Rebate deals are a big part of every trading relationship—if you haven’t got a good handle on them, you could be missing out on massive opportunities.
Rebate deals hold a lot of power in trading relationships.
Suppliers can use them to influence the behavior of their trading partners, and distributors can use them to inform their purchasing decisions. Plus, they’re a valuable source of revenue for both parties involved and can make a big impact on the bottom line.
Who are the commercial team? And what role do they play?
The commercial team within any business is concerned with winning new business, exploring new avenues of activity and seeking opportunities that the business can exploit in its bid to develop and grow. The growth of a business relies heavily on its commercial team, which must have a professional and efficient sales team that knows how to look for new business opportunities, not neglecting trading partners that they have already managed to achieve and gain their trust.
However, the importance of rebates puts significant pressure on your commercial team. They need to be able to confidently set up deals and agreements, negotiate the terms involved, and communicate them to the rest of the company.
Although, too often, commercial teams don’t have the tools available to manage rebate deals effectively, and it can lead to distributors and suppliers missing out on major benefits across their business.
Here are four benefits you could be missing out on if you don’t have a strong handle on your rebates—and some advice on how your commercial team can make them happen.
1. Smarter trading
In the early stages of a trading relationship, when commercial teams are negotiating on the initial rebate terms, they want to be able to get the best deal possible for their business. But often, it’s not just about getting the best rate, or even the highest amount of return—it’s incentivizing the right behavior and making sure it’s going to work from a bigger commercial picture.
That means the commercial team needs as much information as possible to fuel their negotiation strategy. In short, they need to be able to:
- See how last year’s rebate deals performed
- Forecast how the new deals they’re creating will likely perform
- Know the context around how much spend the business currently has with the trading partner
With this information to hand, the commercial team will be better able to secure an agreement that adds significant value and fits with the overall business strategy.
2. Data Confidence
The commercial team have the responsibility of collecting all the data involved in a rebate deal and organizing it into a location that other teams can access. This data includes everything from which products are part of the agreement, to the thresholds that will trigger a higher level of rebate.
Too often, rebate data is spread across fragmented systems, and sometimes even across paper documents and emails. This not only creates unnecessary manual effort for finance teams that need to access the data, it also makes it risky for them to rely on. If any of the information is outdated, it means any forecasts or accruals will be incorrect—which can set off a chain reaction of accounting issues.
But when rebate agreements are stored in an accessible, centralized location, finance and commercial teams can easily access the data, be confident it’s accurate and up-to-date, and know that they have the same understanding of the deal as the trading partner.
3. Better opportunities
Strong rebate management doesn’t just impact the success of finance teams—it can also bring major benefits to sales and purchasing teams.
For purchasing teams on the distributor’s side, clear visibility of rebate agreements in place—and a clear understanding of what each one involves—can better inform their decisions. For example, if the purchasing team knows they are close to reaching a rebate threshold, they can decide to buy more of a certain product and earn a higher rebate.
Improved visibility benefits sales teams on the supplier side, too. If a product isn’t selling as well, they can agree a new deal with the distributor to incentivize them to buy more of the product—ultimately creating advantages for both parties.
4. Stronger relationships
With greater visibility of rebate agreements, and a strong understanding of what’s involved with each deal, there’s a lower risk of disputes that could damage or even jeopardize a relationship.
Rebate management software like our own DealTrack allows commercial teams to take greater control of the rebate agreements, as they offer a dedicated, centralized platform to collect and store all rebate data. They also help suppliers and distributors ensure they have the same understanding of every deal agreed.
Using a rebate management system, distributors have a clear idea of the rebate thresholds they’re aiming for and when they’ve passed them, and suppliers can easily validate the claims made. Plus, if the commercial team stores all the deal information in a rebate management system, each party has an accurate resource to fall back on if there’s ever any doubt.
How can commercial teams reap the benefits of effective rebate management
With the right rebate management tools, your commercial team can transform the way they negotiate and manage rebate agreements for your business, and ultimately strike more profitable deals. And the benefits won’t just be seen in your revenue—they’ll be seen in your supplier relationships and the performance of your teams, too.