Understanding Vendor Rebates
Today's companies are faced with competitive pressures to reduce and manage costs and to have good working relationships with their suppliers. As competition intensifies, the successful management and profitability of vendor rebates is essential.
One of the ways that an organization can improve its profit margin is in the successful analysis, creation, processing, and tracking of vendor rebates in its environment. Vendor rebate information is an extremely valuable asset if you can obtain and use it properly. Without the means to capture and share that information, costly mistakes and loss of money can occur. You need functionality that provides the right information at the right time to the right individuals.
With the vendor rebate functionality of PeopleSoft Purchasing, you can effectively manage vendor rebates and increase revenue. The vendor rebate functionality that resides in PeopleSoft Purchasing integrates with other PeopleSoft applications to give you a complete and overall solution to the full life cycle of the vendor rebate. Through the implementation of the vendor rebate functionality, you can move one step closer to achieving success in managing vendor rebates and tracking the effectiveness of those vendor rebates.
This diagram illustrates the business process flow for vendor rebates were a vendor rebate agreement has been established and a variety of rebate options and PeopleSoft system processes, such as notifications and claims, help manage the rebate process:
The next sections describe the process details.
Vendor Rebate Definition
The most important step in managing a successful vendor rebate program is the accurate definition of vendor rebate agreements. Using vendor rebate agreements in PeopleSoft Purchasing, you can capture the complex rules that are related to rebates from the supplier in a user-friendly and concise manner. You can define multiple rebate rules within a rebate agreement enabling you to fully define the contractual agreement with the supplier. PeopleSoft Purchasing supports a variety of rebate rules. The rebate rules supported are:
Standard rebate: This type of rebate specifies a rebate factor (percentage or amount) based on the purchase threshold levels you defined during a specified time period. Increases in purchased amounts can reach a higher threshold level, which changes the rebate factor for additional purchases.
Retrospective rebate: This type of rebate specifies a rebate factor (percentage or amount) based on the purchase threshold levels you defined during a specified time period. Increases in purchased amounts can reach a higher threshold level, which changes the rebate factor for additional purchases as well as all the purchases to date, within the specified rebate period.
Growth bonus rebate: This type of rebate is based on a specified increase in purchases for a specific item or item category. For the growth bonus rebate, the user needs to be able to define the items, item categories, or both that will be considered for the growth bonus, the target percentage increase or growth that will trigger the rebate, and the purchase amount or quantity for each item or category that will be the basis to determine the growth percentage. The purchase volume for the current period will be compared to these values to determine whether the growth targets were achieved.
Marketing contribution rebate: This type of rebate is based on amounts, with the rebate amount being based on amount or percentage. Unlike the other rebate rules types, the marketing contribution is independent of the purchase transactions. It's a one-time rebate for the life of the rebate agreement.
Flat amount rebate: This type of rebate specifies a flat amount based on the purchase threshold levels you defined during the rebate agreement life. Flat rebate amount can be either prorated or not prorated.
Vendor Rebate Association with Purchase Orders
The vendor rebate assignment with purchase orders is another crucial area. When a purchase order is created in PeopleSoft Purchasing, the vendor rebate agreement association will automatically occur. However, due to business constraints in the business world, vendor rebate assignment when the purchase order is created might not be possible due to the availability of the vendor rebate agreement. This is similar to the beginning of a new rebate agreement period when purchase orders need to be released but the vendor rebate agreements are still in a negotiation phase with the supplier.
To support these types of exceptions, the vendor rebate functionality includes the Backdate Vendor Rebates component. Using the Backdate Vendor Rebates component, you can:
Associate vendor rebate agreements with one or more purchase order lines at the same time.
Dissociate vendor rebate agreements from one or more purchase order lines at the same time.
Modify associated vendor rebate agreements line by line for purchase orders.
Vendor Rebate Claims Management
One of the last steps in managing a successful vendor rebate program is to be proactive in claiming rebate amounts from the supplier. When rebates are accrued, you can generate claims for the accrued rebates and inform suppliers of the rebate claims and payment terms. To assist suppliers in paying rebates, suppliers can pay for the rebate using a variety of settlement methods: adjustment voucher, check, credit memo, direct debit, draft, and electronic funds transfer (EFT).
PeopleSoft Purchasing provides you with the claims management workbench to assist you with the management of claims and the payment process for these claims. The claims management workbench enables you to:
Review, approve, and generate a formal claim to send to the supplier.
Settle a claim.
Reconcile incoming payments.
Defer a claim to the next payment cycle.
Create deductions or reverse deductions to accommodate overdue payments from the supplier.
Overall, the claims management workbench enables you to track what rebates have been paid and what is due from suppliers. This helps ensure that organizations collect rebate claims in a timely fashion and results in cost savings.
The claims management processes integrate with PeopleSoft Payables and PeopleSoft Receivable to complete the payment cycle.
See Understanding the Rebate Accrual Process.Defining Vendor Rebate Agreements
See .
Vendor Rebate Effectiveness Evaluation
The final step in managing a successful vendor rebate program is evaluating the profitability of the vendor rebates that are offered from the suppliers. Reviewing this type of information from time to time enables you to make adjustments to the vendor rebate structure and gives you the necessary information so that you can plan and carry out profitable rebates in the future.
PeopleSoft Purchasing provides you with the rebate analysis workbench to assist you with evaluating and determining the effectiveness and profitability of a vendor rebate. Using the rebate analysis workbench, you can perform multiple inquiries to analyze vendor rebates. You can perform rebate threshold analysis and time period analysis, view purchase orders that have not been received that are associated with the vendor rebate, and view accrued rebate details.