With increasing global competition, ever-more complex trading agreements are being created.
Effective management and control of complex trading agreements that include supplier rebates is notoriously difficult. Most standard accounting and purchasing software packages will not cope with the variety and complexity of pricing strategies and rebate agreements.
But a solution that is disjointed or based on spreadsheets introduces the possibility of missing data, human error and inaccurate reporting.
Complex trading agreements provide both a challenge and an opportunity for any business.
Poor contract management will expose your business to high costs, lack of control and loss of rebate income, leading to poor margins and slow growth.
On the other hand, effective management of supplier rebates can result in a wealth of benefits including reduced contract risk and enhanced commercial value.
POOR CONTRACT MANAGEMENT WILL EXPOSE YOUR BUSINESS TO HIGH COSTS, LACK OF CONTROL AND LOSS OF REVENUE
In our experience, it is only those well-executed and managed rebate agreements that fulfill the promise of mutually profitable growth for both the distibutor and their suppliers.
In order to reach that position, the first step is to develop an effective contract management process.
So what are the keys to successfully managing complex trading agreements?
- Capture contract data systematically — enabling automated processes such as earnings calculations to avoid miscalculations and discrepancies caused by human error, as well as boosting efficiency of process by automatically generating standardised and compliant contract documents from the data.
- Centralise contract control — whilst contracts may be negotiated and managed by multiple people, maintain a centralised system across all product lines.
- Collaborate with suppliers online — ensure that a detailed audit trail is captured at all times and that both you and your suppliers are in agreement.
- Notifications and workflow — putting processes in place to notify you when targets are approaching or when contracts need to be reviewed or signed off will give you peace of mind that nothing important is being forgotten.
- Automate rebate calculations — automating calculations based on transactions and agreed contracts ensures your visibility of rebate earnings is constantly up-to-date and accurate.
- Identify opportunities and risks — automatic on-going forecasts allow you to manage the uncertainties inherent in targeted rebates.
- Implement robust reporting of forecasts, accruals and actuals. Make sure that your system can report up-to-date rebate earnings and forecasts by supplier, by time, by product line, by division, and so on.
These steps will ensure you find it a lot easier to manage trading agreements, track rebate earnings, minimise the risk of loss of data or human error, and maximise deal profitability.
There are a number of solutions that assist businesses in managing complex trading agreements.
Each has their own focus, but if many of your trading agreements include rebates or retrospective discounts, then you probably need to look for a rebate management system that is integrated with your other enterprise systems.
For more information, read our guide “Key drivers for effective rebate management.”