Rebate Management & volume discounts: boost supplier ROI

Rebate Management is the process of managing the discounts, bonuses or refunds that suppliers grant when certain purchase volumes or conditions are met. For example, suppliers may refund a specific amount at the end of a period once an organisation has purchased a defined quantity or reached a certain spend threshold.

This process is still handled manually in many organisations, often in Excel, using data from multiple systems. This makes it error-prone, time-consuming and difficult to oversee. With Rebate Management software, all bonus agreements are centrally recorded and automatically calculated, providing real-time insight into the status of all volume discounts. “Rebate Management is fully integrated within our Business Spend Management platform, and therefore with client systems such as their ERP,” explains Maarten.

A rebate is essentially a refund, a form of volume discount that is paid retrospectively. Where traditional discounts are deducted directly from the invoice, suppliers with a rebate agreement pay back a sum at the end of a period based on the realised purchase volumes. This type of rebate agreement benefits both the supplier and the buyer. Suppliers encourage loyalty and continuity, while buyers benefit from extra margins on higher volumes. Procurement teams often refer to these as quantity discounts or retrospective rebates, all variations of the same principle. The key difference lies in timing; with a rebate, the settlement happens afterwards,.

Many organisations leave money on the table because volume discounts are not properly documented or followed up. Maarten sees this often in practice.
“Rebates are often tracked manually, using spreadsheets with data from different systems. This leads to a lack of overview, both in Procurement and Finance.” In some cases, as much as 40% of spend occurs outside centrally negotiated contracts, so-called ‘off-contract spend’. As a result, volume thresholds are not reached, or only at a later stage. Even when they are achieved, rebates are often not collected due to a lack of visibility.

According to Maarten, the amounts involved are significant. “Missed rebates can account for around 0.2% of total spend. That might sound small, but when you’re talking about millions in spend, those are substantial sums. It’s money that’s literally on the table.”

With Rebate software, the entire process of managing discount agreements becomes automated, from recording terms to calculating and collecting payments.

The benefits:

• Real-time insight into purchase volumes, agreements and progress;
• Automatic calculation of eligible rebates;
• Fewer errors by eliminating manual processes;
• Faster communication between Procurement, Finance and suppliers;
• Maximum savings by signalling rebate deadlines and invoicing opportunities in time.

“The platform proactively reminds you of deadlines and suggests ways to maximise discounts,” says Maarten. With Rebate Management, the entire process becomes transparent. Both Procurement and Finance view the same data, taken from contracts, invoices and purchase orders. This creates control, trust and efficiency within financial management.

Rebate Management forms an integral part of modern Business Spend Management (BSM). By automating rebate processes, every bonus agreement becomes visible, measurable and controllable. “The return on investment is immediately visible,” says Maarten. “You literally get cash back; existing agreements are realised and directly contribute to the financial result.”

Rebate Management was developed in close collaboration with users of the BSM platform. This ensures it aligns seamlessly with daily practice. Procurement and Finance teams can further professionalise their processes, spending less time on manual tasks and more on strategic supplier management.

For suppliers, supplier rebates are a key way to encourage long-term collaboration. Within the BSM platform, all pricing agreements with suppliers are centrally managed and linked to real purchase data. “Both parties look at the same data within the platform,” explains Maarten. “This avoids discussions about what is or isn’t part of the rebate agreements. It improves relationships and speeds up settlements.”

Through the integrated Supplier Portal, suppliers can follow the progress of their rebates in real time. This means fewer misunderstandings and more transparency throughout the chain.

Most organisations underestimate how much hidden value exists within their procurement processes. Rebates are a clear example, these are revenues that often remain invisible in financial reporting.

By digitising these processes, you can uncover areas where extra value can be achieved. The BSM platform provides insight into spend data, contracts and performance, enabling you not only to save costs but also to negotiate better terms with suppliers. “Rebate Management is the latest milestone in our mission to simplify spend management,” says Maarten. “It enables organisations to manage rebates in real time and strengthen their competitive position.”

An effective rebate programme starts with structure. These five steps will help your organisation implement successful rebate management:

1. Align: Establish clear rebate agreements with suppliers.
2. Procure: Ensure purchases fall within these agreements.
3. Pay: Settle invoices on time to maintain rebate eligibility.
4. Monitor: Keep spend data and forecasts up to date.
5. Claim: Validate and collect the agreed discounts.

By automating this process with the BSM platform, you reduce manual work and minimise errors. The result: a more efficient procurement process, greater control and higher returns on your rebate agreements.

ISPnext continues to develop its BSM platform in collaboration with its customers. The latest addition, Rebate Management, is a perfect example of this. “The way organisations manage costs and bonuses is changing fundamentally,” says Maarten. “This enables organisations to manage purchase rebates in real time. It delivers immediate savings and translates into a competitive advantage.” With this solution, ISPnext strengthens its position as the first provider to fully integrate Rebate Management into its BSM platform.

This article is partly based on publications created in collaboration with Executive Finance and Vakblad DEAL!.