Rebate management module overview
Today’s companies face competitive pressures to reduce and manage costs as well as good working relationships with suppliers. In an increasingly competitive environment, the successful management and profitability of vendor rebates is of utmost importance.
A vendor rebate is a type of vendor allowance or incentive in which a part of the purchase price is returned by the seller to the buyer when a specified quantity or value of goods has been purchased within a specified period.
Vendor rebates involve buyers or retailers requesting a percentage of a product’s cost from the supplier, which is then used by the buyer to promote sales through marketing, or to offer discounts to consumers.
In the trading business, it is common for a company to be qualified for a monetary reward in return for achieving preset purchase targets. Better management of their vendor rebate programs is an important part of the company’s financial success.
Rebate management supports the creation, maintenance, and processing of rebates. Rebates are typically based on the purchase of a specific quantity or value of goods during a specific period.
Rebate management capabilities have been present in the Dynamics solution for a long time, but dedicated Rebate management module is introduced within Dynamics 365 Finance and Operations solution since 2021 release wave 1.
Rebate management module in the Dynamics 365 Finance and Operations greatly reduces the complexity and administrative burden associated with rebates programs. It enables organizations to focus on maximizing the benefits of these programs while retaining flexible and efficient processes and eliminating the need for manual calculations.
One of the interesting features of the module is retroactivity, where rebates deals are negotiated with the vendor already during the period and can be applied to purchases or sales that have already been invoiced.
Vendor rebates can be based on either purchase orders or sales orders. They can be calculated based on products that are purchased from the rebate vendor and sold to customers via sales invoices.
Rebate calculation periods are available for both customer deals and vendor deals. A calculation period defines the length of the deal, the calculation frequency, and the calculation period. The rebates can be accrued based on the sales order quantities or amounts for qualified products during the rebate period.
For each agreement calculation, any of the following periods can be set as Invoice, Day, Week, Month, Quarter, Year, customized period, any multiple of any of the previously listed periods.
The calculation can be applied to individual vendors and products, groups of vendors and products, or all vendors and products. Rebates that have multiple detail lines can have different qualifying date ranges. The provision and claim periods can differ. For example, provisions can be processed every day, whereas claims are processed once per month.
Rebates can be configured based on many different parameters. They can be configured as percentage, rate, fixed amount. There are few main calculation methods like Stepped, Cumulative, Rolling, Total value.
Rebate calculation results can also be reduced by other rebates, depending on whether the rebate is set up to calculate based on the net amount.
On the vendor side, rebates that are based on sales orders can calculate the price based on a first in, first out (FIFO) rule, the latest purchase price, the average purchase price, or the sales price.
Rebate target transactions
The outputs that the rebate deal or agreement generates can be financials or items.
Financial outputs are determined by the payment type that is assigned to the agreement from the posting profile. These outputs can include vendor invoices. For auditing purposes, financial rebate target transactions include a reference to the originating rebate agreement.
Item outputs create a free item purchase order for vendor rebates. Item rebate target transactions contain options to determine which rebate reference should be entered on the free item purchase order.
Accurate rebate calculations
The combination of the associated deals, the frequency of the calculations, the calculation basis, and the calculation method that is selected determines the accuracy and precision of rebate calculations. Rebate provisions can be used to accrue posted and claimed values.
Provisions can be managed daily, weekly, monthly, or according to a custom period. However, the functionality can allocate receive payment of it, at any defined frequency that is the same length as or longer than the provision frequency.
Users do not need to handle deals or provisions in two steps. Provisions and write-offs are posted directly to the ledger. Additionally, credit notes can be created automatically. Therefore, there is full integration with accounts receivable. During processing, the calculations can consider settlement discounts, paid invoices, trade discounts, and existing credit notes to ensure that amounts and values are accurately calculated.
When rebates are calculated, the process creates transactions that can be reviewed before posting occurs. A separate process posts rebate management transaction. Reporting statements and transaction listings can be obtained to ensure compliance, effectiveness, and transparency.
The workbench lets you view and process all provisions, rebates, and write-off transactions in a central place, rather than requiring you to open each rebate program separately. From the rebate workbench, you can quickly access all provisions and rebate claims, and process or purge the transactions.