Accounting is an essential business practice for all businesses, big and small. Often, key people in businesses don’t have the know-how or experience to manage their accounts, and why would they? They have expertise in operations, sales, marketing and much more.
It is vital that accounts are managed properly, and rebate accounting is no different. Here we would like to highlight a few of the biggest and most common rebate accounting mistakes, what the consequences of those mistakes are, and how to avoid them in the future.
What mistakes can occur?
Each rebate contract needs to be clear for a business’ finance, buying, and sales department. However, if rebates aren’t managed properly, information and documents can be lost in spreadsheets, or hidden away in filing cabinets or document folders. This can make it impossible to input new financial data.
As mentioned above, using spreadsheets and other manual processes puts responsibility onto the individual, rather than the technology. This means that a lack of concentration when inputting data, or human error, like putting an extra 0 on the end of a figure, can occur. This will affect all rebate calculations to follow, making any results inaccurate thereafter.
The audit trail
Once a rebate contract has been agreed, the audit trail is significant. Human error caused by manual auditing can lead to anomalies in supply and purchase records, as well as leading to issues in rebate claims.
Trading agreements might be in effect for a long time so data must be current and correct. It’s quite likely that the full worth of earnings will not be collected if data isn’t accurate and clear, damaging both cash flow and profitability. Complex trading agreements can pose a substantial threat to a company’s finances and lead to accounting errors. If your company bases its profitability and cash flow on those trade agreements and then fails to receive the rebates it expected, the company has failed to accomplish its goals.
What are the consequences?
It is important that businesses are aware of the consequences of inaccurate rebate accounting. Here are some that can be expected:
- Disagreements about the conditions of trade agreements
- Disputes over rebate claims and calculations
- Monitoring performance against all areas of supplier arrangements is difficult
- Having to rely on a small group of people who know how to handle refunds
- Outdated, spreadsheet-based solutions built by hand
- Deals that fall short of their goals
How to avoid
As mentioned earlier on in the blog, unless you have a background in rebate accounting, it can be a major headache figuring out the maths involved. Getting in experts who have a deep knowledge and history of working with rebates and accruals can alleviate the stress. Furthermore, utilising advanced rebate solution technology, such as e-bate’s real time rebate management technology, means its users will receive automated, live results, allowing you to make immediate decisions to benefit your organisations.