Discounts from suppliers can be provided in lots of different ways. Sometimes discounts will take the form of a simple price reduction when a certain quantity is purchased or a time limited special offer, in other cases suppliers may invoice at the full price before issuing a credit note at a later date to cover the discount offered. These retrospectively applied discounts are often in the form of rebates when a spend or volume is hit over a set period or cash back incentives offered by manufacturers.
There is often a balance to be struck with supplier discounts between passing it on to customers in the form of more competitive pricing, and an opportunity to increase margin. In competitive marketplaces where the same items are being sold by many companies, any opportunity to pass reductions on to customers is welcome, however if staff are working to minimum margin this can be easier said then done.
More Competitive Pricing, More Sales, Same Margin
When a quantity discount or special offer is applied the price on the purchase order from the outset is reduced, stock will be booked in at this discounted price and the sales team will know that have some extra margin available to play with if needed. However when a supplier offers discount retrospectively the purchase order will be raised at the normal price, stock will be booked in at the normal price and it will not be until the supplier sends a credit or provides the rebate at a the end of the year that the true cost is accounted for. The problem here is that although you may know from the outset you will end up with a 10% discount or rebate, if you are unable to account for this until it is received then the sales team is not aware of the extra scope they have to reduce pricing to capture sales while still hitting their margin targets.
In Version 9.4 earlier this year a feature was introduced for precisely this purpose, enabling users to apply a retrospective discount against a purchase order line. This would then allow the Purchase Order to be raised at the normal price but the discounted price would be recorded against the stock booked in against it within OrderWise so that costs, profitability margins and stock values reflect the eventual cost once the discount has been retrospectively processed. This way the sales team can work from the future discounted price immediately and make full use of the extra margin for maximum sales advantage.
For businesses that regularly receive retrospective discounts from their suppliers or know they will receive a rebate on certain items an enhancement has now been made to further streamline the method of applying these retrospective discounts to purchase orders, allowing for greater efficiency to be obtained and scope extended to areas such as rebates.
In version 9.11 of OrderWise, retrospective discount details can now be added and stored against each supplier of an item. Recorded as a % discount, this makes it ideal for now using to manage rebate agreements. Once entered, this discount % rate will be automatically brought through on to any subsequent purchase order raised with that supplier for the specified item with options as before to edit on an ad-hoc basis within a purchase order if required.
With the addition of this great new functionality, businesses regularly receiving retrospective discounts can ensure it is accurately handled, providing the sales team with true margins immediately.
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