Rebates are payments or credits that are payable to customers based on pre-established agreements to purchase certain items in specific quantities or amounts.
There can be distinguished between three Rebate types in process manufacturing:
- Rebate – The rebate type is typically processed by sending a check to the customer or by deducting the rebate amount from the customer’s invoice. This type is by far the most used. In reality, there is not much difference between the Rebate Type vs. the TMA Type. Often it is classified differently purely for reporting purposes because often it will get paid via some kind of marketing budget.
- TMA – The Trade and Merchandising Allowance rebates accrue until they are passed on to the customer, which is usually processed by a credit note (however, the system is still flexible enough to allow a payment via check if needed).
- Freight – Freight rebates accrue based on region and are not passed to the customer. They are used only for reporting.
For every Rebate Agreement, a Payment type has to be defined. The payment type determines how the customer receives compensation under the rebate agreement. The customer can receive payment through accounts payable, customer deduction, trade spending, or freight. Important to know is, that validation conditions exist between the Rebate program type and the payment type.
- A rebate agreement with a rebate program type (defined by rebate program ID) “Rebate” is required to have a payment type of “Pay using Accounts Payable” (Which used to be called Check) or “Customer Deductions” (which in effect is a credit).
- A rebate agreement with a rebate program type “TMA” is required to have a payment type of “Trade Spending“.
- A rebate agreement with a rebate program type “Freight” is required to have a payment type of “Freight“.
This setup is really indicating how the rebate agreement should be paid to the customer. In reality, the actual payment process for a rebate agreement of type Rebate or type TMA is no different. From the customer form, one can pay the customer either with a credit or cut a check through Accounts Payable (AP).
One major difference with the TMA type is the option to create a Manual or Free Rebate using a Rebate program ID with type TMA. This would support marketing activities, that doesn’t have to be based on sales orders coming in. It could purely be based on the customer performing a marketing event (i.e. advertising a product on an end aisle display). So for example, the user will pay Customer A $150 for putting a product on an end cap. Once the proof of performance is received, the user would then go to the customer and pay the amount either as a credit or cut a check. This is not based on any sales orders.