Working with Claimbacks

This chapter provides an overview of claimback functionality in PeopleSoft Order Management, lists prerequisites, and discusses how to:

• Set up PeopleSoft Order Management claimbacks.

• Create claimback contracts.

• Analyze the effect of claimbacks on profitability.

• Process claims for claimback contracts.

• Review claim accruals.

Understanding PeopleSoft Claimbacks

The claimback functionality of PeopleSoft Order Management facilitates collaboration among manufacturers, distributors, and customers.

A claimback refers to money paid to a distributor by a manufacturer (supplier) for the sale of specific products or product groups to specific customers.

In the wholesale distribution environment, the distributor has unique relationships with suppliers and contractors. In our example, the distributor is PeopleSoft system users. They buy from manufacturers and sell to many different entities; most often to contractors. A claimback is an agreement between the distributor and the manufacturer based on sales (orders that are entered and shipped) to a contractor (or customer of the distributor).

This diagram shows the relationship of manufacturers and distributors with their customers within the wholesale distribution environment:

Wholesale distribution environment showing the relationship of manufacturers and distributors with their customers

The distributor (the PeopleSoft system user) might have a contract to buy doors from a specific manufacturer (supplier) for 100 USD per door. The manufacturer might also have an agreement to sell the same door to a specific contractor for 90 USD, but the contractor must go through the distributor to get this price. The distributor needs to pay the manufacturer 100 USD per door and needs to sell it to the contractor for 90 USD. The difference of 10 USD is a claimback that must be managed using the claimback functionality of PeopleSoft Order Management. The difference of 10 USD will apply to each door shipped to the specified contractor, and it will be a reimbursement paid to the distributor by the manufacturer. The claimback ensures that the distributor can maintain its target sales margin for the door.

Note. In this example, we assumed a 0 percent sales margin. The claimback amount would be greater if the distributor maintained a larger sales margin.

Claimback Process Overview

The following diagram shows the high-level process flow for creating a claimback contract and processing the claimback claim within PeopleSoft Order Management:

Overview of claimback process flow

The following steps are an example of a typical business process for claimbacks:

1. Enable claimback functionality for PeopleSoft Order Management.

2. Create a claimback contract for a specific product and customer.

   Note. You can also create claimback contracts for product groups and customer groups.

   The Claimback manager can review the Claimback History page at any time to review the complete audit trail of the changes made to a given claimback contract. The Claimback manager can also review the Claimback Activity page, which displays order, shipment, and claim information related to the claimback contract.

3. During order entry, the Customer Service Representative (CSR) enters an order line that matches a claimback contract. In our example, the claimback contract for product 123 is applied when the CSR clicks the Calculate Price button on the order entry form.

4. The system generates claims for orders that are applied to the claimback contract and shipped.

5. Using the Claims Management Workbench, process and adjust claims.

   You can defer claims to the next period, and you can settle claims by cash, credit notes, check, electronic funds transfer (EFT), draft, direct debit, or adjustment voucher.

6. The system generates accrued revenue transactions, as requested, for unsettled claims. Users with appropriate security can then:

   • Review the accrued revenue transactions that were generated before posting them to the General Ledger.

   • Review the effect of a claimback contract on sales costs, margin, and profitability.

Note. The processing of claimback claims uses the same functionality as the vendor rebate process, which is covered in detail in the PeopleSoft Purchasing book.

See Managing Vendor Rebate Claims.

Prerequisites

Before you process claimbacks in PeopleSoft Order Management, you must:

1. Enable claimback processing in Order Management. You do this on the Order Management Installation Options page.

2. Set up default information for claimbacks on the Order Management Business Unit Definition, Claimback Settings page.

3. Determine claimback default values, processing options, and user security using the Claimback SetID Options page.

4. Set up Order Management business unit groups to assist you in creating claimback contracts.

5. Create special customer groups for claimback contracts.

6. Create special product groups for claimback contracts.

7. Set up feature security for maintaining the claimback Status, Recalculate Claims, and Next Claims Generation Date fields on the claimback contract.

See Also

Setting Up PeopleSoft Order Management Claimbacks

Establishing Customer Group Tables

Setting Up PeopleSoft Order Management Claimbacks

To set up claimbacks, use the Claimback SetID Options and OMBU Groups for Claimbacks components.

