Money in a contract drawer
The drinks deal was negotiated two years ago by an ops director who has since left. It includes a rebate per unit on draught and a bonus if volumes grow. The food service contract pays a retrospective percentage each quarter, as long as the group buys enough of certain lines. Finance knows rebates exist. Nobody knows exactly how much is owed, and the supplier's statement, when it comes, is accepted because nobody has a figure to check it against.
Some quarters the rebate does not arrive at all, and nobody notices for months. When somebody finally asks, the supplier's account manager has changed, the statement cannot be found and the conversation starts from nothing. Finance writes it off as too hard to chase, and the next quarter the same thing happens.
Why rebates are so easy to lose
- Terms are buried in contracts or email threads, often with tiers and exclusions.
- Volumes are spread across many sites and several distributors.
- Sites that join or leave the group change what counts.
- Rebates are paid in arrears, sometimes as credit notes, and are hard to match to periods.
- The person who negotiated the deal has moved on, and the knowledge went with them.
Suppliers usually calculate rebates on their own records. That is not a criticism, but it means nobody on your side is checking.
What goes missing
The direct loss is rebates not paid, paid late or paid at a lower tier than earned. There is also a missed chance to steer buying. If a site is close to a tier, purchasing could shift volume to reach it, but only if someone can see the position during the period. And when contracts come up for renewal, the group negotiates without knowing what the last deal was actually worth.
How we track rebates across the group
- We record each rebate agreement: supplier, qualifying products, sites, period, tiers, rates, exclusions and how it is paid.
- Purchase volumes are read from invoices, supplier data or distributor statements for every site, and matched to qualifying products.
- Accrued rebate is calculated as the period goes on, with progress towards the next tier shown.
- At period end, a claim summary is produced with the volumes and calculation behind it, for finance to send or to check against the supplier's statement.
- Payments and credit notes are matched against expected amounts, and gaps are flagged.
- An accrual figure is available for month-end reporting if finance wants to use it.
| Agreement detail | Why we record it |
|---|---|
| Qualifying products and sites | Only the right volume counts |
| Tiers and thresholds | Shows how close the group is to the next rate |
| Period and payment method | Reminds finance when to expect money |
| Exclusions | Stops over-claiming as well as under-claiming |
How rebates are treated in your accounts is for your finance team and accountant to decide. We provide the numbers and the trail behind them.
After the change
Finance has one list of every rebate agreement with the amount expected and when. At quarter end, the claim is prepared from real volumes, and the supplier's figure can be checked line by line. Purchasing can see mid-period which deals are near a tier. When a contract is renegotiated, the group knows what the old one delivered.
New sites are added to the qualifying list the week they open, and sites that close drop out, so the volumes stay honest. The knowledge that used to sit with one person now sits in the agreement record, where the next ops director can find it.
Is this happening in your group?
- Nobody can list every rebate agreement the group has.
- Supplier rebate statements are accepted without being checked.
- Rebates sometimes arrive late or not at all.
- Tier thresholds are only discovered after the period ends.
- The person who negotiated the deals has left.