Microsoft Dynamics AX

Vendor rebates The vendor rebates functionality helps

companies better manage their supplier

rebate programs by automating tasks that

are involved in administering, tracking, and

claiming rebates that are earned.

Demo script

Olga Turovceva Mulvad

May 2016

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Vendor rebates 1

Contents

Target audience 2

Demo scenario 2

Background 2

Demo overview 3

Demo data and instructions 3

Demo instructions 3

Demo pre-steps 3

Demo step-by-step 4

Demo 1 – Review a vendor rebate agreement 4

Demo 2 – Purchase products that qualify for a rebate and generate a rebate claim 6

Demo 3 – Process the claim and pass it as receivable to A/P 8

Vendor rebates 2

Vendor rebates

Vendor rebates help companies better manage their supplier rebate programs by automating tasks that are involved

in administering, tracking, and claiming rebates that are earned.

The demonstration scenarios in this document provide a broad overview of the feature and will familiarize you with

the typical set of steps for handling rebates. In these scenarios, several types of users who have operational and

decision making responsibilities will use the new vendor rebate functionality to perform their respective tasks:

● Registering details of the negotiated rebate agreements with individual vendors or a group of vendors

● Running the negotiated contracts through ongoing purchases and generating rebate claims

● Approving and processing the generated claims, so that they can be passed on to Accounts payable (A/P) for

collection

Target audience

The demos in this document are intended for business decision makers in enterprise companies, in capacities such as

purchase manager, chief financial officer (CFO), and accounting manager, who have the following responsibilities:

● Negotiating vendor price, discount, and rebate agreements

● Managing staff that processes rebate claims and collects payments

● Ordering inventory at the best possible prices

People in these roles are looking for ways to achieve these goals:

● Flexibly accommodate different types of vendor promotion programs and rebate conditions.

● Reduce the administrative burden and errors that are associated with monitoring promotion performance and

processing claims.

● Improve cash flow forecasts by accruing for future receivables.

● Have a quantified basis for ongoing and future negotiations with the vendor about rebates.

Demo scenario

Background

The following set of demo scenarios takes place at Contoso, which is a manufacturer and distributor of consumer

electronics. Contoso purchases a range of audio and video equipment from a group of key vendors for resale. As is a

common practice in the industry, some of those vendors offer Contoso a “pay-for-performance” monetary reward in

the form of rebates when the company achieves specific volume targets. Although those incentive programs help

Contoso maximize its profits and improve liquidity, handling and monitoring the rebates that are earned represent

an administrative burden.

Because multiple rebate agreements are running simultaneously, Contoso purchasing and financial managers are

eager to exercise better control over their vendor rebates and the cash that they bring to the company.

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The following demos illustrate how vendor rebate management supports Contoso purchasing and financial

managers in their goals.

Demo overview

Demo 1 – Review a vendor rebate agreement

This demo walks you through a vendor rebate agreement. A vendor rebate agreement is a record of a contract with a

vendor that specifies the negotiated terms and conditions under which the company qualifies for a monetary reward

in return for achieving preset purchase targets.

Demo 2 – Purchase products that qualify for a rebate and generate a rebate claim

When purchase orders are placed with a vendor that the company has a rebate agreement with, if those orders

qualify for the rebate, the program identifies the future vendor credit payments and generates claims for every order

line that is invoiced. This demo illustrates this automatic process, and it also explains how the purchasing agent can

review the expected rebates and even see the impact of those rebates on the product’s cost and profit margin.

Demo 3 – Process the claim and pass it as receivable to A/P

Generated rebate claims represent the future payments that can be expected from the vendor. Before a credit note is

issued to the vendor, the agreement owner typically wants to review the claims and approve them. In this demo,

after the purchase manager has approved the claims, the A/P administrator processes them. As a result, a credit

memo (vendor invoice) for the rebate claim amount is automatically created and posted. The credit is then added to

the vendor balance, and the A/P team can include it in the regular settlement process.

Demo data and instructions

Demo instructions

The demo scenarios are run in the USMF legal entity. The demo data in this legal entity includes setup parameters

that have been preset to support the steps in the script.

The data for demos 2 and 3 build on each other, and depend on completion of the previous demos.

Demo pre-steps

Before you start the script, make sure that the following parameters are set on the Procurement and sourcing

parameters page:

● On the Prices tab, the Enable price details option is set to Yes.

● On the Margin alerts tab, the Enable margin alert option is set to Yes.

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Demo step-by-step

Demo 1 – Review a vendor rebate agreement

Let’s start by becoming familiar with how Contoso’s purchase manager has captured the company’s new rebate

agreement with vendor US-101, Fabrikam Electronics, which is a supplier of a product range within TV sets.

● Click Procurement and sourcing > Vendor

rebates > Rebate agreements.

Currently, there is one agreement, which

qualifies Contoso for a rebate when it makes

purchases that meet these conditions:

● Item T0020, TelevisionD30042", is

purchased.

● The item is purchased from vendor

US-101.

● A minimum quantity of 10 units is

purchased.

Several fields provide more detail about the

agreement’s conditions as they were

negotiated with the vendor:

● In the Cumulate purchase by field,

Invoice indicates that a rebate claim will

be determined every time that a purchase

order line is invoiced. Purchases don’t have

to be accumulated over a period.

To make the calculation of the rebate

claim amount depend on the period, the

user must select one of the other available

options (Week, Month, Year, Lifetime, or

Customized period).

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● The Rebate program accrual account

and Rebate program expense account

fields must specify account numbers that

will receive accrued rebate amounts during

the intermediate stage between approval

and processing.

● In the Rebate line break type field,

Quantity indicates that the rebates are

volume-based. Amount would indicate

that the rebates are amount-based.

Now let’s walk through the agreement’s Lines

FastTab.

