Best Practices for Systematizing Rebate & Special Pricing Agreements

Best Practices for Systematizing Rebate & Special Pricing Agreements

In this blog, we are going to focus on the system requirements for configuring, storing, monitoring, reviewing and operating rebate deals or special pricing agreements. For the sake of efficiency and audit tracking, and to avoid unnecessary disputes, all elements of pricing agreements should be stored in one single source of truth.

Accessible for all

The software should provide a central repository that (with appropriate security settings) is accessible to all finance, admin, procurement and commercial staff who play a part in administering, managing or otherwise working with these agreements. Separate documents, notes, spreadsheets, or information held in different systems should be avoided. The system should hold everything about the agreement without having to refer to separate systems or paperwork, for example:

  • Stock items, pricing and agreement deals
  • Supplier details
  • Approvals
  • Payment terms
  • Environmental charge
  • Standard conditions


The software should provide the ability to add notes to the deal after it has been agreed. (but, importantly, without changing the original deal document)

Version control

It should be clear which agreements are live, old or at proposal stage.

Online approvals

There should be an integrated online approval system that can be used both internally and externally (with suppliers) to create both proactive approval requests and an audit trail of responses.

Systematized pricing strategy / modelling

Systematization is important to avoid disputes over what was agreed. Rather than a lengthy written description of the agreement, which could be open to interpretation at a later date, it is better to be able to describe all the deal dimensions through a software solution that provides enough flexibility to record even the most complex of situations. A simple time frame, quantity and volume discount is insufficient in most cases.  The software needs to be able to model a wide range of deal mechanisms, including for example:

  • Guaranteed rebates
  • Incentive rebates
  • Growth rebates
  • Marketing funds
  • Price/margin support
  • Fixed percentage rebates
  • Fixed value rebates
  • Rebates based on unit volumes
  • Targeted rebates with different types of target bands
  • Retrospective target bands
  • Non-retrospective target bands
  • Growth deals where the rebate is calculated on the growth element only
  • Strung rebates where the rebate on one product is dependent on the turnover of another
  • Separate target and earnings - where the target is determined by all products in a range, but the earnings are only calculated on certain products

This is not a definitive list.  The principle is that the system should be easily configured to cope with any deal attributes that are required.

Agreement documentation

The system should be able to produce a PDF of the agreement containing all of the systematised information.  In other words, there should never be a reason to produce a spreadsheet or other document containing information that is pertinent to the deal.

Deal reconciliation flexibility

Deal negotiations don't always go to plan, and as a result there can be times when there is a gap between the old agreement and the new one.  It is useful if the software allows users to make purchases under the old agreement, but then reconcile to the new agreement once it has been signed off.

Maximizing rebate claims, simplifying admin

When the deal is set up, all the items included in the deal should be tagged accordingly to facilitate rebate claims.  But, with thousands of stock items in play, and many more added on a daily basis, matching stock items to deals can be a time-consuming process.  Missing this process means missing out on rebate claims. To aid this task, the system should work on an agreed series of category codes, with each deal covering one or more category codes.As new stock items are added to the system, the user should tag them with the appropriate category code.  At that point the system should suggest to the user which which deals could be matches to the category of item being loaded to the system.  In this way, rebates are maximized and administration is minimized.

Andrew Butt

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