{"id":23009,"date":"2022-12-13T11:15:36","date_gmt":"2022-12-13T11:15:36","guid":{"rendered":"https:\/\/mailinvest.blog\/index.php\/2022\/12\/13\/why-customer-rebates-are-like-buying-cups-of-coffee\/"},"modified":"2022-12-13T11:15:36","modified_gmt":"2022-12-13T11:15:36","slug":"why-customer-rebates-are-like-buying-cups-of-coffee","status":"publish","type":"post","link":"https:\/\/mailinvest.blog\/index.php\/2022\/12\/13\/why-customer-rebates-are-like-buying-cups-of-coffee\/","title":{"rendered":"Why customer rebates are like buying cups of coffee"},"content":{"rendered":"

<\/a>\n
<\/p>\n

\n

It may seem overly simplistic to associate the complex nature of financial accounting with a cup of coffee, but when it comes to customer rebate management this analogy makes intuitive sense for anyone who has ever tried to get a free cup of the caffeine-laced beverage.<\/p>\n

Rebates vs. discounts<\/strong><\/h2>\n

Rebates are similar to a discount. So what\u2019s the difference between them? Discounts are typically applied at the point of purchase to reduce the buying price: when you get a bill you pay the discounted value. It\u2019s all very immediate. Rebates, however, are typically applied retrospectively: there\u2019s a deferred aspect to rebates that doesn\u2019t apply to discounts. You pay the bill for the full amount then, at some later point in time, part of the amount may get returned to you. Often certain conditions may have to be met in order to get rebates such as volume-based, special pricing agreements (SPAs)<\/a> or claim-backs.<\/p>\n

Customer rebates and coffee<\/strong><\/h2>\n

To use just one rebate example, we\u2019ll turn volume-based discounts into one of the world\u2019s most-consumed beverage: coffee. When I go to a coffee shop and get one free every time I fill up my coffee card it\u2019s kind of similar. I won\u2019t receive the free coffee unless I hit that magic target. If I fall short I get nothing. Customer rebates are similar in the sense that they aren\u2019t guaranteed \u2013 or are only guaranteed if you\u2019re super-confident that you\u2019re going to hit that target. Just like when buying coffee, money flows in one direction initially. Then, at a later date, the money flows back (you get a free cup of coffee). When it comes to customer rebates, timing varies on this, but in the B2B world, rebates are often calculated annually.<\/p>\n

Why manufacturers offer rebates to their customers in the first place<\/strong><\/h2>\n

Just like that so-called \u2018free\u2019 cup of coffee, customer rebates aren\u2019t really a hand-out. They\u2019re actually an incentive to build loyalty and improve sales and market share. Think about it: you\u2019re more likely to buy a Starbucks coffee if you feel like you\u2019re earning 10% of the next one \u2013in a way, you\u2019re locked in. You get a discount, they get your loyalty. It\u2019s the same with customer rebates. And, like coffee discount cards, when customer rebates are done well, everyone benefits. Distribution to customers expands and rebate discounts increase: everyone is happy. But it requires a team effort: since distribution is complex and distributors are key to getting their products to market, improving market share is not possible without both the manufacturer \/ supplier and the distributor \/ reseller \/ customer and the distribution network that gets the product out there. In addition, sometimes customer rebates are used in non-competitive situations. Sometimes it\u2019s about changing or encouraging behavior in an industry such as trying to get people to go to coffee shops more often. You\u2019re not competing, you just want customers to buy more. And more people buying = more sales = more money for everyone. But, unlike the simple cup of coffee, the rebate equivalent of forgetting to stamp your card or deciding to only take your free coffee the next time you\u2019re in the shop, even though you\u2019ve already earned it, can have severe financial and even legal repercussions. There are many trials and tribulations of a customer rebate program<\/a> \u2013 so how can rebate accountants or financial personnel responsible for rebate management ensure they don\u2019t fall foul of risk, fraud or ignorance of regulations? It all comes down to cash flow, accuracy, data management and reporting.<\/p>\n

\n