managing rebates in builders merchants?
Builders’ merchants Wolseley and Grafton Merchanting found their existing systems let them down. Having missed opportunities to achieve better margins, and grappled with the administrative burden involved in their old processes, both companies decided to look for an alternative.
They (along with several other well known names) chose the DealTrack Rebate Management System.
This software manages contracts, automates processes and handles all the complexities involved in tiered discounts and retrospective trade agreements.
DealTrack rebate management software meets the needs of builder’s merchants where other systems can fall short:
- Currently there are over 90 different deal types available to choose from as standard within the software. Added to that is the ability to customise agreements, meaning that buyers negotiations are no longer limited by the capabilities of the software.
- DealTrack rebate management software provides the opportunity to harmonise volumes, assortments and suppliers across the whole organisation and then negotiate deals, calculate rebates, manage accruals and cash collection across brands, depots and/or channels.
- DealTrack rebate software can be used to manage the distribution of rebates between branches. This is an interesting feature that gives builders merchants the power to incentivise the right behaviours at branch level.
- Where appropriate, DealTrack can be integrated with existing ERP systems eg for financial management.
- DealTrack handles multiple units of measures and conversions between them, so that goods may be receipted in units of measure different to that in which the deal was negotiated.
Solving rebate accounting problems by simply getting control of margins and profitability (though for many, that in itself is a big leap forwards) isn’t actually the end goal. Once users have implemented DealTrack and reaped those rewards, the next exciting phase starts.
DealTrack’s carefully thought-out workflow, alerts and reporting provides users with the information needed for smarter trading: selling in a way that maximises margin.
Then, to come full circle — back to the point of having rebates in the first place — DealTrack helps businesses create mutually beneficial trading agreements, enabling both parties to grow market share.
To learn more, read our proposition: “Putting the merchant in the driver’s seat”. In it you’ll find an outline of the typical problems we have witnessed within building materials suppliers and how we solve them with DealTrack.
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