Disadvantages of using an ERP system for rebate accounting

Disadvantages of using an ERP system for rebate accounting

Firstly, if you’re reading this blog you will most likely to be familiar with what an ERP system (enterprise resource planning) is, but as a reminder it is a type of software that manages and integrates a company’s financials, supply chain, operations, reporting, manufacturing, and human resource activities into one system. Examples of ERP systems include NetSuite, Oracle, SAP, SAGE plus many more. Many ERP systems already have a way of recording contract information and a vendor rebate module or elements of purchasing software that allow for rudimentary recording of rebates owed. But we have found that there are disadvantages of ERP systems in a very complex trading environment where the standard module is incapable of modelling all the product / price / branch / margin combinations that might be required.

What are the disadvantages of an ERP system?

Although ERP systems have their benefits there can be limitations to the technology especially if your company is dealing with complex trading agreements involving rebates. Most ERP systems are at a disadvantage of:

  • modelling every aspect of a trading agreement so that all nuances of the agreement can be executed using the ERP system.
  • providing clear information at point of sale about true margins and the real cost of items.
  • providing completely transparent and auditable profit reporting at group level.

Why can't your ERP system cope with rebate accounting?

Our research has shown that there are many disadvantages of an ERP system for managing rebates to the same degree of both accuracy and simplicity as our rebate management system. The reason behind that is that rebate deals can be quite complex and fields prompting for rebate amount / percentage and rebate threshold are inadequate to say the least.

  • There are many different types of rebate calculation

Rebate agreements are created to drive growth, so suppliers will often change the agreement from year to year.  They might add other incentives like marketing support, and they may focus on a product line or category to provide exceptional rebate agreements. We have seen over 300 different types of rebate agreement — all of which need to be recorded in order to make the right claim.

  • Not all aspects of the contract can be systemized

We’ve seen many examples where a contractual agreement is a document that sits outside the ERP system and relies on manual interpretation to get the details replicated in the ERP system.  Many companies end up with some information automated in their ERP system but having to refer to paperwork or other electronic documents for other information. For some, that can be the start of their problems; the misinterpretation of contract documents and in ability to transcribe contract information into a system. For that reason, spreadsheets are often the preferred route to getting more accuracy. But spreadsheets rely on accurate information feeds and are open to manual error and problems with version control.

ERP system integration with Enable

ERP system integration with Enable

The best of breed vs ERP debate has raged ever since ERP packages became available, but a ‘best of breed’ solution like Enable has been proven to be the best option for supporting vendor rebates, and complex rebate accounting… a bold claim, let’s look at some details.

  • From a functionality perspective, SAP ERP can deal with simple rebate deals e.g. those earning rebate amounts that are either fixed or a percentage of total spend. If you start to add complexity into the rebate ‘mix’ then SAP often fails to provide a solution.
  • Rebates are generally negotiated at a group level to maximise profit margins and not all organizations or parts of the organization run from a single ERP solution. Therefore, rebate accounting needs to sit across the different ERP solutions to be effective.
  • Unlike most ERP systems, Enable offers an optimised vendor rebate management system, and has been built and updated specifically for that purpose. The needs of finance, procurement, purchasing compliance and rebate accountants have been carefully thought through and incorporated into the functionality.
  • The ERP system approach tends to be transaction-centric, whereas authoring, approving and tracking deals is a collaborative process facilitated by workflow and partner portals in Enable.
  • The approach taken when developing our rebate management system has been to put a magnifying glass on the processes around negotiating, accounting for rebates and claiming against rebate deals. Enable is designed to be flexible and enable procurement to be creative in agreeing deals.
  • The software has been developed from the ground up to deal specifically with the challenges of global rebate management, delivering a structured approach to managing complex trading agreements, supplier rebates and supplier rebate agreements. In addition to the comprehensive functionality included in Enable, the user interface has been designed specifically for the needs of finance and procurement professionals.

Enable has proven significant benefits to the businesses that use the software. The system integrates with ERP systems, and collates ERP data against rebate deals in order to calculate accurate, granular rebate earnings.  The rebate management system holds all the detailed information needed in order maintain compliance and facilitate business growth through optimised rebate management.

“4% is the number of rebates companies typically find have gone unclaimed when they first implement Enable”

Why choose our rebate management system:

  • Claim rebates owed to you
  • Avoid the use of spreadsheets to compensate for inadequacies in your current ERP system.
  • Use one system instead of multiple ERP systems that contain the information needed to negotiate and report on rebate deals.
  • Don't have to rely on the knowledge of a few people for accuracy of your deals

If your ERP system isn’t coping with the demands of your financial controller, your auditors and your procurement teams in terms of managing rebates you may want to consider a specialist rebate management system.  Find out more about Enable — designed from the ground up to integrate with ANY ERP system.

Andrew Butt

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