1	MANAGING CUSTOMER REBATES Extended Lesson
2	LEARNING OBJECTIVES BY THE END OF THIS LESSON, YOU SHOULD KNOW HOW TO: Connect a customer to a rebate plan Perform rebate analysis Create rebate credit invoices Analyze accrued rebate costs MANAGING CUSTOMER REBATES
3	BENEFITS Easy to create complex rebate models Automatic rebate calculation immediately when creating debit invoices Automatic rebate cost accounting Predefined rebate plans can be granted to many customers Simple creation of rebate credit invoices Possible to create many rebate invoices at a time depending on the user parameters specified. MANAGING CUSTOMER REBATES
4	WHAT ARE CUSTOMER REBATES? A rebate is a sales incentive granted by the supplier to the customer after the customer order has been invoiced, i.e. Retrospective discount End-of-period refund MANAGING CUSTOMER REBATES
5	WHY DO COMPANIES OFFER REBATES? Companies use customer rebates as a business strategy Improve customer satisfaction Increase sales Allows to "price protect" certain product lines: selecting which models or brands to be discounted A straight price reduction on some models would have a domino effect on all products in a line The company can earn interest on the money during the turnaround time Gives customers a temporary discount on an item, to stimulate sales, while maintain its current price Avoids the negative customer reaction perceived with a price being lowered and then raised later And many reasons more… MANAGING CUSTOMER REBATES
6	WHICH ARE THE REBATE MODELS? Fix Rate Strategy with Predefine fixed rebate % from the beginning which will apply to each sales Target Rates Strategy setting sales volume targets and rates, making the rebate % dependent on the actual sales volume achieved during a period of time Combined Strategy Using a mix of both, by using first the fixed rebate % and later on, based on historical data of sales volume, recalculate the rebate % MANAGING CUSTOMER REBATES
7	HOW DO SUPPLIERS HANDLE REBATES? Sales Account manager consults sales historical data: prepares a rebate plan, discusses it and agrees with the customer The rebate clerk enters the plan in the system: rebate agreement, with Conditions Rules Terms Customer orders are processed and invoiced, triggering: Rebate transactions: calculations based on the agreed terms Accrued rebate cost postings à provision for future rebate payments MANAGING CUSTOMER REBATES
8	HOW DO SUPPLIERS HANDLE REBATES? CONT. Rebate analysis à settlements are run in a periodical basis Based on the settlements à credit invoices are created for the customers MANAGING CUSTOMER REBATES
9	CUSTOMER REBATES FLOW MANAGING CUSTOMER REBATES
10	CUSTOMER REBATES SOLUTION Basic Data Rebate Agreements Calculation of rebates: transactions Creating provision for future rebate cost Analysis: settlements Rebate invoices MANAGING CUSTOMER REBATES
11	BASIC DATA To manage rebates, you will need to set up The standard data for running the sales process: Customers, sales parts, prices, etc… Rebate Types Sales Part Rebate Groups, or alternatively Assortments MANAGING CUSTOMER REBATES
12	SALES PART REBATE GROUPS Used to group parts with the same characteristics regarding rebates Example: Paint that has a different sales part number for different colors but generates the same rebate Paper with different qualities and different prices: but with a change in prices following the same fluctuations Sales parts are connected to a sales part rebate group in the sales part window Sales Part rebate groups can be used for statistical purposes and as a control type in posting control MANAGING CUSTOMER REBATES
13	REBATE TYPES Rebate types are used for identifying the different kinds of rebates that are used Possible to define more than one type when needed to differentiate the reason or purpose of the rebate Example: Sales promotion Marketing cost contribution (for wholesalers) Channel fee contribution Rebate type can be used for statistical purposes and as a control type in posting control Will be printed in the rebate invoice document MANAGING CUSTOMER REBATES
14	REBATE AGREEMENT Contains the values and terms that apply to the customer rebates Each agreement can be connected to one or several customers à rebate receivers Multi-site agreement, company dependent MANAGING CUSTOMER REBATES
15	REBATE AGREEMENT LINES MANAGING CUSTOMER REBATES
16	AGREEMENT LINES: FIXED REBATE % Example with rebate groups: MANAGING CUSTOMER REBATES
17	AGREEMENT LINES: FIXED REBATE % Example with assortments: MANAGING CUSTOMER REBATES
18	AGREEMENT LINES: TARGETED % Example with rebate groups: MANAGING CUSTOMER REBATES
19	CUSTOMER ORDER INVOICING When printing & posting a customer order invoice Normal invoice postings are created An invoice report is created Rebates are calculated: rebate transaction based on the fixed rebate rate Rebate cost postings are created MANAGING CUSTOMER REBATES
