The Rebate Tracking feature offers a method for management of "rebates" linked with your company's purchases. This feature allows for multiple rebate codes on the same purchase and for a distinction between monthly and quarterly rebates.

What is considered a "rebate?"

We use the term "rebate" a bit loosely. This feature was primarily designed for when products are purchased at a higher initial cost (or full retail) and some portion of the paid cost is later returned as a "rebate." Once the "rebate" purchase been paid, the vendor returns your "margin" back as a rebate check or credit. This feature is used to track the rebates that your company is due based on purchases, record the payments or credits received from the vendor as a result of rebate activity, and optionally adjust the cost of received goods by the anticipated rebate amounts.

•Allows for the tracking of purchase rebates by purchase and item.

•Allows for an automatic cost adjustment to the received cost of the product based on the expected rebate.

•Allows you to link vendor credits and payments (checks) to specific rebates.

•Offers an inquiry where expected and received rebates can be compared.

If your company purchases from vendors who utilize this type of "rebate," you might benefit from using this feature. Due to the nature of this type of purchase, the average cost of the goods at time of receipt is usually higher and results in a lower margin at time of sale when the rebate is not considered. The Rebate Tracking feature allows for an adjustment to the cost of the received goods in anticipation of the expected rebate.

Another type of "rebate" that vendors might offer is more typical of co-op or buying groups and is based on your company's purchases over some set period of time. Typically, these rebates are smaller amounts, are paid on a schedule (yearly, quarterly, etc.), and aren't linked to specific products. In these cases, cost corrections are usually not warranted due to the typically lower amounts and the fact that the rebate was not linked to specific products and just overall purchases. This feature was not designed or intended to be used for this type of rebate.

There are no document changes associated with this feature. An inquiry is provided; however, any reporting must be done using Crystal Reports or other methods.

Setup

Rebate Tracking is provided free of charge; however, it must be enabled prior to using and there is some set up involved which is the responsibility of your company. The following is a step-by-step summary of what is required for use of this feature:

1.Map the "Rebate Receivable" account in the Receiving Journal (Main Menu > General Ledger > Database > System Journals) to the ledger account you want to use for pending rebates. This should be an account that is only used specifically for rebates. It should not be the accrual or accounts payable account.

2.Enable the "Rebate Tracking" parameter. This is done from the Purchase Orders tab on the Parameters form (Main Menu > Maintenance > Database). A administrator type user at your company should have permission to enable this feature.

3.From the same area, you must define one or more "Rebate Codes." Codes may be up to 6-characters, include a name/description, type (indicating the rebate period... either monthly or quarterly), and indicate whether or not the rebate is applied to the cost of goods you receive.* Rebate Codes may be linked with purchases and also can be assigned to vendors. This is also done from the Purchase Orders tab on the Parameters form (Main Menu > Maintenance > Database).

4.If any of your rebates will involve specific purchases or items, you will also need to create Product Rebate Codes. These codes will be assigned to products and must be defined before use from the Code Definitions form (Main Menu > Inventory > Database).

5.Product Codes are assigned to items from Item Maintenance form's Common, Codes tab (Main Menu > Point of Sale or Inventory > Database) or by Global Modification.

6.Vendors that involve rebates can be linked with Rebate and Product Codes from the Rebate tab in Vendor Maintenance. A percentage is assigned to each distinct Rebate Code - Product Code combination. Percentages must be greater than zero. Only one instance of any Rebate Code - Product Code combination is allowed per vendor. Each vendor can have one monthly default and one quarterly default rebate code (both are optional).

*Usually, an adjustment to your product cost is preferred. The determination being whether the rebate is being used for specific purchases ("item based") where the rebate amount for an item is known and can be used to adjust the cost vs. a rebate that is based on overall purchases over a time period and is not linked with either a specific purchase or particular items.

Process Example

The following explains the expected process that would be used along with this feature (after all setup has been completed).

•When purchasing from a vendor who uses rebates, and if the vendor has a default Rebate Code assigned, the code will automatically be associated with any purchase; If no default has been set or the default is not the desired rebate code, the rebate code may be selected using the Rebate selection provided when using the Adjust (F6) function found in the Order Entry and Receipts transactions.

•As soon as goods are received, the items' average costs will based on the received cost less any eligible rebate (assuming the rebate code has cost adjustments enabled). The last receipt and current market costs are not affected and reflect the full cost of the products. The resulting purchase order document does not show rebate information; however, there is an inquiry, and prior to processing the receipt, you can view the rebate distribution by using the Adjust (F6), Rebate Entry form.

•The Receiving journal will reflect an inventory (asset) amount less the expected rebate, an accrual (liability) for the full amount (including the expected rebate), and a "expected rebate" entry for the difference.

•When the receipt is invoiced as a payable (via Billing Entry), the invoice amount will default to the full amount of the receipt (this is not reduced by the rebate). The accrual account also will default to the same "full" amount.

•At this time, the accrual account has been credited for the same amount as the Payable invoice will debit.

•After receipt, the rebate information is available in the Rebate Inquiry as "expected" rebates. A total amount is listed.

•If the rebate is an actual payment (check), the check can be entered from the Payments transaction in Point of Sale. There is a separate radio button for "rebate" checks.

If the rebate is provided in the form of a credit, a credit invoice can be entered from Billing Entry in Payables. Credit Invoices display additional fields for rebates when this feature has been enabled. Both checks and credits, allow you to designate the vendor, rebate code, month, and amount. The numeric month determines the current or prior monthly period to which the credit or payment will be linked.

In both cases, the offsetting ledger entry will be or should be the "Rebate Receivable" account. This is automatically set based on the mapping in the Receiving journal.

•After payment (check) or credit processing, the Rebate Inquiry will list any credits or payments for the selected vendor(s) and rebate codes. The monthly period that the credit or payment was assigned is used along with date selection in the inquiry rather than the actual date the payment or credit was entered.