Mirror images: Rebate Management for Distributors

Rebate management for distributors is double the challenge, having to manage both the rebate and it's 'mirror' image.

Distributors must manage rebates as both income and as an expense!  With very thin profit margins, distributors can't afford to miss any rebates offered from manufacturers.  With a increasing emphasis on performance-based promotional allowances, many manufacturers are moving away from off-invoice and using bill-backs and rebates. This trend places an additional burden on distributors to calculate the full rebate amounts earned, and pro-actively manage the collection of rebate funds due, either by payment or through short-pays on the manufacturer's invoices.   Distributors must manage these rebates with the same intensity and discipline as any other accounts-receivable.

CPG manufacturers manage trade promotion as an expense. Manufacturers use rebate management solutions (also called TPM solutions) to manage the rebates and allowances offered to the distributor to promote their products and brands.  From the manufacturer's perspective, these rebates are typically expenses on the their brand's Profit and Loss statements.  When the rebate and trade allowance method-of-payment is bill-back, it is critical to keep track of the incurred financial liability, what's been settled, and what's still outstanding.   While manufacturer profit margins tend to be larger than typical distributors, failure to keep track of outstanding allowances can lead to embarrassing quarter-end over-spend surprises.

Rebates and trade allowances that distributors offer to their retail customers must be managed as an expense, and shown on each product's P&L similar to how manufacturers do it.

CPG retailers manage trade promotion allowances as income.   Retailers are inundated with rebates and promotions from virtually every one of their hundreds, even thousands of vendors.  Almost every brand promotes most, if not all of their items several times a year.  When you consider that a typical grocery store has between 30,000 and 45,000 unique UPC items, it is obvious that the scope of rebate management for retailers can be overwhelming.   One of the challenges is the sheer volume of individual rebates and trade allowances to be managed in a software solution.

Distributors must use rebate management solutions to manage the income due, much like retailers.  Distributors face many of the same challenges, including the sheer scope of items and frequency of promotional events.

Distributors must have a rebate management solution that manages allowances and its mirror image!

If your organization uses NetSuite as it's ERP, iTPM is an option to consider to manage trade spending as both income and expense.

Leave a Reply

Your email address will not be published. Required fields are marked *