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How to achieve financial compliance with better rebate management

Posted by Andrew Butt on July 23, 2019 16:51:00

Over the years we have seen many accounting scandals which means there are now more calls from organisations like the Financial Reporting Council (FRC) for “Boards of retailers, suppliers and other businesses to provide investors with sufficient information on their accounting policies, judgements and estimates arising from their complex supplier arrangements”.

Financial compliance requires your business to adhere to their financial regulations that are in place. If they fail to do so, they will face harsh regulatory fines, at the very least. This alone makes an investment in a rebate management system worthwhile. In order to achieve financial compliance, these organizations need to take a closer look at their systems and processes for managing rebates. 

Issues that can arise from poor rebate accounting include: 

  • Inaccurate rebate payment accounting
  • Poor visibility of your rebate deals — no tracking or audit trail or transparency of deals.
  • Departments trying work it out for themselves — limited financial oversight on types of rebate.
  • Misrepresented numbers in reports due to no system to help check the numbers — wrong information innocently fed into spreadsheets .

Don’t rely on your suppliers when claiming rebates

We’re seeing more and more evidence of companies who rely on their suppliers or vendors to tell them what rebates they should claim. This is surprising given that rebates can be the largest contributor to profit for buying groups and a significant percentage for companies in the building materials, retail and wholesale distribution sectors.

This may raise a few Financial Directors’ eyebrows, but given the complexity of vendor rebate deals in some organisations and the lack of robust systems to track purchases against those contracts, it’s no wonder that some companies struggle to understand what supplier rebate claims they should be making.

Take a look at your internal rebate accounting processes

It can be a real challenge to calculate rebates using spreadsheets and gain an accurate picture of what should be claimed. It also takes a lot of time to manually track all of the data necessary to ensure financial compliance and this data can also be error prone as numbers get missed entirely. The repetitive nature of manual data entry for rebates can lead to simple mistakes or worse yet, can put an organization into bankruptcy.

Everyone involved in the rebate accounting process recognises the importance of robust rebate management and the potential negative hit on the bottom line but simply lack the right tools. However with a rebate management system this will provide robust governance practices that reduce the risk of manual error and strengthen internal controls should be music to the ears of Financial Directors and it means they can be well on their way to achieving financial compliance.

Implement the right technology - a rebate management system

As well as facilitating accurate rebate claims, a rebate management system contributes positively to supplier relationship management. By providing absolute clarity on what is owed by whom companies have seen improved supplier relationships and a better base from which to model and negotiate new agreements.

An automated rebate management system like Enable provides finance and purchasing teams with the information necessary to inform their suppliers about accrued rebates rather than the other way round. 

It ensures financial compliance by allowing for complex trade agreements to be handled correctly and put into an electronic system, this information is easy to enter and comes straight from purchasing teams once a contract has been negotiated.

Our rebate management system helps businesses manage complex trading agreements involving retrospective payments, such as rebates, retrospective discounts, royalties, purchase income and back margin. Plus it has the following features:

• A library of trading agreements in a structured data format
• Approval workflow for internal staff
• Signoff workflow for trading partners
• Online turnover submissions for trading partners
• Import of transactional data from internal systems and trading partners
• Calculation of retrospective income earned and payments due
• Financial Accruals for retrospective earnings
• Automatic invoicing of retrospective income payments due
• Customer and Product level net margin calculations
• Reporting and analysis, including year-on-year and category based reporting

Financial compliance is a growing concern for any regulated industry and as the number of regulations and standards increase, you need a rebate management system that can address this ever evolving environment. With real time access to information and automation, it’s easier than it has ever been for an organization to ensure that financial compliance challenges are being not only met, but exceeded.

To learn more about how Enable can help you achieve financial compliance, why not sign up to a free trial?

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Topics: Rebate Management, Compliance, Rebates, Finance, Supplier Rebates