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Rebate management jargon buster: An A-Z of helpful definitions and terminology

Posted by Oisin Cooke on October 16, 2019 08:57:39

If you’ve ever been confused about terminology relating to rebate management, you’re not alone! The world of rebates is a complicated place at the best of times, especially when there can be multiple different names for the same thing.

This jargon buster, glossary of terms, or A-Z of helpful definitions relating to rebates was created by Enable to help its customers – and those involved in the rebate management process at any point – gain greater clarity and understanding.

It is not a complete list of all the words relating to deal management that you might come across, just a good place to start, so if you have any suggestions for words or terminology that should be added to the list please get in touch.


Back door funds

As opposed to "front-door funds" which are used to increase sales, rebates are termed "back-door funds" as they are based on purchases.

See also: From counting to measuring and managing vendor funds

Back end rebates

Rebates earned on the purchase side of the agreement. These would feed into the back margin.

See also: Supplier rebates contract types

Back margin

Any margin that comes from the purchase side of the agreement. E.g. rebates, discounts, etc.

See also: Get more out of your retrospective payment trade agreements

Bonuses

One-off rebates, usually offered as an additional reward/incentive.

            See also: Are there two scarier words for a CFO than ‘Profit Warning’?

Commercial income

Income generated from the sale or exchange of goods or services.

            See also: Tesco's scandal: a cautionary tale for the collaborative economy

Contract management

The management and overseeing of contracts and agreements made with trading partners.

            See also: How to choose a contract management system

Contract support

This is the name more commonly used to describe SPA’s or ‘Special Pricing Agreements’ in the UK.

            See also: What is special pricing collaboration?

Co-op funds

Monies set aside by vendors to promote sales.

See also: From counting to measuring and managing vendor funds

Customer rebate

A rebate viewed from the perspective of the supplier of the goods, where the rebate is paid out to the customer.

Note: The terms 'customer rebates' and 'supplier rebates' both refer to the same rebate payment, but carry different terminology dependent on the point of view.

See also: Why customer rebates are the best thing (for customer success) since sliced bread

Fees

Price as remunerations for services, usually allowing for costs.

Front-door funds

Agreements used to incentivize sales (rather than incentivize purchases, as in more traditional rebates). SPAs, MDF, and Co-op funds are often called "front-door funds".

See also: From counting to measuring and managing vendor funds

Goods receipt

A commercial document acknowledging that a person has received money or property in payment following a sale or other transfer of goods or provision of a service.

            See also: What are your supplier rebate accruals based on?

Growth rebates

These are rebate agreements that are conditional on growth from previous trading periods. This could be based on percentage, number of units, or value of growth, usually from the previous year.

See also: Types of vendor and customer rebate agreements


Global and local contracts

Rebates can be agreed on a global or a local scale, or variations of both. Deals based on global purchases will encompass all purchases within the business, whereas local contracts will only apply to purchases for that individual entity. This could be an opco, region or branch.

See also: Supplier rebates contract types


Incentive rebates

Rebate agreements used to drive and encourage purchases or sales, usually with incremental target conditions, such as volume or turnover.

See also: A few examples of volume incentive rebate deals

Joint initiative fund

A dedicated fund to contribute towards a set of initiatives, similar to co-op funds. 

See also: From counting to measuring and managing vendor funds

LTI’s / Long term incentives

These are deals that span the entire length of the trading period, sitting alongside other, shorter term incentive deals, often used to ‘fill the gaps’ between deals. Very similar to Overriders.

            See also: Types of vendor and customer rebate agreements

Manufacturer and distributor contracts

These contracts are agreed between manufacturers and distributors, and are the overarching agreements inside which the rebate deals live.

See also: Supplier rebates contract types

Margin support contracts

This is another term for Special Pricing Agreements or SPAs.

See also: Supplier rebates contract types

Margin warnings

Margin warnings allow the distributor to check the absolute margin of sales orders as they are placed (taking manufacturer support into account). These are issued in situations where a distributor has pricing support from a manufacturer.

See also: Supplier rebates contract types

MDF’s / marketing development funds

Rebates offered for the purposes of marketing development, usually tied to a specific product or product line for promotional purposes.

See also: From counting to measuring and managing vendor funds


Net and Net-Net price

The Net price accounts for any upfront discounts off the price, whereas the Net-Net price also includes any rebates accrued against the unit.

See also: Supplier rebates contract types


Overriders

A rebate deal that spans the whole year or trading period. Common when there are also shorter term/more targeted promotional deals in play, and allows there to still be rebate earned on products not included in specific promotions, or between deals.

            See also: Enable case studies


Pass through rebates

Synonym for contract support.


Price rebate

A rebate based on the purchase price of a product.


Programs

A synonym for rebates.


Purchase order

A commercial document issued from a buyer to a seller, indicating types, quantities, and agreed prices for products or services. It is used to control the purchasing of products and services from external suppliers.

            See also: What are your supplier rebate accruals based on?

