RM505 – Enhancing Business Partnerships: Prepaid Lump Sum Rebates Through Purchase Ledger in D365 SCM

Introduction

Rebate Management in Dynamics 365 Supply Chain Management (SCM) empowers businesses to manage customer incentives efficiently. For car part distributors selling products like brake discs, the combination of Prepaid Lump Sum Rebate Deals and the Pay Using Purchase Ledger payment method simplifies upfront rebate processing while maintaining financial transparency.

Understanding Prepaid Lump Sum Rebates

The Prepaid Lump Sum rebate type allows businesses to pay a fixed rebate amount to customers upfront, rather than calculating rebates based on ongoing sales. This approach is ideal for securing long-term purchase agreements or promoting new product lines. With the Pay Using Purchase Ledger payment method, the rebate is processed through vendor accounts, allowing for clear separation between rebates and customer receivables.

Scenario: Promoting Bulk Purchases of Brake Discs

Business Context:

Your company distributes brake discs to auto service centers. To encourage bulk purchases, you offer a £10,000 upfront rebate for customers who commit to buying 10,000 brake discs over six months.

How It Works:

1. You create a Prepaid Lump Sum rebate deal specifying the rebate amount and the purchase commitment.
2. The rebate is paid to the customer upfront via the Purchase Ledger, treating the rebate as a vendor transaction.
3. Over the six months, the customer’s purchases are tracked to ensure they meet the agreed commitment.

Steps to Configure Prepaid Lump Sum Rebate with Pay Using Purchase Ledger

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

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

4.  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)

5. Assign Supplier record to Customer for Purchase invoice

• Navigate to Customer Record > Miscellaneous details > Remittance > Supplier

Configuration

Step 1: Set Up the Posting Profile

1. Navigate to Rebate Management > Setup > Rebate Management Posting Profiles.
2. Create a new posting profile with the following settings:
   • Credit Type: Vendor (since the rebate will be processed as a payment to the customer).
   • Credit Account: Specify the account used to record the rebate as a liability.
   • Provision Debit Type: Ledger (to record the rebate expense).
   • Rebate Account: Specify the expense account for tracking prepaid rebates.

Step 2: Create and activate Rebate Deal

1. Go to Rebate Management > Rebate Deals > Customer Rebate deals > +New
2. Click New and define the deal:
   • Rebate Type: Prepaid Lump Sum.
   • Rebate Amount: £10,000.
   • Commitment: Purchase of 10,000 brake discs within six months.

3. Add line details for Product group selection

4. Setup Rebate management details

• Rebate to be claimed once a six month

• Rebate amount of £10,000 as upfront payment

• Rebate is specific to Site and Warehouse

• Submit it to workflow (Must!)

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

Step 3: Create dummy Sales order to Trigger rebate payment

Step 4: Process the Rebate Payment (Optional!)

Step 5: Post the Rebate Payment (It create Supplier Invoice Journal)

Step 6: Review and Process Supplier Invoice Journal

Step 7: Verify Supplier Invoice (This invoice is settled to pay the customer upfront for the rebate.)

Step 8: Track Customer Commitments

1. As the customer purchases brake discs, the system tracks their progress toward the 10,000-unit commitment.
2. If the commitment is not met, you can choose to reclaim part of the rebate or adjust future deals.

Example in Action

Scenario Execution:

• The customer commits to buying 10,000 brake discs over six months.
• On deal creation, the system posts the following financial entries:
  • Debit: Rebate Expense Account (£10,000).
  • Credit: Vendor Account (£10,000).
• A vendor invoice is created, and the rebate is paid to the customer.

Over six months, the customer buys 8,000 brake discs, falling short of the commitment. You renegotiate future rebate terms to account for the shortfall.

Benefits of Prepaid Lump Sum with Pay Using Purchase Ledger

1. Upfront Incentives for Long-Term Commitments
   Prepaid rebates help secure bulk purchase agreements, ensuring consistent sales over time.
2. Financial Transparency
   Processing rebates through the Purchase Ledger keeps customer receivables separate from rebate transactions, improving clarity in financial reporting.
3. Flexibility in Managing Commitments
   The system tracks customer progress, allowing you to adjust future deals based on performance.

Conclusion

By using Prepaid Lump Sum Rebates with the Pay Using Purchase Ledger payment method, car part distributors can offer attractive upfront incentives while maintaining full control over rebate tracking and financial accountability. This approach is particularly effective for promoting bulk purchases of high-demand items like brake discs, ensuring both customer satisfaction and business profitability.

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