RM504 – Driving Customer Loyalty and Efficiency: Standard Rebates with Invoice Deductions in D365 SCM

Introduction

Rebate Management in Dynamics 365 Supply Chain Management (SCM) provides businesses with powerful tools to incentivize customer loyalty, drive sales, and ensure financial transparency. Among the available rebate types, the Standard Rebate is the most commonly used, offering a flexible way to reward customers based on sales volume or value.

For a car part distributor selling products like brake pads, Brake Pads, and suspension components, using the Standard Rebate type with the Customer Deduction payment method allows the rebate amount to be deducted from the customer’s future invoices, streamlining financial operations.

What is the Standard Rebate Type?

The Standard Rebate type allows you to offer rebates based on specific criteria such as:

• Sales volume: Reward customers for buying a minimum quantity.
• Sales value: Offer rebates based on achieving a specific purchase threshold.

With the Customer Deduction payment method, the rebate amount is applied directly to the customer’s account and is deducted from their subsequent invoices.

Scenario: How the Standard Rebate Works

Automotive distribution business wants to encourage customers to buy Brake Pads in bulk. You offer a 5% rebate for customers purchasing 500 Brake Pads or more in a month. Instead of issuing a separate payment for the rebate, the system automatically applies the rebate as a credit to the customer’s next invoice.

Key Steps:

1. The customer purchases 600 Brake Pads at £20 each, totalling £12,000.
2. The system calculates the rebate as £600 (5% of £12,000).
3. When the rebate is settled, the customer’s next invoice is reduced by £600, simplifying the process.

Steps to Configure Standard Rebate with Customer Deduction

To implement this in Dynamics 365 SCM:

Prerequisite:

1. Price attribute group

• Navigate to Pricing Management > Setup > Price attribute groups > Create New > ‘Only Category attribute is required’

2. Create Price Component code

• Navigate to Pricing Management > Setup > Price component codes > Assign price attribute group created above

3. Setup Price Trees

• Navigate to Pricing Management > Setup > Price component codes > Price Trees > Setup pricing tree structure

4. Create Rebate Agreement Type

• Navigate to Rebate Management > Setup > Rebate Agreement type > Assign ‘Customer Rebate’ price component code created above

5. Assign Category to Released Products

• Navigate to Product Information Management > Setup > Category and attributes > Category Hierarchies > Choose your default hierarchy > Add Products (Or this can be imported using data management)

Step 1: Set Up Posting Profile for Customer Deduction

• Navigate to Rebate Management > Setup > Rebate Management Posting Profiles.
• Create a new posting profile with:

• Link this posting profile to the rebate deal.

Step 2: Create and activate Rebate Deal

• Go to Rebate Management > Rebate Deals > Customer Rebate deals > +New

• Add line details for Product group selection

• Setup Rebate management details

• Rebate to be claimed once a month

• Rebate is eligible for order quantity above 500 in a month

• Rebate is specific to Site and Warehouse

• Submit it to workflow (Must!)

• Workflow sets agreement deal to active and change status to Agreed

Step 4: Process Sales Order Transactions

• Record the sales order for 600 Brake Pads.

• Track Rebate from with Sales order: Sales order lines > Price details

• Post the invoice.

Step 5: Process Provision and Rebate Transactions (this step is optional)

• Process Provision: This involves calculating and creating accruals for the expected rebate amounts based on qualifying transactions. These accruals are not yet posted to the general ledger but are set aside as provisions.

• Process Rebate Management:  step calculates the actual rebate amounts based on the qualifying transactions. It generates the necessary transactions that reflect these rebates, ensuring accurate calculation and preparation for posting.

• Both provision and Rebate management transactions are visible under transaction screen

Step 6: Post Provision and Rebate Transactions

• Provision Post: This step finalizes the accruals by posting them to the general ledger. It ensures that the financial impact of the expected rebates is recorded in the company’s accounts.

• It creates general journal for posting

• Rebate Post: This final step posts the calculated rebate transactions to the general ledger. It records the financial impact of the rebates, completing the rebate management cycle.

• It created general journal for posting

• Verify posted transactions:

Step 6: Tracker Customer balance deduction

• Navigate: Customer record > Transactions
• Rebate is processed as Credit Note for customer

Benefits of Standard Rebates with Customer Deduction

1. Simplified Financial Operations
   Rebate amounts are automatically applied to reduce customer invoices, eliminating manual payouts.
2. Improved Customer Loyalty
   Offering tangible rewards, such as discounts on future purchases, strengthens relationships with customers.
3. Enhanced Financial Visibility
   Rebate provisions and settlements are tracked in real time, ensuring accurate reporting of expenses and liabilities.

Example in Action

Scenario:

A customer purchases 600 brake pads at £20/unit, totalling £12,000. The rebate deal offers a 5% rebate for orders over 500 units/month.

• Rebate Calculation: £12,000 × 5% = £600 rebate.
• Settlement:
  • The rebate is posted as a credit to the customer account.
  • The next invoice for £1,000 is reduced by £600, leaving a balance of £400.

Conclusion

Using the Standard Rebate Type with the Customer Deduction payment method in Dynamics 365 SCM is an efficient way for car part distributors to manage rebates. It reduces administrative workload, improves financial accuracy, and rewards customers effectively by integrating the rebate directly into future transactions.

By implementing this strategy, your business can foster customer loyalty while maintaining complete control over rebate operations.

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