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How building material suppliers can drive profitable growth

Posted by David Hunt on July 25, 2017 08:23:00

Profitability for building materials suppliers is often very closely dependent on the amount of rebate they can negotiate and claim and many businesses across the building materials industry tell us that the sheer volume of categories and the complexity of rebate deals means that administering rebate claims is a mission critical element of their building and construction business which can be the difference between a decent year and a great one.

100% of our customers have identified previously missed rebate claims after implementing our rebate management system and we have even seen cases of missed rebate claims amounting to 7 or even 8 figure sums.

And yet across the globe, building materials suppliers are making the same mistake of relying on antiquated methods such as manual spreadsheets to take care of this complex and crucial part of their company’s bottom line.

Why are those in building and construction missing out on claiming all rebates due?

  1. Reliance on building material suppliers to calculate rebate due
  2. Rebate isn’t calculated in detail
  3. New product introductions by the building material supplier are missed
  4. Disparity between the supplier agreement and the information in the finance system
  5. Deals do not perform as expected
  6. Deals are not clear, or not completely agreed
  7. Commercial team has no visibility of the building material supplier products in your system
  8. Commercial team lacks historical information for negotiations
  9. Missed rebate thresholds
  10. Lack of visibility of available rebate at the point of sale

So that’s a lot of potential pitfalls that can lose a builders merchant money. Furthermore, even when companies feel they have none of the above issues, we have still managed to find at least 4% of annual rebate income that has not been claimed.

What other issues are building material suppliers facing?

  • Too many people involved in the rebate process

One of the overriding issues that make it hard for rebate claims to be efficiently handled is the familiar ‘too many cooks’ scenario. Most building and construction businesses who deal with rebate claims have several people involved in the process including members of the commercial team who negotiate contracts that include vendor rebates; buyers who place orders under those contracts; people responsible for sales; pricing rebate accountants who work out what to claim and, of course, the building materials suppliers themselves. That’s a lot of moving parts that can fail or simply have an off day.

  • Using the wrong or outdated system to manage rebates

Building material suppliers that use ERP systems already have a way of recording contract information and a vendor rebate module or elements of purchasing software that allow for rudimentary recording of rebates owed. But our own research has found that no ERP system provides all of the functionality that is typically required by companies who trade with complex rebate deals. They simply lack the granular level of functionality needed to carry out detailed matching of actual purchases and sales against those supplier agreements.

  • Complex rebate deals

Profitability for building material suppliers is often very closely dependent on the amount of rebate they can negotiate and claim. No surprise then, that many businesses across the building materials industry tell us that the sheer volume of categories and the complexity of rebate deals means that administering rebate claims is a mission critical element of their business. 

The rebate accounting function alone can make the difference between a good and a great financial year. Yet this is the scenario we come across very often when we talk to building materials suppliers across the world:

  • Whilst no business wants to grow without controlling profit margins, we are surprised by the number of rebate accountants who still rely on simple spreadsheets to monitor and manage those mission-critical rebate claims!
  • Procurement teams are challenged with making better deals across thousands of categories using information pulled together from disparate systems.
  • Building material suppliers are reluctant to increase rebates as they lack good information too!

What can our rebate management system do for building material suppliers?

Building material suppliers need the right rebate management system that offers a complete solution that covers all aspects of your trading relationships from contract to claim and should have the built-in ability to consolidate with any kind of system. A rebate management system is data hungry, requiring information to be passed between it and sales, contracts, purchasing, goods received, invoicing and other elements of your financial systems.

Rebate management systems  provide varying degrees of sophistication — from ERP modules that provide some functionality for tracking rebate accruals to Enable which provides functionality above and beyond getting rebate claims right. Enable’s Rebate Management System is, focuses on systemising all the processes around managing and tracking contracts that contain rebates.

However, the end result isn’t just accurate rebate accruals. Our rebate management software delivers much more than that, it helps businesses grow profitably by accurately tracking rebate accruals and automatically raising rebate invoices. Over the longer term, Enable helps companies grow profitably by aiding their ability to negotiate better deals. We know that better supplier relationships lead to better deals.

Our rebate management system features:

  • Supplier agreements are systemised without loss of flexibility

In other words, no matter what level of complexity is involved in your supplier contracts, our rebate management software will enable you to reflect the agreement within the system and be able to track every action taken against that agreement.  No more agreements hidden away in filing cabinets. In reviews carried out by several organisations, no other software provides the level of flexibility that is provided by Enable.

  • Flexible approval workflows

Supplier agreement approvals are obtained online through an inbuilt document workflow that date and time stamps every approval. No more disputes over who agreed what. Workflows can be set up to include people within and outside your organisation with permissions appropriate to their role in the business.

  • Supplier portal

The supplier portal enables suppliers to view activity against contracts to avoid disputes over what is claimed. No more copying and pasting information — all parties can view the same information online.

  • Automation

Automatic gathering of purchase and sales information from other systems, calculating accruals, invoicing or debiting the supplier, and reporting all activity removes a layer of complexity from the day to day management of deals involving rebates.

  • Deal modelling

Our rebate management system provides the ability to model deals and create what—if scenarios. Gathering information about purchasing history at the category or item level is only the start of it.  This rebate software gives the ability to factor in a range of variables, and in doing so arms the procurement team with insightful information on which to base supplier negotiations.

Dealing with “ship and debit” deals, retrospective discounts, tiered discounts, marketing funds and a host of other pricing strategies  is one of the principle ways that building materials suppliers agree suitable profit margins.

By providing timely, accurate information, our rebate management software enables procurement teams to focus on the real issues — how to create innovative deals that are seen as a winning situation on both sides of the agreement. No disagreements, better relationships and better deals for builders merchants and suppliers going forward.

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