20	REBATE TRANSACTIONS A rebate transaction is created as defined on the agreement line: For the rebate type For a rebate amount: Transactions are created for: The ordering customer Its parents, when working with hierarchies Transactions are also created for sales parts that do not give rebates Transaction rebate value = zero Used for the final settlement calculation MANAGING CUSTOMER REBATES
21	REBATE COST ACCOUNTING MANAGING CUSTOMER REBATES Provision for rebates are accounted for each time a debit invoice is posted à visible on the rebate transaction Rebate accrual cost % defined on the agreement line should reflect, as accurately as possible, the rate at which the rebate will be calculated at final settlement
22	REBATE ANALYSIS: SETTLEMENTS MANAGING CUSTOMER REBATES Rebate Settlements are analysis performed to calculate the rebate amount earned by the customer 2 Types of settlements Periodic: uses the predefined fixed rebate rates Final: uses historical data and target sales volumes with target rebate rates
23	REBATE ANALYSIS: SETTLEMENTS MANAGING CUSTOMER REBATES Can be run exclusively or combined The final subsequent to the periodic Created with a background job Started manually Scheduled Transactions are marked once they have been included in a settlement
24	PERIODIC SETTLEMENT MANAGING CUSTOMER REBATES When the company’s strategy is to refund the customer a fixed portion of the sales price Without condition of certain sales volume Consolidates all rebate transactions Occurred during a period of time as defined on the agreement Sums up the rebate amount earned by the customer on each transaction per: Sales part rebate group / alternatively assortment node Rebate type Tax code of the invoice line
25	PERIODIC SETTLEMENT: CALCULATION MANAGING CUSTOMER REBATES Consolidates all rebate transactions Occurred during a period of time as defined on the agreement* Sums up the rebate amount earned by the customer on each transaction per: Sales part rebate group/alternatively assortment node Rebate type Tax code of the invoice line (Only for companies where the tax regime is VAT)
26	FINAL SETTLEMENT MANAGING CUSTOMER REBATES When the company’s strategy is to refund the customer a certain portion of the sales price on condition that a certain value of goods is bought (target sales) Actual rebate amount due Varies according to the money volume of business done (what the customer has spent) over the period of time The total sales volume is compared to the targets as defined on the rebate agreement to determine the rebate rate to apply
27	FINAL SETTLEMENT CALCULATION: STEPS MANAGING CUSTOMER REBATES Calculate the total sales: Based on what was defined in the agreement The specific rebate group alternatively on the assortment node All rebate groups alternatively all assortment nodes Or all customer purchases Done by summing up the net amount of the Invoice lines For the time interval as entered on the agreement*
28	FINAL SETTLEMENT MANAGING CUSTOMER REBATES Compare this total sales amount to the targets as defined on the agreement line AND get the corresponding final rebate percentage.
29	FINAL SETTLEMENT MANAGING CUSTOMER REBATES Update the rebate transactions that are connected to that agreement line for that period of time with the new final rate Consolidate the transactions: Per rebate type Per rebate group alternatively per assortment node Per tax code (Only for companies where the tax regime is VAT)
30	REBATE INVOICES MANAGING CUSTOMER REBATES The ultimate purpose of the settlements is to create credit invoices as a refund to the customer New invoice type defined at company level Own number series Invoice per company, not per site For all transactions within a company Reference to the settlement As many lines as settlement lines On the invoice lines: rebate types instead of sales parts Not included in invoiced sales queries and analysis: it is not a sales
31	REBATE INVOICES MANAGING CUSTOMER REBATES When creating invoices The rebate provision, that was accumulated each time a debit invoice got posted (M204 accrued cost), is consumed If not enough provision has been done (M204), an extra rebate cost is accounted for (M205)
32	REBATE INVOICES MANAGING CUSTOMER REBATES Final settlement Credit invoice The amount credited considers whether periodic settlements have been previously invoiced If so: the invoice amount is for the difference between the final settlement amount and the sum of the previously invoiced periodic settlements. Before printing and posting the invoices, it is possible to make manual adjustments to the rebate lines. It is possible to create many rebate invoices at a time using the batch create rebate invoices option.