This section discusses how to:

• Configure claimback options and defaults.

• Configure claimback user security.

• Define Order Management Business Unit groups for claimbacks.

See Establishing Feature Function Security.

Pages Used to Set Up PeopleSoft Order Management Claimback Options

Configuring Claimback Setup Options and Defaults

Access the Options & Defaults page (Setup Financials/Supply Chain, Product Related, Order Management Foundation, Claimback SetID Options, Options & Defaults).

Enter header-level default values for the claimback contract on this page.

Claimback SetID Information

Claimback Contacts

Prefixes

Tolerances

Tolerances, both over and under based on either a flat amount or a percentage, are defined in the Claimback Contract Header and passed to the Claims Management Workbench to be used during the settlement process.

Note. The Accounts Receivable Payment Predictor functionality allows the user to set up matching tolerances that will automatically write off any remaining claim balance. The claim tolerances defined in the Claimback Contract Header are handled differently through the Claim Settlement process, which creates an adjustment to an open item to handle the amount of the remaining claim to be written off. To avoid creating duplicate write-offs for an open item, which could create a credit balance for the customer (vendor), you should not use a Payment Predictor method that uses a tolerance.

Configuring Claimback User Security

Access the Unrestricted Managers page (Setup Financials/Supply Chain, Product Related, Order Management Foundation, Claimback SetID Options, Unrestricted Managers).

To allow a user to access the Claimback Contract, you must define the user as an Unrestricted Manager or as the Claimback Manager on the Options & Defaults page. To allow a user to view and maintain Claimback Claims for the contract, you must define the user as an Unrestricted Manager, as the Claimback Manager on the Options & Defaults page, or as the Settlement Manager on the Claimback Contract.

Note. Access for maintaining the claimback contract Status, Recalculate Claims, and Next Claims Generation Date fields is controlled by standard feature security functionality. You can set up this security for a role, a user, an Order Management Business Unit, or the installation.

Defining Order Management Business Unit Groups for Claimbacks

Access the Order Management Business Unit Group page (Setup Financials/Supply Chain, Product Related, Order Management Foundation, Claimback OMBU Groups, OM Business Unit Group).

Creating Claimback Contracts

This section discusses how to:

• Create claimback contracts header and line information.

• Enter claimback value-added tax (VAT) information.

• Review claimback activity.

• Review claimback history.

Pages Used to Create Claimback Contracts

Creating Claimback Contracts Header and Line Information

Access the Claimback Header page (Order Management, Claimbacks, Claimback Contract, Claimback Header).

