Apr 03, 2020

Tips for Buyers: Setting up your Supplier Rebates

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As a buyer, accurate management of your supplier rebates can be an exceedingly complex affair. In the B2B world, your suppliers will offer rebates as a means of incentivising you to purchase more volume and lock you in for the long term. The rebate offered is essentially a discount – though one that is only paid once you as a buyer, meets a set of previously agreed conditions.

So, rebates serve to ensure the lower price is only given after you have made the full purchase volume, rather than shouldering the risk of providing the discount upfront as a reduced purchase price.

Rebate programmes are now common in most B2B industries – including pharmaceuticals, automotive, construction and fast-moving consumer goods (FMCG). They may be offered as growth incentives (where your supplier rebate applies based on incremental growth in orders), product mix incentives (to encourage buyers to make purchases across a range of products) or as various other conditional discounts. As a buyer dealing with multiple rebates from multiple suppliers – each with varying terms and conditions – managing supplier rebates is inevitably complex. Nonetheless, the effort is worth it as once the process is conducted accurately, you can ensure that you’re not missing out on claims that are rightfully yours.

In addition to the rebate itself, buyers must be sure that they really are negotiating the fairest price.  It pays to do your research to check that the price offered by one supplier, when factoring in the rebate, better than a competitor’s upfront purchase price?If you have reliable quantity forecasts, this should be relatively simple and will enable you to negotiate the best rebate deal possible. However, it’s also important to remember that the market may change during the course of the agreement with one supplier and that opportunities to make savings by switching to another may emerge.  Be aware that should you switch before you’ve met the terms of the agreement, you will lose the rebate. On the other hand, you could end up paying more for your volumes by not switching to a competing supplier just so you meet the required volume to qualify for the rebate from your existing one.

What’s more, you must be sure that you are managing rebates in such a way that you are not losing time and money chasing up claims, effectively negating the intended financial benefits of the agreement.

With so many intricate considerations and moving parts across multiple deals to contend with, it’s essential that your supplier rebates are set up, tracked and managed in an efficient and reliable way. To do so rebate management software is required to ensure that you keep a firm handle on all the figures and that the complexities involved with managing supplier rebates do not outweigh the commercial benefits they are supposed to realise.


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