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Supplier rebates: Financial compliance — lessons to be learnt

Posted by Andrew Butt on May 15, 2016 17:13:57

The report that Tesco is returning to profit is good news for the beleaguered retailer, who have been hit with fierce competition from discounters Aldi and Lidl and the fall out of the supplier income scandal, which according to a recent article in the Sunday Times is still being investigated by the serious fraud office. 

The supplier income scandal still hangs like a black cloud over Britain’s largest supermarket retailer, and for organisations that benefit from supplier or vendor rebates the specter of incorrectly reported rebate income and any resulting audit investigation should weigh heavily on the minds of finance teams and at board level.

Not long after the accounting scandal there were 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”. The ‘Tesco issue’ also put the spotlight on firms such as KPMG and PWC and others who have the responsibility to audit and sign off accounts.

Issues that certainly arise from poor rebate accounting include: 

  • Inaccurate rebate payment accounting
  • Poor Visibility — 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 .

Rebate management systems that can be adopted to provide robust governance practices reduce the risk of manual error and strengthen internal controls should be music to the ears of Financial Directors.

Even better still the positive effect of measuring supplier or vendor payments, ensuring all of the rebate income is tracked and how that translates to the bottom line should be a compelling reason to look at an a more systemised approach to rebate management.

In terms of financial compliance what is examined? This will vary depending upon whether an organisation is a public or private company, what kind of data it handles and if it transmits or stores sensitive financial data — for example if you are a buying group the compliance focus is rebates and retrospective payments. It may vary for other companies for whom managing complex trading agreements is just part of their purchasing operations.  

DealTrack as a dedicated Rebate Management System ensures 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.

Finance can use this information safe in the knowledge that it’s accurate and therefore compliant — the reports will not only be quick to pull off but also accurate.

DealTrack also provides the ability to raise invoices automatically — the system ensures that profits are maximised, but also again are accurate.

The system also ensures what you are claiming has actually been achieved and with easy access to the information to prove that in no uncertain terms.

Costly financial audits to ensure compliance are avoided. Risk management becomes a much simpler process.

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Topics: Rebate Management, Rebates, vendor rebates