Recalculate Claims	Select this check box if changes to any of the fields on the claimback contract will affect the actual claim or claim amount; for example, purchase price, claimback amount, percentage, and price date fields. You can select this option if you have access through the Feature Security to edit the Recalculate Claims field. See Establishing Feature Function Security. When you select this option, the Generate Claims batch process will update the claim amounts for any existing claims that have not yet reached the settlement process for the claimback contract. Then, it will set the value of this field back to N (deselected).
Next Claims Generation Date	The system calculates this value when a new claimback contract is added. The date is based on the start date and the schedule ID defined for the claimback contract. You can override the calculated date if you have access through the Feature Security to edit the Next Claims Generation Date field. Claims are generated for the claimback contract only if the Next Claims Generation Date value is less than or equal to the current date.
Customer ID	Enter a value for the sold-to customer shown on the sales order. this field is required, and it is based on the Customer Type value.
Customer Group	Enter a specific customer group with a Group Type equal to CLMB (claimback). This required field is based on the Customer Type value.
Product ID	Enter a value based on the Product Type. This field is required.
Product Group	Enter a specific product group with a Group Type equal to CLMB (claimback). This required field is based on the Product Type value.
Unit of Measure	Select a value. This field is required if the Product Type is equal to Product ID or if a maximum quantity is entered on the claimback contract. The default is the product sales unit of measure (UOM). If the Product Type is equal to Product Group, then the UOM is always the sales UOM entered on the sales order. The UOM value entered on the claimback contract determines the UOM for which the claimback amount or percentage is entered, as well as the UOM for the maximum quantity field. When applying the claimback contract to the sales order line or schedule, you must apply a UOM conversion if the order UOM is different than the claimback contract UOM. This conversion application is necessary for maximum quantity calculations as well as for margin calculations.
Stop Apply at Max Quantity (stop applying at maximum quantity)	Indicates whether or not the contract should still be applied to a sales order line or schedule when the maximum quantity on the claimback contract is reached. If the option is not selected, then a warning message is displayed during order entry. If the option is selected, an error message is displayed during order entry and the contract is not applied to the sales order because the maximum quantity has been reached.
Maximum Quantity	Optional. Limits the quantity that can be ordered against the claimback contract. If a value is entered in the Maximum Quantity field on the claimback contract, then the order quantity will be validated before a claimback contract can be applied to a sales order line or schedule to ensure that the maximum quantity has not already been reached.
Include Shipments	If the sales order line or schedule is marked as Direct Ship to Vendor, the system will apply only claimback contracts with the Include Shipments option set to Both or Direct to the sales order line or schedule. If the sales order line or schedule is not marked as Direct Ship to Vendor, then the system will apply only claimback contracts with the Include Shipments option set to Both or Standard to the sales order line or schedule.
Claimback Amount	Displays a per unit value for the claim amount calculated for the claimback contract.
Claimback Percentage	Displays a percentage of the product purchase cost that applies to the claim amount calculated for the claimback contract. Note. If a claimback amount and a claimback percentage are both provided for a specific claimback contract, the claimback percentage will be applied to the claim amount first, and then the claimback amount will be applied.
Claimback Margin Impact	Displays if the claimback contract will affect the margin calculation, which is based on either the unit cost or the alternate unit cost defined on the sales order.
Settlement Method	Displays the method used to reimburse the claimback amount or percentage specified in the contract. If the settlement method is other than Voucher, where vendor payment is processed through accounts receivable instead of accounts payable, then a vendor and bill-to customer relationship must exist. If the vendor and bill-to customer relationship does not exist, then a warning message will be sent informing you that additional setup is required. Additionally, if the settlement method is Draft or Direct Debit, then a warning message will appear if the settlement method for the customer (which is associated with the vendor) is different. Note. The vendor and bill-to customer relationship can be automatically created from the Vendor, Identifying Information page if you select the Create Bill To Customer option. Selecting this option creates a bill-to customer with the same ID used to create the vendor ID and associates it to the vendor. Using the same page, you can also enter an existing bill-to customer in the Customer ID field in the Additional ID Numbers section.
AP Payment Terms (accounts payable payment terms)	Calculates payment due days for claims that are processed through accounts payable. This field is required.
AR Payment Terms (accounts receivable payment terms)	Calculates payment due days for claims that are processed through accounts receivable. This field is required.
Group Name	Enter the Order Management Business Unit Group ID for this claimback contract. When the Order Management Business Unit Group ID is entered on the Claimback Header page and you click the Load BU Settlement Options button, the system populates the claimback contract line table with one record for each Order Management Business Unit assigned to the Order Management Business Unit Group ID. The system also populates all default values for each business unit, as long as they are already established for the Order Management Business Unit.

Contract Line Entry

In the Settlement Options group box, specify the claimback line information.

Note. The Settlement Options group box contains several fields. The Accounts Payable Business Unit, Accounts Receivable Business Unit, and General Ledger Business Unit fields are provided by default from the Order Management Business Unit. They are not stored in the claimback line table.

Entering Claimback VAT Information

Access the VAT page (Order Management, Claimbacks, Claimback Contract, Claimback Header, VAT - Review link).

The VAT - Review link appears on the Claimback Header page only when VAT is applicable to the claimback contract. VAT is considered to be applicable if the General Ledger Business Unit associated with the first Order Management Business Unit entered on the claimback contract is tied to a VAT entity. The VAT entity's registration ID and country for the Accounts Payable Business Unit location code are retrieved by the system. In addition, the vendor's VAT registration, country, and location are provided by default to the VAT page, but the user can override any of the default VAT information as necessary.

Note. Because VAT applicability is determined by the first Order Management Business Unit defined for the claimback contract, all business units you define for the contract should have the same VAT applicability. Likewise, all products defined for a product group associated with the contract should have the same VAT treatment because only one set of VAT defaults will be defined for the claimback contract.