The two lines specify the quantity tiers that

grant different rebates, as follows:

● Purchases for product quantities between

10 and 19 units qualify for a rebate of

USD 15 per unit.

● Purchases for quantities of 20 units and

more qualify for a rebate of USD 30 per

unit.

Notice that the agreement status is

Approved. This status indicates that the

program can apply the agreement to

purchase orders that meet the agreement’s

conditions.

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Demo 2 – Purchase products that qualify for a rebate and generate

a rebate claim

Demo story: The vendor rebate agreement that authorizes Contoso to receive a rebate from vendor US-101,

Fabrikam Electronics, when it buys item T0020, TelevisionD30042", in any quantity above 10 units, is in place. A

purchasing agent now places an order with the vendor.

1 Click Procurement and sourcing > Purchase

orders > All purchase orders.

2 On the All purchase orders list page, on the

Action Pane, click +New.

3 In the Vendor account field, select US-101,

and then click OK.

4 On the Purchase order page, enter an order

line for item T0020 and a quantity of 30.

5 In the Warehouse field, enter 13.

6 Select the order line, and then click Purchase

order line > View > Price details.

7 On the Price details page, click the Rebates

FastTab.

On the Price details page, the purchasing

agent can see that a rebate from the valid

vendor rebate agreement for the total

amount of USD 900 is applied to the line. The

USD 900 is calculated as the line quantity of

30 units multiplied by USD 30, which is the

rebate amount per product unit that applies

when the line quantity is more than 30 units

(the second quantity break on the

agreement).

This amount is also shown in the Vendor

rebate field in the Margin estimation section

of the Price details page.

8 Close the Price details page.

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9 On the Purchase order page, on the Action

Pane, on the Purchase tab, in the Actions

group, click Confirm.

You can now invoice the order.

10 On the Action Pane, on the Invoice tab, in the

Generate group, click Invoice.

11 On the Vendor invoice page, in the Default

from field, select Ordered quantity, and then

click OK.

12 In the Number field, enter fab-12345 as the

invoice identifier.

13 On the Action Pane, click Post.

The purchase invoice has now been posted,

and the rebate claim has been generated for

the invoice line.

14 Click Procurement and sourcing > Vendor

Rebates> Rebate claims.

The next steps in the vendor rebate handling process are to review, approve, and process the claim into the

receivable.

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Demo 3 – Process the claim and pass it as receivable to A/P

Demo story: The vendor agreement owner is responsible for periodically reviewing and, as required by the

company’s policy, approving the rebate claims that are generated. After claims are approved, the A/P administrator

passes them as credit notes to the regular receivables processing.

1 Open the rebate claim.

The rebate balance amount for this claim is

USD 900 (30 units multiplied by the applicable

rebate amount of USD 30).

Note that, when a claim is generated, its

status is set to Calculated. This status is used

because the rebate is granted per invoice, not

on a cumulative basis.

2 Close the rebate claim.

3 Mark the claim, and then, on the Action Pane,

click Approve.

4 On the request page, in the Vendor field,

select US-101, and then click OK.

Message bars inform the user that a Rebate

accrual journal has been posted for the claim

amount. This posting has debited the Accrued

Vendor Rebates Receivable account for the

expected vendor credit and credited the

interim Accrued Vendor Rebates Received

account for the expected gain.

5 In the rebate list, select the line, and then, on

the Action Pane, click Rebate transactions to

see and navigate to the journal batch number

for this rebate accrual posting.

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To move the claims to the regular A/P

process, the A/P clerk must now complete the

rebate claim handling by running the Process

function.

6 On the Action Pane, click Process.

7 On the Process rebates page, click Filter. In

the Criteria field for the Vendor account

field, select US-101, and then click OK.

Together, the message bars and the fact that

the claim’s status has changed to Completed

indicate that the following events have

occurred:

● A Rebate accrual journal posting has

reversed the previous interim amounts on

the accrual receivable and expense

accounts.

● A vendor invoice (credit note) for the

rebate amount has been created and

posted.

Note: The setting of the Manual invoice

posting option on the Rebate program

tab of the Procurement and sourcing

parameters page determines whether a

vendor invoice is posted automatically as

part of claim processing or manually.

● As a result, the vendor’s Payable account

has been debited, and the Discounts and

Allowances Received account has been

credited.

Note: The Discounts and Allowances Received

account number is specified for the

procurement category that is used on the

purchase invoice line for the rebate. The

procurement category, in turn, is set on the

Rebate program tab of the Procurement

and sourcing parameters page.

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8 In the rebate list, select the line, and then, on

the Action Pane, click Rebate transactions to

see and navigate to the journal batch number

for this rebate accrual posting and also the

vendor invoice number.

9 Select the line for the vendor invoice

transaction, and then, on the Action Pane,

click Vendor invoice.

The Invoice journal shows details for invoice

number VRINV00001.

The line specifies the details of the vendor

invoice for the Commissions and Rebates

procurement category, a quantity –1, and an

amount of –900. This line represents

Contoso’s rebate claim to vendor US-101.

10 Click Accounts payable > All vendors.

11 Select vendor US-101, and then, on the

Action Pane, click Transactions.

12 Find the line for invoice number

VRINV00001.

The positive amount of USD 900 has now

been added to the vendor balance.

The process for handling vendor rebates involves multiple manual tracking tasks that are often tedious. By

automating these tasks, the vendor rebate management feature helped Contoso employees efficiently move through

the following process:

1 Generating accurate rebate claims

2 Accruing the expected receivable and interim gain in the general ledger

3 Updating the vendor balance and the income statement with the allowance that is due

In this way, the vendor rebate management feature helped Contoso employees avoid potential errors and associated

rework, and contributed to a timely positive cash flow for the company.

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