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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Contents Target audience

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Demo scenario

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Background

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Demo overview

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Demo data and instructions

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Demo instructions

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Demo pre-steps

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Demo step-by-step

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Demo 1 – Review a vendor rebate agreement

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

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

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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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