Rebate management module
The Rebate management module is used to build contracts, offers, or agreements between your company and your customers and vendors to make calculations easier. The Rebate management module keeps track of rebates and deductions in one location where all applicable users can quickly build, evaluate, and process them.
- Rebates - Returns a portion of a purchase price by a seller or a buyer, typically on purchasing a specific quantity or value of goods within a specific period. These returns, unlike deductions, are done after the entire invoice of the purchase amount.
- Deduction - compensation, consideration, or fee paid for a license or privilege to use intellectual property such as a brand, copyright, or patent or the usage of a natural resource like fishing, hunting, or mining. Deductions are usually computed as a percentage of revenue or profit from realized use. The more use, the greater the deduction realized.
- Royalties - Customer royalties are payments made by one party to the licensee or franchisee for the right to use the asset. Rebates, royalties, and deductions are all supported by the new rebates and deductions module.
Prior to creating and processing transactions in the rebate management module, you need to set up posting profiles for provisions, rebates, and write-offs. The posting profiles can be set up for a specific customer or vendor.
Rebate transactions are automatically generated based on the calculation method selected and scheduled in batch jobs. Furthermore, Rebate management deal workflows can be set up to review and approve deals.
The Rebate management module has a central rebate workbench which helps to streamline rebate processing. It also Integrates with the deduction workbench to let you process rebates as customer deductions.
The following elements allow Supply Chain Management to streamline the rebate process:
- Rebate workbench - 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.
- Procurement category - This category, which has a payment type of Pay using accounts payable , is in the Rebate management posting profile. You can use this category to create the target vendor invoice journal.
- Rebate management details for sales and purchase order lines - These details enable you to view eligible rebates during the order entry process.
- Deduction workbench enhancements - This feature adds support for short payment scenarios by enabling users to transform rebates into a deduction.
See Rebate management module overview to learn more about the Rebate management module.
Flexible calculations
Rebate calculation periods can be used for customer deals and vendor deals. A rebate calculation period defines the length, the frequency, and the calculation period of the deal. The rebates are typically accrued during the rebate period based on the sales order quantities or amounts for qualified products.
The following periods can be configured for a rebate deal calculation:
Invoice
Day
Week
Month
Quarter
Year
Customized period
Any multiple of the preceding listed periods
The calculation can be applied to:
Selected customers and products.
Groups of customers and products.
All customers and products.
Rebate deals can have multiple lines. Different rebate deal detail lines can have different date ranges. The provision period and claim period can be different. For instance, provisions can be processed every week, whereas claims can be processed once per month.
Calculation methods
Rebates can be configured as a percentage, a rate, or a fixed amount. Main calculation methods include:
Stepped
Cumulative
Rolling
Total value
Furthermore, rebate calculations can be reduced by other qualifying rebates if the rebate is configured to calculate based on the net amount.
Vendor rebates that are based on sales orders can calculate the price based on the first in, first out (FIFO) rule, the latest purchase price, the average purchase price, or the sales price.
Rebate target transactions
There are two output types that a rebate deal can generate:
Financial outputs - include customer deduction journals, free text invoices, and vendor invoices and are defined by the payment type that’s assigned to the rebate deal or agreement from the posting profile. Financial rebate target transactions have a reference to the originating rebate agreement, which can be reviewed for auditing purposes.
Item outputs - customer rebates create a free item sales order. Item outputs for vendor rebates create a purchase order. Item rebate target transactions allow for defining a specific rebate reference to be entered on the free item sales order or purchase order.
Accurate rebate calculations
The accuracies of the rebate calculations are defined by the configuration of the deals, the calculation frequency, the calculation basis, and the calculation method. Rebate provisions are typically used to accrue posted and claimed values.
Provisions can be set up for different periods. The system can handle the rebate allocation, payment, or receipt at any interval that matches or exceeds the provision period. Write-off follows the same interval as the rebate. Users can change a plan or payment amounts anytime during the payout.
The process of managing deals or provisions is simplified in one step. Provisions and write-offs are posted straight to the ledger. Also, you can generate credit notes automatically. This means that accounts payable and accounts receivable are fully integrated. When processing, the calculations can take into account settlement discounts, paid invoices, trade discounts, and existing credit notes to make sure that amounts and values are correct.
Rebate calculations generate transactions that can be checked before posting. Rebate management transactions are posted by another process. Posting to proposed transactions can create a journal, credit note, or debit transaction. Reporting statements and transaction listings can be used to monitor compliance, effectiveness, and transparency.
Guaranteed royalty payments
With Rebate management, you can manage royalties efficiently and conveniently, even when there are guaranteed minimums, due to automatic payment generation.
Maximizing spend versus rebates
Territory, which is based on the country/region of the transaction, can be used to group vendors and products and to provide different offers. When users choose products, they can specify the items that are part of the rebate settlement and the quantity of items that will be applied.
On the Rebate management parameters page, you can set up options for the rebate management module across all legal entities. These options change how posting, status updates, number sequences, and other things work.
Workflows for rebate management deals
Rebate management employs the workflow framework approve rebate deals. The following two processes are managed with every Rebate management workflow:
A workflow element to approve the deal.
A workflow element to activate the deal.
A rebate deal must be approved and activated via a rebate management workflow before it can be used.
To activate a deal, submit it to workflow approval by going to All rebate management deals > Select the deal > Action pane > Workflow > Submit.
After the workflow completes, the new deal will be active and usable.
Once a deal is active, you can't modify most of its settings. To change an active deal, you need to deactivate it and then make a new deal. If you want the new deal to be similar to the old deal, you can copy the old deal. However, the following settings can be changed for an active deal:
Reconcile by
Cumulative guarantee
Posting profile
Posting profile for guarantee
Document notes
Currency
From date
To date
Remove rebate lines
Rebate status
Configure rebate deal statuses by going to Rebate management > Setup > Status > Status.
