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The Deal Economy

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Forecasting rebates? Here’s 4 challenges you may come across.

Whatever industry you are involved in, forecasting the potential earnings for your business is essential in preparing for the ups and downs of the year ahead. But how do you make decisions about your budget, such as how many employees you can afford to hire or how much you can spend on marketing if you don’t know how much revenue and profit you’ll be generating?

Accurate forecasting and accurate accruals are vital to success within your business to ensure that you are aware of what the future is likely to hold so that you can appropriately allocate resources to assist in key areas. For many businesses forecasting is not a focus and even for those that make a point to forecast their future, various challenges can limit the accuracy and benefit of these forecasts.

With this in mind, let’s dive in to the four common challenges of forecasting rebates.

The rebate data cheat sheet: what are your supplier rebate accruals based on?

Supplier rebate agreements are often based on the volume of purchases of particular products. This means that in order to accurately calculate the rebate that should be accrued or collected, and to minimise the chance of disputes with suppliers it is crucial that your rebate calculations are based on accurate data.

When choosing which data to use for your supplier rebate calculation, you will likely be considering the three following options. Unsurprisingly, each of these choices have advantages and disadvantages to consider depending on your internal systems, business processes and priorities.

Let’s dive in and take a look at the pros and cons.

5 rebate challenges facing buying groups and their members

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:

The need for a system to manage special pricing agreements (SPAs)

The Deal EconomyDecember 18, 2018

Ah yes, rebate claims. An evil necessary in the land of SPAs (special price agreements). While they’re inherently necessary to realize intended profit on the sales transaction, they’re a pain in our side when it comes to handling the issues that plague the reconciliation process. But the process of reconciling product rebate claims is full of information that is largely dismissed, not getting any attention to the voice that tells us the very issues we continue to tolerate rather than fix. Let’s...

A system to facilitate supplier collaboration for building materials companies

The Deal EconomyDecember 12, 2018

We learn about collaboration from an early age. As children we quickly learn that we need to collaborate with teachers, classmates and team players in order to be successful. "There's no 'i' in 'team' is a common mantra in sports and work teams. And "supply chain collaboration" has been a hot topic for decades. Despite that, there are very few systems that enable wholesale distribution companies and their suppliers in the building materials sector to truly collaborate on their trade agreements.

Managing special pricing agreements is linked to higher margins

The Deal EconomyDecember 4, 2018

SPAs (Special Pricing Agreements) are a common vendor program in many industry sectors. The program gives a special product discount for verified sales to an ultra-competitive event where in-stock discounts can’t secure the order. SPAs trace their roots back to the 1970’s but have shown significant growth in the past decade. As B2B e-commerce now counts for an estimated 15% of all orders and grows at 8% per year, SPAs have grown significantly as price and availability are easily and quickly rese...

Seven key elements of successful trade negotiations

The Deal EconomyNovember 27, 2018

The phrase win-win is probably over-used, but I am going to use it anyway to describe the situation where both parties come out of a negotiation feeling like they have won. Let’s be honest. If you think you won and the other party (your supplier or your customer) feels they lost, then it’s not really a good situation. Price is important, but (particularly in industries like building materials distributors and grocery retailers where margins are tight) time to market, supply chain reliability, in...

From counting to measuring and managing vendor funds

The Deal EconomyNovember 20, 2018

Vendor monies that support reseller sales are big business. US-based research conducted in October 2018 estimates that, at top performance levels, distributors, dealers, and retailers use $600+ Billion (USD) in vendor funds. Projections from the EU find that approximately €500 Billion (EU) in vendor funds are similarly spent.

SIG selects Enable’s DealTrack rebate management software

The Deal EconomyNovember 13, 2018

SIG is a leading European provider of specialist building materials, with close to £3bn of annual revenues and around 9,000 employees across the UK, Ireland and Mainland Europe. As a specialist distributor, SIG plays a critical role in the construction supply chain, bringing value to its customer base across major European markets.

Managing rebates, SPAs, ship and debit claims, claimbacks, contract support, MDFs and co-op funds for wholesale distribution businesses

The Deal EconomyNovember 7, 2018

Rebates, SPAs, claim-backs, contract support are all very similar and at the same time quite different to each other. In essence they are all terms for the money that wholesalers claim from suppliers and manufacturers for selling their products. Some of the key differences lie in how the agreements are formed, whether goods are actually ever handled by the wholesaler, and how the claims are made. Collectively, they are sometimes referred to as “vendor monies”. It is estimated that, annually, the...

Buyers’ guide to rebate program management systems

The Deal EconomyOctober 29, 2018

Whilst many core business systems have some functionality to help monitor trading agreements that involve vendor rebates, most have neither the flexibility nor the extensive range of functionality that is needed to support the increasingly complex world of rebate management. For many, that lack of functionality has resulted in missed rebates and poor accrual accounting. But worse than that, if your business systems don’t support rebate management fully, then the whole purpose behind creating dea...

Best practice — systematising rebate agreements and special pricing agreements

The Deal EconomyOctober 22, 2018

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 place. A cloud based solution is ideal for multi-centred operations.

Why building materials wholesalers should invest in a specialist rebate management system

The Deal EconomyOctober 17, 2018

Companies tend to look for specialist rebate management software when they reach a point where their core business systems are proven to be inadequate. This particularly affects builders' merchants, plumbing distributors, electrical distributors, HVAC distributors and others who operate in the building materials industry. These businesses usually have to deal with a large number of complex trading agreements involving rebates, special pricing agreements, retrospective discounts, over-riders and...

Twelve things your rebate management system must do

The Deal EconomyOctober 11, 2018

We have a buyers' guide that outlines everything you should look for in a Rebate Management System, but I wanted to outline my top 12 features in this blog.

How do distributors track and manage “ship and debit” rebate agreements?

The Deal EconomyOctober 3, 2018

A ship and debit agreement enables suppliers to sell their goods at a uniform price, while distributors can react to local market conditions and lower the price they use to sell to customers without losing all of their margin.

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