See Also

Order Processing in a VAT Environment

Reviewing Claimback Activity

Access the Claimback Activity page (Order Management, Claimbacks, Claimback Contract, Claimback Activity).

The Claimback Activity page displays order, shipment, and claim information related to the claimback contract. It also provides links to the appropriate pages (order entry, stock request inquiry, and claim details) based on the information displayed for each line. This page displays the total quantity ordered against the claimback contract, the total claim amount generated for the claimback contract, and the number of claims submitted to the vendor for the claimback contract.

Reviewing Claimback History

Access the Claimback History page (Order Management, Claimbacks, Claimback Contract, Claimback History).

The Claimback History page provides a complete audit trail of the actions taken against a claimback contract, including the operator ID responsible for creating or modifying the contract, the date and time the contract was created or modified, and the audit action (add or change) taken against the claimback contract.

Analyzing the Effects of Claimbacks on Profitability

This section lists the page used to analyze the effects of a claimback contract on product profitability.

Page Used to Analyze the Effects of Claimbacks on Profitability

Processing Claims for Claimback Contracts

This section provides overviews of applying claimback contracts to sales orders and calculating the claim amount for the claimback contract, and discusses how to:

• Generate claims.

• Use the Claims Management Workbench.

Note. The claimbacks feature uses the same functionality to process claims as the vendor rebates feature.

See Also

Maintaining Claims

Applying Claimback Contracts to Sales Orders

You validate claimback contracts and apply them to sales order lines or schedules in one of two ways:

• Automatic application during online or batch order entry.

• Manual application during sales order entry.

Automatic Application of Claimback Contract

To automatically apply claimback contracts during the order entry process, the CSR clicks the Calculate Price button.

When the Process Claimbacks option is set to Y on the Order Management Installation Options page, the claimback fields will be available for entry on the sales order line and schedule, and the system will attempt to retrieve a claimback contract ID both online and in batch mode. During online order entry, the claimback will not be applied until the Calculate Price button is clicked.

Note. For the claimback to be provided by default to the order, the sales order must have a scheduled ship date that falls between the contract start and end dates.

If the Automatically Apply field on the Claimback SetID Options page is not set to None, then the system will automatically populate the Claimback Contract ID field on the sales order line and the sales order schedule with the matching claimback contract ID when the Calculate Price button is clicked.

Manual Application of Claimback Contract

You can override the application of a Claimback Contract ID on the sales order line or schedule. This capability is particularly important when:

• More than one claimback contract qualifies.

• The Automatically Apply option is set to None.

• You need to maintain the Claimback Contract ID on the schedule to control changes to the product group defined for the contract.

Note. You can modify the Claimback Contract ID field on the Sales Order Schedule even if the schedule has been partially shipped. If the schedule is shipped completely or a claim for the claimback contract has reached the settlement process, then you cannot modify the Claimback Contract ID field.

Common Scenarios for Applying Claimbacks

This table describes the fields and sales order entry scenarios that affect the claimback contract matching process:

Calculating the Claim Amount for a Claimback Contract

The claim amount for a given claimback contract is calculated using the formula:

( (Starting Purchase Cost × Claimback Percentage) + Claimback Amount) + (Current Purchase Cost − Starting Purchase Cost))

Several factors affect the value of the starting cost:

• Cost Defined on Contract: If this field is selected on the contract, then the Starting Purchase Cost is equal to the Purchase Cost defined in the claimback contract.

• Cost Fixed from Contract Date: If this field is selected on the contact, then the Starting Purchase Cost is retrieved for the product and is based on the Cost Fixed Date defined in the Claimback Contract.

• Neither: If neither the Cost Defined on Contract nor the Cost Fixed from Contract Date fields are selected on the contract, then the Starting Purchase Cost is always equal to the Current Purchase Cost. Current Purchase Cost is always the purchase cost based on the claim generation date.

Note. The purchase cost is determined by the vendor list price minus any discounts. The vendor list price is retrieved from either a procurement contract (if defined on the claimback contract) or from the price defined on the Vendor's Unit of Measure & Pricing Info page. The discounts are retrieved from either a procurement contract (if defined on the claimback contract) or from vendor price adjustments that are defined in the system. The logic to determine the starting or current purchase cost for the claimback calculation is similar to the logic used in Purchasing to determine the purchase order price.

