How today’s rebate strategists can overcome rebate complexity
Rebates can be incredibly complex. In this article, we share two examples of rebate complexity (SPA's and geographical-specific rebates) and explain how the right rebate management software can help you manage rebate complexity so you can view rebates strategically, rather than tactically, and focus on more value-added tasks, rather than mere data entry.
Why are rebates complex?
In an ideal world, rebates would be simple. If you buy a certain volume of something, you’d receive a certain discount. But rebates have become increasingly complex over the years and certain environments make them even more complex. Let’s take a look at two examples where rebates have become so unwieldy over time that rebate strategists knew the only way to manage them effectively was to invest in automation built specifically to manage complex rebates.
EXAMPLE 1: SPECIAL PRICING AGREEMENTS
Special Pricing Agreements are deals between a manufacturer and a distributor to supply products to a defined market segment at a discounted rate. Also known as SPAs, contract support, sales rebate agreements, contract claims, chargebacks, and ship and debit.
Director of Product Management, Andy James explains why they are so complex, “While special pricing arrangements are based on a simple principle — mutually agreed funding of specific discounts to end customers — they usually involve a high number of fast-moving agreements coupled to complex rebate management processes. That’s why it’s crucial for manufacturers and distributors to move past digital spreadsheets, physical documentation, and other rudimentary forms of data collection and tracking. Special pricing can result in unprecedented flexibility and improve relationships, but it has to be operated efficiently”.
One of Enable’s customers, Charles Pearce, Commercial Manager at Polypipe, talks about the challenges of managing SPAs, “They have very complex information and require a lot of activity so it’s very important to be able to evaluate and optimize the profitability of SPA’s but like everyone else we manage them using spreadsheets and manual calculations. With inconsistent claim formats, significant manual manipulation and calculation has to be done and it’s difficult to provide partners with a clear visibility of the SPAs agreed”.
EXAMPLE 2: CUSTOMER STORY - BALFORD
The second example of rebate complexity comes from Chris Morris, Director of Commercial Operations at Balford. Balford has a large number of clients to support as part of their corporate food services. In Pennsylvania, Balford operates as a dairy distributor, and in this context, rebates are both geographically specific as well as product and volume specific. In this video, Chris explains, “having to have those rebates in place for each one of their locations as well as being able to get it to the corporate location, as they grow, becomes more complex. With the dairy, we take on additional customers that are eligible for additional layers of support that we have to manage.”
Chris was looking for a more efficient way of managing their rebates and discovered that while ERPs promised they can handle rebates, their facilities for handling complex rebates were limited. For example, he says, “It's a very sales or revenue focused activity. It didn't allow you to change to a percentage base or to have volume-based it was purely sales-based”. Only with significant customizations, would the ERP be able to handle these complex rebates. Chris explains why they decided to move to Enable, below.
“Ultimately, we want to get to more self-service type applications. We want the customers to own their own experience versus us having to direct them and that was one of the big gaps we had in our legacy system and that was one of the reasons why we made a change both to our ERP and to our rebate platform.”
In Chris’s case, the complexities of geography were critical to manage. He explains, “If their locations were to purchase something not on that list they wouldn’t have to pay us for that. So being able to really limit the scope of products that they even have visibility of was key: To make sure that not only can't they place an order for them but also, on the Enable side, we're not going to rebate those products mistakenly on top of that.”
Why having a strategy helps with rebate complexity?
Kyle Haas, Solutions Consultant at Enable explains that there's a movement, now, to acknowledge the importance of rebates as more of a strategic tool that can add genuine business value. “These are actually a strategic sales lever and we can start capitalizing on these and switching from more of a reactive state to a strategic state,” Kyle explains.
But, as the best strategists know, and Max McKeown says in The Strategy Book, strategy enables a business to answer the questions: What do we want to do? What do we think is possible? What do we need to do to achieve our goals? When should we react to new opportunities and adapt plans? Strategy isn’t a one-off activity, but taking strategic actions (like using tools that manage complex rebates) makes a big difference.
Those leading the way in the Deal Economy know that the true benefits of managing rebates strategically aren’t just recouping unpaid rebates or avoiding overpaying them, it is about avoiding lost opportunity costs, employee burnout, and a lack of visibility. More importantly, it’s about having more time to improve efficiency.
As Karl continues, “With complex deals, it’s easy to start seeing a lot of time and resources going into administering the deals rather than necessarily getting the most out of them. What we see sometimes are actually some very qualified people who are essentially doing data entry. I think, at that point, it's an important consideration as to whether you can be better utilizing that resource by letting a system handle that data admin and letting them apply their skills to getting you a better commercial outcome.”
Why are rebates so important for sound business?
In a webinar interview with Tim Foster, BDO said, “If you look at it from the perspective of finance, procurement and operation teams, they’ve all been forced to reevaluate their revenue streams.” He explained that the vast majority of his clients have been looking at how they can
- make their revenue streams either more effective and efficient, or
- looking at different types of revenue streams that they may not have previously tapped into before.
“They’ve been rethinking their revenue, creatively and strategically, and optimizing all of the revenue streams across the organization as well as looking at minimizing any sort of compliance risks and audit mistakes” using rebates as a foundation, he explains.
How Enable supports complex rebates
In the past, organizations have relied on spreadsheets with complex formulae or rebate modules within their ERPs which require significant modifications, to manage the complexity inherent in B2B rebates. Now there’s another way: rebate management software.
With a really user-friendly, browser-based interface and accounts that provide only the right level of access, Enable has an agreement library and built-in rebate calculation mechanisms. We can configure the system to relevant currencies and keep an activity log of key user actions. We have a collaborator portal that makes contracts accessible to all trading partners and a great set of reports – including on program earnings, daily earnings, and transactions. You can upload and reconcile transaction data manually, or in an automated way, allocate cash to relevant debtors or creditors easily, track their history and make manual adjustments, if necessary. We also help with forecasting and accruals management.
In essence: Enable’s cloud-based rebate management platform will help you take full control of your rebate programs. As a result, you’ll be able to sell more competitively, optimize purchasing and pursue the long tail of rebates as all partners involved in the rebate relationships can move towards profitable growth, together.
If you want to investigate further, take a look at our customer stories to see how the world’s leading brands are driving profitable growth with Enable. Then, when you’re ready to get started, try Enable – for free.