A vendor rebate is a type of vendor allowance or incentive in which a part of the purchase price is returned by the seller(vendor) to the buyer(company) when a specified quantity or value of goods has been purchased within a specified period.
Business scenario:
A company qualifies for a monetary reward in return for achieving preset purchase targets. Payment terms are monthly based on the recorded purchase invoices.
Walkthrough:
First off all, you will need to create a contract
Create new Vendor rebate agreement (Procurement and sourcing > Vendor rebates > Rebate agreements)
In the Cumulate purchase by field select Invoice to calculate the rebate amount every time that a purchase order line is invoiced
In the Approval required option set to No, since we don't want a owner approve the rebate claims before a rebate can be accrued or paid out.
Set the Accrual account and Expense account fields that will receive accrued amounts during the intermediate stage between approval and processing.
Under Line tab in the lower part of the page select the products that qualify for a rebate program.
In the Rebate line break type field select the Quantity. Enter 1 in the From value field and 3 in the To value field. In this case, the rebate amount applies when you purchase one or two items, but not when you purchase three items.
Click Validation button to validate the agreement. After validation agreement would be closed for editing.
Note: If you need to change the agreement, click Validation button and check Remove validation flag. It will work if you don't have unprocessed claims.
The next steps is to buy products that qualify for a rebate program and generate a claim.
Create new Purchase order
Add line that was added to the Vendor rebate agreement
Click Purchase order line > View > Price details > Rebate FastTab to see rebate amount
Note: If you cannot see Price details option, navigate to Procurement and sourcing parameters page, on the Prices tab, on the Price details FastTab, set the Enable price details option to Yes.
Once purchase order is invoiced, royalty claim will be generated.
To view all the claims, select Procurement and sourcing > Vendor Rebates > Rebate claims.
If Approval required option was set to No, rebate claim will be automatically processed (status is Completed), a vendor invoice for the rebate amount will be created and posted. As a result, the vendor's payable account is debited, and the Purchase expenditure for expense account for the category defined in the parameters is credited.
If Approval required option was set to Yes, rebate claim will NOT be automatically processed. A/P clerk must complete the rebate claim. On the Rebate claims page, on the Action Pane, A/P clerk needs to select Approve and then Process buttons. The following events occur upon process:
- the claim's status is changed to Completed:
- A Rebate accrual journal posting has reversed the previous interim amounts on the accrual and expense accounts.
- A vendor invoice (credit note) for the rebate amount has been created. the vendor's Payable account is debited, and the Discounts and Allowances received account is credited
