In this use case we are looking at ways to eliminate unearned discounting by making use of automated rebate processes with accruals and payouts. Distributors use rebates to support volume growth or business retention with specific customers. However, implementing rebates can be a complicated and time-consuming process involving multiple parties. Pricefx makes it easier to set up and create the establishment, approval, documentation, setup of accruals, monitoring of performance, and payout of the rebate to the customer once earned thus making rebates the effective way they can be to achieve business objectives.
Use Case Situation Description
User Role:
Sales or Pricing Analyst
Business Objective:
Our business wants to support overall business objectives for volume growth, or business retention by utilization of rebates with specific customers. Implementing such rebates requires agreement internally and with the customer on the rebate mechanism and amount, documenting the rebate, setting up rebate accruals, monitoring performance, and issuing payouts when earned.
Complication:
Establishing, monitoring, and paying out rebates can be a difficult and time-consuming process involving many parties. Sales and pricing or product teams must come to agreement on the specific terms of a rebate and secure internal approvals while also getting customer agreement on the rebate plan. The rebate may be part of a sales contract, or separately documented between the parties in a signed letter. Once established, finance gets involved by setting up accruals to cover the amounts payable to the customer if the rebate is earned. All the parties mentioned have an interest in monitoring performance during the rebate period to see if it is working as planned, and to understand if a payout will really be made. Finally, once the rebate period is completed, if the customer has earned the rebate, finance must issue a payment to the customer within the prescribed time window or return accrued monies to earnings. All these activities can be disconnected from each other, requiring a lot of interaction to ensure the process is working well internally and for the customer.
Capability Needed:
An integrated framework to oversee establishment and approval of the rebate, preparation of documentation for execution by the customer to verify agreement on the rebate terms, setup of rebate accruals, monitoring of rebate performance throughout the agreed up on time period, and payout of the rebate to the customer once earned.
Benefit:
Achieving or exceeding performance on the targeted goal (volume growth or business retention).
KPI:
Rebate performance versus targeted objective (volume, revenue) or rebate effectiveness
Calculation:
Rebate performance = (YTD performance / targeted performance) * 100 on the desired metric (volume, revenue)
Rebate effectiveness = [(Sum of absolute value of (actual – goal) for all time periods in rebate) / number of time periods in rebate] * 100