33	ACCRUED REBATE COST: FOLLOW-UP MANAGING CUSTOMER REBATES Accrued rebate costs is a balance account à so at some point it might be needed to perform a manual reconciliation To analyze the rebates earned by the customer, the accrued rebate costs and the unconsumed accrued rebate costs: Accrued Rebate Costs Follow-up
34	REBATES & CUSTOMER SALES FOLLOW-UP MANAGING CUSTOMER REBATES Possible to follow-up invoiced sales different dimensions, like: The revenue The cost for each invoice line Detailed information on the discounts The total rebate earned
35	EXCEPTIONS TO REBATE GENERATION MANAGING CUSTOMER REBATES It is possible to exclude certain sales from generating rebates E.g. because the price is already too good Rebate Builder: Parameter on the CO line By default generates rebates Inherited from customer price agreements Inherited from campaigns Can manually be updated, as long as the order is not invoiced
36	CREDITING CUSTOMER ORDERS & REBATES MANAGING CUSTOMER REBATES There can be 2 different reasons why you need to create a credit invoice: The price changes (price adjustment) The customer returns parts (RMA) This will trigger the creation of negative rebate transactions The formula for the negative rebate is the same as when creating rebate positive transactions The agreement used will be the one valid at that moment
37	CREDITING CUSTOMER ORDERS & REBATES: MANAGING CUSTOMER REBATES Besides creating the negative rebate transactions, the accrued rebate cost is reduced The amount is calculated as for debit invoices POSTINGS FOR REBATES COSTS
38	REBATES & CUSTOMER HIERARCHY MANAGING CUSTOMER REBATES Example: Customer A is invoiced for an order: Customer A earns rebates based on his agreement Customer ”Large Stores” earns rebates based on his own agreement Customer ”Corporation” earns rebates based on his own agreement Possible to set-up so that a parent customer’s rebates are dependent on the sales of directly connected children customers
39	REBATES & CUSTOMER HIERARCHY: MANAGING CUSTOMER REBATES To manage rebates and customer hierarchies, you will need to set up additionally: Customer hierarchy levels Customer hierarchy rebate set-up BASIC DATA
40	REBATES & CUSTOMER HIERARCHY: MANAGING CUSTOMER REBATES Example of agreement for a customer of level 1 using rebate groups: AGREEMENT LINES
41	REBATES & CUSTOMER HIERARCHY: MANAGING CUSTOMER REBATES When using customer hierarchies, you will need to set up additionally The assortment And the node level All rebate agreements for all the customers in the hierarchy will use the same set-up à in order to make it possible the calculation of the total sales volume in the final settlement WORKING WITH ASSORTMENTS
42	REBATES & CUSTOMER HIERARCHY: MANAGING CUSTOMER REBATES Example of agreement for a customer of level 1 using assortments: AGREEMENT LINES
43	REBATES & CUSTOMER HIERARCHY: MANAGING CUSTOMER REBATES When invoicing a customer order of a lower level, transactions are eventually created* For the ordering customer For the parent of the ordering customer For the parent of the parent of the ordering customer … And so forth until the highest level of the hierarchy is reached TRANSACTIONS
44	REBATES & CUSTOMER HIERARCHY: MANAGING CUSTOMER REBATES Total sales volume calculation This sum is for all children in the specific level stated on the agreement line FINAL SETTLEMENT
45	REBATES & ADDITIONAL REBATE CUSTOMER MANAGING CUSTOMER REBATES Possible to set-up an additional customer on the customer order so that he also will earn rebates on the specific order Example: Customer A is invoiced for an order, Customer B is an additional customer Transactions are created for customer A based on his agreement Transactions are created for customer B based on his agreement
46	CREATE CUSTOMER REBATES MANAGING CUSTOMER REBATES The rebate transactions shall be created without tax codes. In periodic and final rebate settlement, group them without considering the taxes. The rebate credit invoice is created for the customer (receiver) without applying taxes. After creating the rebate credit invoice, sales tax for the customer’s default delivery address can be applied to the rebate invoice by using the Set Default option in the customer credit invoice lines. WORKING WITH SALES TAX COMPANY
47	CREATE CUSTOMER REBATES MANAGING CUSTOMER REBATES Mixed tax is a combination of sales tax (address) & VAT (sales part). In rebate calculations, the VAT is handled as the pure VAT. After creating the rebate credit invoice, it is possible to apply a sales tax portion using the Set Default option in the Customer Invoice Tax Lines dialog box. WORKING WITH MIXED TAX REGIME
48	CREATE CUSTOMER REBATES MANAGING CUSTOMER REBATES VAT is used but a child tax code is connected to a parent tax code. Treat this as a pure VAT, i.e. just use the parent VAT tax code and skip the child tax for creating rebate credit invoices. WORKING WITH VAT & TAX LIABILITY SURCHARGE
49	END OF LESSON