Lifting the lid on supplier rebates

Posted by David Hunt on April 20, 2016 11:48:23

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.

From our research, it's clear that the lack of a rebate management system is the number one challenge for companies rather than an unwillingness to be proactive in claiming vendor rebates from suppliers.

What we have seen is not sloppy management processes, but a real challenge to work through spreadsheets and gain an accurate picture of what should be claimed.  Everyone involved in the process recognises the importance of robust rebate management and the potential negative hit on the bottom line but simply lack the right tools.  

Andrew Butt — MD of Enable highlighted the problem recently in a webinar attended by senior financial and commercial directors from a range of businesses, and this was endorsed by Andrew Curwen of XL Vets.

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 contracts.

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

The risks highlighted in 2014 by Tesco’s ‘slip up’, have put rebate accounting firmly in the financial authority’s spotlight.  This adds weight to the need for more robust systems to deliver the information needed to satisfy auditors. 

So there is significant upside for using a rebate management system … improved profitability, cash flow and financial compliance to name a few but is it right for YOUR company?

During our recent webinar Andrew Butt, outlined the type of companies that would most likely benefit from the DealTrack Solution. Typically, if your annual rebate income is higher than $5 million then the ROI should be achievable within 6-12 months, and we have worked with companies with rebate incomes of up to $1.2bn, who have seen a ROI within 6 months or less.

DealTrack rebate management system helps businesses manage complex trading agreements involving retrospective payments, such as rebates, retrospective discounts, royalties, purchase income and back margin.

DealTrack provides a structured approach to managing these types of agreements, including:

  • 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

To learn more about DealTrack and how better management of complex deals can lead to improved margins, click below to listen to this 45 minute recorded webinar.

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Topics: Rebate Management, Contract Management