Purchase invoice

A commercial document presented to a buyer by a seller or service provider for payment within a stated time frame to prove that something was bought and how much was paid for it.

            See also: What are your supplier rebate accruals based on?

Rebatable transactions

The value of turnover that rebates are calculated against. For rebates paid to the customer this is commonly annual sales transactions, and for rebates collected from suppliers, annual purchase spend.

Rebate

A portion of a payment that is returned to the buyer. Can be thought of like an ‘after the fact’ discount. Sometimes also referred to as Channels, Channel funds or Programs.

See also: Types of vendor and customer rebate agreements


Rebate credit / Back end credit

A rebate credit or back end credit is a form of payment used in leu of cash when settling invoices for rebates. This is common in ongoing relationships between manufacturers and distributors, where rebate owed is given as a credit note and deducted from future purchases.           

Rebate accounting

The process of accounting for rebates accurately. This includes calculating rebate accruals and forecasting.

            See also: Why your ERP system doesn't cope with rebate accounting

Rebate accruals

The process of recognizing rebate that will be earnt on each product by the end of the trading period, for representing in the company accounts.

            See also: What are your supplier rebate accruals based on?

Rebate forecasting

Projecting the amount of rebate that will be earnt from a particular rebate deal.

            See also: The cost of hidden errors in financial forecasting for B2B deals [Webinar]


Rebate management system

A software package specifically designed for constructing, calculating and managing rebate agreements.

            See also: What is rebate management software?

Rebate terms

The specific conditions of an agreement by which rebates are calculated.

            See also: Best practice rebate management


Retros

Abbreviation for ‘retrospective payment’ – another synonym for rebate.

See also: Get more out of your retrospective payment trade agreements

Schemes

Sometimes used as a synonym for rebate or rebate program, but can also sometimes refer to an overall trading agreement between trading partners.

            See also: Top 7 types of rebate deals

Ship and debit

A rebate mechanism where the distributor debits the supplier for every qualifying unit that they ship. Similar to Special Pricing Agreements, this allows the protection of the distributor's margin when market prices fluctuate, but it not specific to one customer or project. 

            See also: How do distributors track and manage ship and debit rebate agreements

SPA’s / special pricing agreements

Agreements, usually between manufacturers and distributors, where a rebate is paid to the distributor upon sale of an eligible product to an eligible customer, in order to support their margin. This allows special prices to be offered to end customers, but maintains the margin of the distributor, and can also be restricted to a particular site or project.

            See also: Managing special pricing agreements is linked to higher margins


Supplier invoices

Invoices issued to suppliers to claim for rebate earnings owed.

See also: Supplier rebates contract types

 
Supplier rebate

A rebate viewed from the perspective of the buyer, where they are receiving a rebate payment from the supplier of the goods.

Note: The terms 'customer rebates' and 'supplier rebates' both refer to the same rebate payment, but carry different terminology dependent on the point of view.

See also: Supplier rebates contract types

Supplier statements

Data reports that are compiled in support of supplier invoices. These could contain information about the terms of any rebate agreements, and the purchase volumes.

See also: Supplier rebates contract types


Collaborative visibility

The ability for trading partners to view relevant rebate information about any deals or agreements that they have together.

            See also: 7 keys to unlocking mutual growth from B2B deals


The Deal Economy

A term coined by Andrew Butt to describe the $500bn in rebates, market development funds and special pricing agreements (SPAs) paid by manufacturers to their distributors and resellers in the USA last year, alone. The Deal Economy is a new way of viewing rebates: as a collaborative tool for improving sales and profits for all parties which focuses on reducing complexity and improving visibility for all participants.

See also: The Deal Economy article on LinkedIn.


Tiered discount rates

Discounts are often agreed based on a specific ‘level’ or ‘tier’, where a certain value, volume or growth must be achieved to earn the discount. Many deals have multiple tiers, where a higher discount is available for each new threshold.

See also: Supplier rebates contract types


Vendor Funds

A synonym for ‘Supplier Rebates’


Volume and value discounts

These discounts are offered either on volume of units, or value of transactional data within the trading period.

See also: Supplier rebates contract types


"What if" scenarios

A forecasting tool used to help in buying decisions, by creating hypothetical situations to calculate the difference in potential rebate earnings on planned spend.

See also: The cost of hidden errors in financial forecasting for B2B deals [Webinar]

Year-on-year reporting

Rather than reporting on rebates in isolation for a single year, year-on-year reporting is the practice of reviewing spend and rebate performance for the current year vs. previous years, vs. forecast for the full year to come. 

See also: Supplier rebates contract types

 

Conclusion

We hope you’ve enjoyed reading this blog post, and have benefited from the definitions we’ve included here. We know we haven’t listed them all, so please contact us if you think we should add more in.

Have you got some rebate terms you want defined? Get in touch.

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Topics: Rebate Management, Contract Management, Rebate Accounting, Rebate Management System, Special Price Agreements SPAs, Customer Rebate Management