Effective revenue management is the lifeblood of every business. However, revenue leakage remains a key challenge for commercial teams – and mismanaged rebate programmes are often to blame.
Part of the problem, as Bain & Company highlights in a recent report, comes down to the inefficient management of agreements and contracts.
Indeed, according to the management consultancy’s survey of nearly 1,700 pricing executives, only 16% express confidence that their companies have the right contract management tools and dashboards in place to track the performance of their customer agreements and audit customers to ensure contract compliance.
Most b2b companies are leaking value through their contracting practices:
(Image source: bain.com)
“Business-to-business companies are leaking large sums of cash due to sloppy contract management,” write Chuck Davenport, Pricing Expert Partner at Bain, and Justin Murphy, Partner at Bain. “All too often, after the sales and legal teams agonise over contract details and approvals, the contract goes into an electronic drawer where it cannot be easily accessed, analysed or tracked. The contract does not get codified for standard variables such as volume-triggered rebates or payment terms.”
As a result, many B2B organisations are losing large amounts of money each year and failing to realise their revenue potential.
Driving Revenue Growth with Rebates
Revenue management strategies should be fine-tuned to drive four basic outcomes:
- Sell products to more customers
- Sell more products to each customer
- Sell products more often to each customer
- Sell products for more money
To do so, there are essentially five types of sales plays B2B companies have at their disposal, as outlined in a separate report from Bain:
Rebates can and should be used to boost sales across all five categories.
By running special sales incentives to both new and existing customers, a rebate programme can drive specific types of buyer behaviour that lead to revenue growth. Value incentive rebates, for example, can be used to upsell products, product mix incentives to cross-sell, retention rebates to win back customers or reward a contract renewal, and all types of volume incentive rebate to sell more products to more new and existing customers.
However, while rebates are a fantastic tool to drive sales and revenue, they nonetheless bring added complexity to pricing strategy and indeed the whole revenue management process.
Revenue management systems need to provide instant visibility into every transaction made against rebate agreements for commercial teams to understand how they impact both the top and bottom lines of the business so they can optimise strategies accordingly.
Due to the complexity of rebate management, without having the appropriate tools and systems in place to keep constant track of which customers deserve which rebate, many organisations run the risk of making unwarranted rebate payments, leading to revenue leakage.
In addition, delays can be caused when it comes to validating customer rebate claims, resulting in disputes, late payments and damaged relationships. Additional revenue opportunities can also go to waste through an inability to analyse the data your incentive programmes generate – analyses that unlock insights into opportunities to upsell, cross-sell or target strategic customers with the right incentives and promotions.
However, as Bain has found, very few companies have the appropriate tools in place to create a single source of truth for all customer contracts and agreements and to enable the easy monitoring of sales made against them.
Improving Revenue Management with Rebate Management Software
To plug revenue leakage and improve profitability, organisations need to establish processes for streamlining rebate management – and support those processes with the appropriate digital tools.
Ideally, such tools need first and foremost to centralise all rebate contracts and agreements in the cloud, providing easy access to all stakeholders – both internal and external – and facilitate quick and simple contract negotiations with trading partners.
Furthermore, once the agreement is in place, sales teams need to be able to track sales and customer performance against those agreements, customers need access to the data so they can make accurate claims, while the finance department needs to be able to validate those claims quickly to ensure timely payments and keep relationships healthy. As such, the tool should facilitate robust workflows for all parties to audit, authorise and sign off rebates quickly and easily.
The tool also needs to provide real-time visibility into live agreements, so you know precisely how they’re affecting your bottom line in real time. Only when you can continuously track and analyse rebate data can you make adjustments that will improve revenue and cash flow and gain the insights necessary to make optimal pricing decisions on new agreements and renewals going forward.
In addition, the tool needs to automate rebate management. Manually calculating rebates using outdated systems like spreadsheets opens the door to costly errors, overpayments and lost revenue.
Rebate management software solves all these problems and more besides. In order to reduce revenue leakage and improve contract management and profitability, today’s most successful organisations are implementing comprehensive revenue management technologies.
With real-time calculation engines, configurable workflow engines and user-specific visual dashboards providing real-time insights into rebate performance, rebate management software streamlines the entire rebate management process.
Want to learn more about how rebate management software can improve revenue management? Talk to our experts at e-bate today for more information or to request a demo of our leading-edge rebate management solution.