Rebate Management: the solution for collecting volume discounts

The first problem encountered by the buying party is that many goods and services are still being procured outside of the contracts by various departments within the organisation. “Off-contract purchases can add up to 40% in some cases," Maarten de Ru, Director Partners & Alliances at ISPnext says. "A consequence of this is that certain volume thresholds are not reached or are reached less quickly." But even when this is less of an issue, bonus agreements are by no means always followed up, he notes. “Agreements are not recorded properly. They are often maintained manually in Excel files, fed with data from a variety of systems. This is both time-consuming and error-prone. Especially when staff turnover causes certain people to leave, bonus agreements may become blurred. There is insufficient awareness within the organisation of volume thresholds and to what period of time agreements apply.”

*Rebates are also referred to as 'kick-backs or bonuses'

Missed bonus rebates can account for 0.2% of all spending. "That is money that is actually on the table," says De Ru. “But now you have to make sure this becomes money in the pocket. To do so, you need to have a good idea of what your orders are and at what point volume discounts kick in. Where lie the volume thresholds and for what period of time do they apply? You then need to keep your suppliers on their toes." To tackle this problem, ISPnext has added the Rebate Management module to its Business Spend Management (BSM) platform. "If you only have one contract with volume discounts, you could track it by hand. But for wholesalers, manufacturing companies, retailers and the food & beverages industry, there are often as many as 100 agreements active at the same time. Things will soon be difficult to keep track of. Unless you manage it centrally; then it is very easy to manage."

Disagreements over what is covered by an agreement and what is not, and the period of time within which items need to be ordered, can lead to very unpleasant conversations. The BSM platform, however, allows you to both look at the same data which is directly derived from the contracts, invoices and outstanding orders. This way, it is clear to all parties what they are and are not entitled to, and that benefits relationships.”

ISPnext is the very first BSM software vendor to integrate such a service into its platform. "This is truly unique," states De Ru. "It will transform the way organisations deal with costs and bonuses. It enables organisations to effectively manage procurement bonuses in real time. This will result in significant savings and thus competitive advantages. This is a game-changer within Business Spend Management." 

"The return on investment (ROI) is very visible," Maarten stresses. "You can now easily calculate the payback period. After all, you get instant 'cash' back. From Finance, you cash in on previous agreements which directly benefit your bottom line."

The module was developed in collaboration with users of ISPnext's BSM platform. “We are noticing that contract and supplier management is becoming more professional. From that change also comes the need to better manage bonus agreements." It fits into ISPnext's broader vision of Business Spend Management. "We focus on simplifying the way organisations manage their spending. BSM should lead to real savings. Rebate Management is the latest milestone in our mission. At the bottom line, every euro saved leads to better business results.”

This article is created in partnership with Executive Finance.nl