In this blog, I will be discussing Trade Allowance Agreements and specifically the Bill Back setup on the Trade Allowance Line.
See the link below for information on setting up the Trade Allowance Header and Trade Allowance Line:
Bill-back merchandising events are used for trade allowances where reimbursement is given after purchase. One advantage to the bill-back option is the ability to select at what point during the purchasing process the customer will be reimbursed. This is also complimented by the accrual nature of such reimbursements. One customer may purchase the same item various times during the promotion, but the company has the ability to limit the interval at which it pays bill-back reimbursements.
Bill backs are a slightly more complicated process and include two separate postings. Once a sales order with a corresponding bill back trade allowance is entered, the sales clerk can see that a bill back from a valid trade allowance agreement is on the details form, in the rebate amounts fields in the margin estimations section. Once a sales invoice is posted, the corresponding bill back claims are generated for each invoice line.
Below is an example of a Bill Back Scenario:
A cell phone model is released. It is more expensive than the preceding model of the same phone since it has the latest technology.
In order to encourage customers to buy newer model, your company is offering a bill-back trade allowance of $50 for each phone purchased for all ordered quantities between 1 and 5 and 100.00 for all ordered quantities between 6 and 15.
In this example, the customer can collect their $50 when they order the phone.
On the Trade Allowance there is a Fund setup to pay a lump sum of 10,000.00 to Sparrow Retail for promoting item D0002.
Fund is setup with a Budget of 2,000, Customer Desert Wholesale, and item Litware Mobile Phones SAW M806.
The Trade Allowance Agreement is for 4/1/2015 – 7/1/2015
Customer: Sparrow Retail
Item: Litware Mobile Phones SAW M806.
Select Show >Line View to add the Bill Back
The Item and Funds tab at the bottom will default information from the Header view.
Select the Amounts tab to add the Merchandise cost
The Amounts tab looks very different from the Lump Sum. There is an Identification section and a Trade Allowance Lines section.
Calculation date type:
Created– Eligible for the rebate when the item is ordered
Requested receipt– Eligible for the rebate when the item is received
Requested ship– Eligible for the rebate when the item is shipped.
Unit of measure rebate option: Convert or exact match
Unit type: Inventory unit or Catch weight unit
Unit: Unit of measure the rebates are stored in.
Rebate line break type: Select if the tiered rebate is based on Quantity or Amount.
Cumulate sales by: Month (That way the customer can be eligible for as many purchases as they make in a month).
Payment Type: The same options as Lump Sum are available. I will select Customer Deduction.
Rebate program ID: This is setup in Sales and Marketing > Common > Rebate program > Rebate program types.
The Rebate program ID defaults from Trade allowance parameters and the Default accrual and Default expense account default from the Rebate program type.
Trade allowance lines contains the detail about the rebate.
Amount type: Select Amount per unit, Fixed amount, or Percentage. In this example we will use Amount per unit.
Enter From qty 1 and To qty 5 for our first tier and 50.00 rebate value.
Enter From qty 6 and To qty 15 for our second tier and 100.00 rebate value.
If Approval is required, you must click Internal Approved. Click Confirmed in the Action Pane.
With the Bill Back you must create the Sales order first and depending on the status of the sales order, the customer will be eligible for the rebate (in this example the customer is eligible when ordered).
Create a new sales order
Sales and marketing or Accounts Receivable > Common > Sales orders > All Sales orders
Create a new Sales order for Sparrow Retail (US-008) and add item Litware Mobile Phones SAW M806 (5306) with a quantity of 2. Add a second line with a quantity of 4.
Select each line and select Sales order line > View > Price details
Expand Rebates.
For the line with a quantity of 2, you see $100.
2 falls within the first tier of $50 rebate per unit.
For the line with a quantity of 4, you see $200.
4 falls within the first tier of $50 rebate per unit.
Invoice the sales order so the item will display in the Bill Back Workbenc
Trade allowance management > Common > Bill Back Workbench
Both of the lines should display with the same amount as was displayed in the Rebate tab of the Price details form above.
Cumulate the Rebates:
For most rebates, the first step in processing after invoicing the sales order is to cumulate. This will sum up the rebate amount during the rebate calculation. The exception to this rule is when the invoice method is selected. When using the invoice method, there is nothing to cumulate because each sales order invoice will have its own claim and the status will automatically be calculated.
The quantity of each of the claimed sales invoice line falls into the agreement's first quantity break of 1 to 5 (2 and 4) and the customer received the $50 bill back ($300 total). Because the customer purchased 6 units of televisions within a month, they are entitled to a bigger bill-back, i.e., 100 USD per unit ($600 total) as specified by the second quantity break (6-15). The claims, therefore, have to be recalculated in order to account for any cumulative effect.
This will change the Rebates to calculated
Approve the Rebates:
After cumulating the rebate claims, you can approve them for further processing
Process the Rebate:
You processed the approved rebates to post on the interim accounts
Once processed the status will change to Mark and the Infolog will show the vouchers that have posted. The claims have now been transferred to the temporary customer balance as deductions.
The rebate accrual account has been credited to represent the future liability towards the customer.
The rebate expense account has been debited in recognition of the cost incurred in connection with the sales.
Sales and marketing > Common > Customers > All customers or
Accounts receivable > Common > Customers > All customers
Find customer US-008 (Sparrow Retail). Once highlighting this customer, click collect, settle open transactions.
In the Settle open transactions form, select Functions > Bill back program
To create the credit note mark the Rebates, click Functions > Create credit note
The number of vouchers posted to the journal is one.
Go back to trade allowance management to look at the bill-back workbench and verify that our claims were set to Completed.
Financially, this implies that the customer's receivable account has been credited, and the rebate accrual account has been debited.
Note that a transaction for a negative amount of $600.00 without invoice reference has been added to the customer balance.
Voucher:
When paying the customer’s invoice, you can use the credit note to offset the invoice.
In the Payment Journal select Functions > Settlement
Mark the Sales invoice and the credit note and click Close
Purge Bill backs:
You can delete all rebates with a status of mark or completed by using the rebate purge form. However, recognize that purging rebates will not make any entries to the general ledger. If a liability is created in the general ledger when the rebate is recorded, it must be reversed manually.
In the Bill back workbench, select the Purge function.
The Rebate purge window will allow you to purge up to a certain date.
The Bill backs will be removed from the Bill back workbench
