Safety in numbers is the well-known hypothesis that, by being part of a large group, an individual can reduce their risks and is, therefore, more likely to succeed. In the same way, buying groups typically form to provide smaller independent companies greater buying power by consolidating their purchases. While this structure can be hugely beneficial, we’ve found that it usually adds complexity to the process of managing retrospective rebates.Due to the number of members changing and volatility of small business, there can be a great variance in the purchase volume from time to time. This means that the buying group as a whole can often struggle to commit to consistent large purchasing volumes which reduces buying group negotiating power and will lead to suppliers offering lower discounts.
Rebates often enter the conversation as a mutually beneficial method, offering tiered discounts based on actual purchases. Whilst rebates are the best solution for this problem in the eyes of the buying group, supplier and buying group members, they create new challenges for all involved. This can lead to large amounts of time and energy — that could be better utilised elsewhere — being unnecessarily wasted.
Let’s dive in to the 5 rebate challenges that are faced by both buying groups and their members:
What challenges do buying groups face when managing rebates?
1. Negotiating the right deals
Good information is foundational to the ability to negotiate beneficial deals for the group or for each individual member. A system that can produce reports that can quickly be broken down and viewed by particular product or supplier, whether this is for the group or individually, can help to identify key areas to focus negotiations on that will provide maximum impact.
2. Collecting data
For the buying group to operate successfully they need a system to gather information from all group members. Group members implement a wide variety of different internal systems which can cause a challenge when consolidating data, some smaller group members may have no system for managing or storing data at all. Having a single system that can seamlessly integrate with a wide range of sources can help to solve this headache.
3. Poor cash flow
Slow processes, disagreements and human error can cause lost income and discrepancies that result in poor cash flow which can be devastating for smaller members which rely on rebate payments. In turn this can have negative impacts on the group as a whole. An automated system will provide records of all agreements and accurate up-to-date calculations that will improve cash flow, benefiting all members.
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4. Recording deals
The buying group needs to maintain a detailed record of all the deals they have negotiated and often members do not have an accurate store of deals that have been negotiated by the group and deals that may be specific to them. Having all deals in one easily accessible system can be a huge benefit to both members and the group as a whole.
5. Sharing data
Often in rebate agreements, deals will be based on aggregated group turnover. A robust system is required for all members to have a simple way of providing this data to the group and an easy way for members themselves to access up-to-date group data, so that members can claim the correct amount of rebate that they are owed, whilst also maintaining the privacy of each individual members data.
Attempting to use spreadsheets or ERPs to manage buying group rebates can increase the number of challenges even further as they are simply not designed to do this.
Does overcoming these challenges lead to increased revenue and profit?
We looked at this topic closely in our Webinar back in April. Leading manufacturers and distributors are now using rebate management software as a way to drive profitable growth.
More about buying groups + rebates
- Central purchasing: data consolidation and analysis for better negotiations
- 7 features every buying group should look for when selecting a rebate management system
- What the XLVets buying group did to improve its rebate management
Buying groups both depend and thrive on close collaboration and clear visibility of information between each member of the group and its central offices. Enable’s Enable rebate management system has a consistent track record of benefitting buying groups and is specifically designed to handle rebates in a way that no other system can. Enable was created to reduce the arduous admin process by calculating rebates accurately and providing an intuitive channel for upload and store of data.
Enable can help to reduce overheads, find lost rebate earnings and improve cash flow which will greatly benefit buying groups and their members.
To some, income from special pricing agreements, rebate agreements or market development funds is treated as a ‘bonus’. But to other companies, these rebates form a significant proportion of their revenue and therefore warrant accurate management.
How can you ensure you keep track of your rebate contracts effectively and reliably?
Our guide will give you all the information you need to implement a structured approach to effectively managing rebates and complex trading agreements.