See PeopleSoft Enterprise Source-to-Settle Common Information 9.1 PeopleBook.

Example of Cost Fixed from Contract Date (Amount)

When the Cost Fixed From Contract Date option is selected for a claimback contract, the cost is derived from the product cost for the date specified on the contract and is compared to the product cost at the time the claim is generated. The claimback amount can be determined once both product costs are derived.

• Create a claimback contract, select the Cost Fixed from Contract Date option, and enter a Cost Fixed Date of January 1, 2005.

• In the Claimback Amount field, define the claimback amount as 10 USD.

• The date (January 1, 2005) stored in the Cost Fixed Date field is used to determine the starting cost for the product. As of January 1, 2005, the product starting cost is 75 USD. February 1, the cost for the product increases to 100 USD. Assume that the total quantity shipped in January is 20 units, and the total quantity shipped in February is 10 units.

When calculating the per unit and total claimback amount:

• Claimback claim amount (per unit shipped) for January 2005:

  (75 USD × 0) + 10 USD) + (75 USD − 75 USD) = (0 + 10 USD) + 0 = 10 USD/unit shipped.

• Total claimback claim amount for January 2005:

  Total Claimback Amount = 10 USD × 20 units = 200 USD

• Claimback claim amount (per unit shipped) for February 2005:

  (75 USD × 0) + 10 USD) + (100 USD − 75 USD) = (0 + 10 USD) + 25 USD = 35 USD/unit shipped.

• Total claimback claim amount for February 2005:

  Total Claimback Amount = 35 USD × 10 units = 350 USD

Example of Cost Defined on Contract (Percent)

When the Cost Defined on Contract option is selected for a claimback contract, the claimback amount, per unit and total, is determined using the cost stored in the claimback contract.

• Create a claimback contract on January 1, 2005. This claimback contract has the Cost Defined on Contract option selected. The cost, defined in the Purchase Cost field, is 125 USD. The calculated product purchase cost for the month of January is 130 USD, and the calculated product cost for the month of February is 135 USD.

• In the Claimback Percent field, define the claimback percent as 15.00.

• Assume the total quantity shipped in January is 12 units, and the total quantity shipped in February is 8 units.

When calculating the per unit and total claimback amount:

• Claimback claim amount (per unit shipped) for January 2005:

  (125 USD × 15%) + 0) + (130 USD − 125 USD) = 18.75 USD + 5 USD = 23.75 USD/unit shipped

• Total claimback claim amount for January 2005:

  Total Claimback Amount = 23.75 USD × 12 units = 285 USD

• Claimback claim amount (per unit shipped) for February 2005:

  (125 USD × 15%) + 0) + (135 USD − 125 USD) = 18.75 USD + 10 USD = 28.75 USD/unit shipped

• Total claimback claim amount for February 2005:

  Total Claimback Amount = 28.75 USD * 8 units = 230 USD

Note. The Purchase Cost defined in the claimback contract determines the Starting Purchase Cost in this calculation, and the Current Purchase Cost is calculated based on the claim generation date.

Example of Neither Cost Fixed from Contract Date or Cost Defined on Contract (Amount and Percent)

When neither the Cost Defined on Contract option nor the Cost Fixed from Contract Date option is selected for a claimback contract, the system uses the Current Purchase Cost, as of the claim generation date, to determine the product cost and to derive the claimback amount per unit and total.

• Create a claimback contract on January 1, 2005. Neither the Cost Defined on Contract option nor the Cost Fixed from Date option is selected for this claimback contract.

• In the Claimback Percent field, define the claimback percent as 9.00.

• In the Claimback Amount field, define the claimback amount as 7 USD.

• The purchase cost, as of January 1, is 20 USD. February 1, the purchase cost increases to 30 USD.

• Assume the total quantity shipped in January is 25 units, and the total quantity shipped in February is 18 units.

  Note. If both an amount and a percentage are entered in the claimback contract, then the percentage discount is applied before applying the flat amount to the total claimback amount.