On the Rebate parameters page, specify the default rebate deal status.
Rebate management groups
Rebate management groups for customers, vendors, or items can be used to drive rebate management calculations.
Rebate management customer groups
Rebate management customer groups are typically configured for customers related to a chain of companies, for example, a franchise company or a supermarket chain, and are usually related to rebates.
Create rebate management customer groups by going to Rebate management > Rebate management groups setup > Customer groups.
A customer can be assigned to different rebate management customer groups.
Rebate management vendor groups
Configure rebate management vendor groups and add vendors to be used for rebates by going to Rebate management > Rebate management groups setup > Vendor groups.
Item rebate groups
Configure item rebate groups and add items by going to Rebate management > Rebate management groups setup > Item groups.
An item can be assigned to different Rebate management item groups.
Rebate management posting profiles
Configure rebate management posting profiles to define posting entries for Rebate management calculation lines. A posting profile selected on the deal header applies to all deal lines.
The posting profiles configuration applies across companies (legal entities). Furthermore, you can specify the company to which provisions will accrue and by whom claims will be paid. Additionally, you can specify different provision debit accounts and write-off credit accounts per source posting company.
Go to Rebate management > Rebate management posting setup > Rebate management posting profiles to set up Rebate management posting profiles for customers and vendors.
If you set the Reconcile by field to Deal in the deal details, you can't use the dynamic deal account during posting. Instead, you must specify a customer or vendor account. If you set the Reconcile by field to Line in the deal details, you can use a posting profile that offsets to a dynamic deal account on the deal line because the customer or vendor account is specified per deal line.
You can configure a posting account for each legal entity under the Posting by company FastTab of every Rebate management posting profile. To do that, select the record of each legal entity and provide the following information:
Debit type: Choose whether to debit a ledger account or a vendor. For customer rebates and royalties, the Debit type field is set to Ledger account.
Debit account: Specify the account where the debit amount is posted to when a rebate provision is made.
Main account: Enter the main account for write-offs.
Manage rebate reduction principles
Rebate management deals can use reduction principles to reduce other provisions or rebate value calculations for an item. You can set up the rebate reduction principles and then assign them to your Rebate management deal lines if needed. The rebate reduction principle rules work only when rebate deals overlap. Therefore, extra rebates might be given when multiple rebates aren’t owed. To configure rebate reduction principles go to Rebate management > Setup > Rebate reduction principles.
For each reduction principle, set the fields as described in the following table.
| Field | Description |
|---|---|
| Rebate reduction principle | Enter a unique name for the rebate reduction principle. |
| Description | Enter a description of the rebate reduction principle. |
| Apply reduction | Select this checkbox to apply a reduction basis to rebates that belong to this rebate reduction principle. |
| Reduction basis | If you selected the Apply reductioncheckbox, select the reduction basis (Provision, Rebates, or Both). If you select Both, and if both a provision and a rebate have been posted for a previous deal, only the rebate will be applied. |
| Exclude from reduction | If this checkbox is selected, provisions and rebates that belong to this rebate reduction principle will be excluded from subsequent reductions. The setting of the Reduction basis field doesn't apply to this setting. |
Examples of rebate reduction principle setup
The following table presents configuration examples for rebate reduction principles. The Description field defines the purpose of the rebate reduction principle.
| Rebate reduction principle | Description | Apply reduction | Reduction basis | Exclude from reduction |
|---|---|---|---|---|
| Deferred | Reduce rebate | Yes | Both | No |
| Exclreb | Exclude rebate | Yes | Rebate | Yes |
| Multiple | Multiple rebates | Yes | Both | Yes |
| None | Prov and Rebate only | No | Both | Yes |
| Provision | Provision only | Yes | Provision | No |
| Rebate | Rebate only | Yes | Rebate | Yes |
Examples of rebate reduction principle calculations
You have created a sales order with one sales order line that has a value of $1,000. The following deals apply to this sales order:
Deal 1: 10 percent on $1,000
Deal 2: 15 percent on $1,000
Deal 3: 20 percent on $1,000
Deal 4: 25 percent on $1,000
The way you work defines the order of processing, which is important for the calculation. The following table describes the result if you use the sequence 1, 2, 3, 4, and if you process only the provisions.
| Deal | Description and settings | Provision result |
|---|---|---|
| 1 | The classification doesn't check other deals for reductions. The check is done for both provisions and rebates. Apply reduction: No Reduction basis: Both Exclude from reduction: No |
$1,000 x 10% = $100 |
| 2 | The classification checks other deals for reductions but is flagged so that it itself is ignored. The check is done only for rebates. Apply reduction: Yes Reduction basis: Rebate Exclude from reduction: Yes |
$1,000 x 15% = $150 |
| 3 | The classification checks other deals for reductions. The check is done for both provisions and rebates. Apply reduction: Yes Reduction basis: Both Exclude from reduction: No |
($1,000 - Deal 1) x 20% = $180 |
| 4 | The classification checks other deals for reductions. The check is done for both provisions and rebates. Apply reduction: Yes Reduction basis: Both Exclude from reduction: No |
($1,000 - Deal 1 - Deal 3) x 25% = $180 |
Process, review, and post rebates
Rebate management deals determine how to calculate rebates and royalties using various methods and criteria. They also define what to include or exclude in the calculation. There are three kinds of Rebate management deals: customer rebates, customer royalties, and vendor rebates. They share many common settings and have some differences.
For more information on Rebate management deals, see Rebate management deals