When calculating the per unit and total claimback amount:

• Claimback claim amount (per unit shipped) for January 2005:

  ((20 USD × .09) + 7 USD) + (20 USD − 20 USD)) = (1.8 USD + 7 USD) + 0 = 8.80 USD/unit shipped.

• Total claimback claim amount for January 2005:

  Total Claimback Amount = 8.80 USD × 25 units = 220 USD

• Claimback claim amount (per unit shipped) for February 2005:

  ((30 USD × .09) + 7 USD) + (30 USD − 30 USD)) = (2.7 USD + 7 USD) + 0 = 9.70 USD/unit shipped.

• Total claimback claim amount for February 2005:

  Total Claimback Amount = 9.70 USD × 18 units = 174.60 USD

Pages Used to Perform Claimback Claim Maintenance

Generating Claims

Access the Generate Claim Request page (Order Management, Claimbacks, Generate Claims/Accrue Revenue, Generate Claim Request).

The Generate Claims page allows you to submit the Claimback Claims and Accruals batch process. This process automatically creates claims for shipments that have been made against a claimback contract and creates new claims for claims that were deferred to another period.

Using the Claims Management Workbench

The Claimback Manager can update the status of claims that have been created for claimback contracts using the Claims Management Workbench. The claimback status determines what actions the Claimback Manager can perform.

Reviewing Claimback Accruals

This section provides an overview of revenue accrual for general ledger and lists the pages used to review claimback accruals.

Accruing Revenue for General Ledger

The Generate Claim Request page provides a batch process and request capability for automatically accruing incurred revenue for claimbacks that have not gone through the settlement process. In this case, shipments were made against the claimback contract, and claims may have been generated, but the claims were not yet passed to Accounts Payable or Accounts Receivable for processing. The Accrued Revenue transactions will be sent to General Ledger so that new journal entries can be created by the Journal Generator.

You can submit the Claimback Claims and Accruals process for:

• A specific claimback contract (SetID and Contract ID).

• All claimback contracts for a SetID.

• All claimback contracts for a specific Vendor ID.

The process is run based on the status of the claimback contract. Claimback contracts with a status of Approved or Closed will compute accrued revenue amounts for all shipments for which the order schedule is tied to the claimback contract and a claim has:

• Not yet been generated.

• Not yet been passed to Accounts Payable or Accounts Receivable for processing.

• Been deferred to another period, but a new claim has not yet been created.

The Claimback Claims and Accruals process looks at any shipments that have a claimback contract applied to them and determines if an accrual transaction needs to be generated. If no claim has yet been generated, an existing claim has not yet been settled, or a claim has been deferred to another period, then the claimback amount will be accrued and passed to the General Ledger.

Note. The Claimback Claims and Accruals process will process any claims with a status of Open or Approved, but it ignores any claims with a status of Pending Payment, Partially Paid, Paid, or Cancelled. If a claim has a status of Deferred, then it will only be included in the accrual calculations if no new claim has been generated for the deferred claim or if the new claim has a status of Open or Approved.

The system retrieves the Accrued Revenue Distribution Code from the claimback contract. The Accrued Revenue Distribution Code is provided by default to the claimback contract line for the Order Management Business Unit, and it is then used to retrieve the Accrued Revenue ChartField information and to populate that information in the Accrued Revenue transaction table for debit entry.

The system retrieves the Claimback Distribution Code from the claimback contract. The Claimback Distribution Code is provided by default to the claimback contract line from the Order Management Business Unit, and it is then used to retrieve the Claimback Revenue ChartField information and to populate that information on the Accrued Revenue transaction table for the credit entry.

A user can review transactions written to the Accrued Revenue transaction table before they are posted to the General Ledger on the Claimback Accruals Inquiry page.

Accrued Revenue transactions written to the Accrued Revenue transaction table are retrieved and posted to the General Ledger using the Journal Generator batch process (FS_JGEN). A special journal template has been created for Claimback Accrued Revenue. A journal entry is made to the Accrued Revenue ChartFields at the end of the current period, with a reversing entry to the same account in the start of this period. A user can review Accrued Revenue transactions that have been posted to the General Ledger on the GL Accrued Revenue page.

Pages Used to Review Claimback Accruals