AX 2012 Trade allowance functionality: Rebates

In this topic I would like to go thought the rebate processing.

You can apply the presented flow to process special discounts that are paid to a customer.

Discount conditions and terms are defined in the Trade allowance agreement (in essence, rebate agreement). First of all, you will define the validity period of an agreement and then you will perform accounting for rebates. Based on the granted to the customer agreement for the specific volume of sales over a specific period of time, AX will accumulate discounts and pay them retrospectively.

For instance, you are working with the customer. You make an agreement with customer that if he buys goods for the total amount more than 1 million then you would provide a discount of 15% on total sales. Accordingly, you create a rebate agreement. Now, if customer makes retrospective sales volume, you offer them a rebate. The rebates are passed on to the customer in the form of credit notes.

To configure the Rebate processing functionality, the following settings should be done

Below are details on each of the configuration step

Rebate program types

Navigate to Sales and marketing > Setup > Rebate program > Rebate program types

Create Rebate program with the Rebate program type = “Bill back”

Trade allowance management parameters

Navigate to Trade allowance management > Setup > Trade allowance management parameters

Set Default rebate program ID: Only Rebate program types with the Bill back Rebate program type will be available for the selection in the drop-down list.

Accounts receivable parameters

Navigate to Accounts receivable > Setup > Accounts receivable parameters

Switch to the Rebate program tab.

Switch to the Prices tab.

Set “Enable price details” flag to yes.

Customer hierarchy

Navigate to Trade allowance management > Setup > Customer category hierarchy

Customer hierarchy will be used in order to select the customers that the trade allowance agreement refers to.

Product hierarchy

Navigate to Product information management > Common > Released products > Product > Setup > Product categories

Product category hierarchy will be used in order to select the items that the trade allowance agreement applies to.

Only categories with the following Category hierarchy type will be available in the trade allowance agreement:

Procurement category hierarchy

Sales category hierarchy

Retail product hierarchy

Supplemental retail hierarchy

Go to Product information management > Setup > Categories > Category hierarchy types

Deduction types

Navigate to Trade allowance management > Setup > Deductions > Deduction type

Users

Navigate to System administration > Users > Users

Link user to the worker using Relations button. This relation is used when you confirm the trade allowance agreement.

Once we completed with the configuration, we can switch to the process itself.

On the diagram below you can find the full process of the rebate processing.

Trade allowance agreement

Now let’s create trade allowance agreement. From business prospective trade allowance agreement is a contract which is drawn up between two partners (the rebate provider and rebate recipient). Inside of this contract the conditions, terms, and validity period of the agreement are specified. In a rebate agreement, you specify the rebate recipient, the rebate value and validity period of the agreement, and the criteria on which the rebate is based. You can also define amounts to be accrued.

We will do the same in AX.

Navigate to Trade allowance management > Common > Trade allowance agreements

Populate:

“Description” – summary of the contract

“Details” – details of the contract

“Order from”, “Order to” – validity period of the agreement

“Unit” – unit of measure of the goods

Expand Customers fast tab

Select customer category

Select either all customers or specific – this will be our rebate recipient.

Expand Items:

Select Sales hierarchy

Select either all items from the sales hierarchy or specific and click OK.

Click on the Line View

Click Add button on the Merchandising event group of fields

Specify Description

Default type = Bill back

Switch to the Amounts tab

Rebate program ID is defaulted from the parameters, as well as Rebate program accrual account, Rebate program expense account.

Change Rebate line break type from Quantity to Amount.

Create trade allowance line with Amount type = “Percent” and Value = 25%. This will be our amounts to be accrued.

Confirmation of Trade allowance agreement

Before a trade allowance agreement is used in sales order entry, it must be ‘Confirmed’.

Navigate to Trade allowance management > Common > Trade allowance agreements > Details > Trade allowance agreements tab on the Action pane> Status group of fields > Confirm

Once you Confirm it, the Status will be changed from ‘In progress’ to ‘Confirmed’.

Once a Trade allowance agreement has Status = Confirmed, it can’t be changed. You will need to change it back to ‘In-progress’.

Note: Once the trade allowance agreement has been used to generate rebates on sales invoices, you can’t change the status back to ‘In-progress’. In this case you will create a new Trade allowance agreement by using Maintain > Copy functionality and close the previous agreement by using Status > Closed functionality.

Keep in mind that confirmation of a Trade allowance agreement can be controlled by a workflow approval process.

Sales invoice

Bill back trade allowance agreement merchandising events do not affect the sales order invoice price

But still you can see applied rebate amount on the Price details inquiry form (Sales order line > View > Price details).

Once again, with a rebate, customer buys the item at full price, unlike discount when money is saved instantly.

Rebate amount= Unit price * Trade allowance agreement percentage /100 = 275*25/100=68.75

Change Qty on the sales order line to 2 ea

Post Packing slip

Post Invoice

When the sales order is posted, if the rebate doesn’t require approval, the system posts the rebate accrual according to the setup of the trade allowance agreement merchandising event:

On the Action pane click Manage tab and select Rebate

On the opened form click Journals > Rebate accrual journal

Click Lines and then Inquiries > Voucher

Deductions workbench

You can use Deductions workbench in the following case when customer does not wait for the rebate to be paid, but instead submits a payment which deducts the rebate.

First what you need to do is to create a deduction journal entry.

Navigate to Accounts receivable > Journals > Payments > Payment journal

Create a payment journal for the customer account and select the invoices that the payment relates to.

Click Enter customer payments

Select Offset account

Specify payment amount equal to Invoice amount

Click Save in journal

Close the form and click Lines button

Click the Deductions button

Create a new Deduction

Specify Deduction type in the Type field

Amount, which is equal to rebate amount. In our case it was 2 pieces with the unit price 275 = 550

550 * 25/100 = 137.5

When you close the form, the system adds a journal line to the payment journal.

Offset account for the line is taken from the deduction type.Deduction offset field

Post the journal by clicking Post button

Verify the voucher for the deduction line

Verify settlement

Navigate to Accounts receivable > Common > Customers > All customers > Collect > Closed transaction editing

Next create a credit note for the rebates.

Navigate to Accounts receivable > Common > Customers > All customers > Collect > Settle open transactions > Functions > Bill back program

Mark the rebates as required

Click Functions > Create credit note

Ledger journal processing was created during invoice posting

Credit note processing was created during credit note creation

Notice Journal batch number

Find that journal and check the Voucher

Note: If the rebate requires approval, you first Approve and Process the rebate on the Trade allowance management Bill back workbench.

Next one, you will need to settle the deduction to the credit note using Deduction workbench

Navigate to Trade allowance management > Common > Deduction workbench

Select the deduction and credit and click Deductions > Maintain > Match.

Status will be changed to Closed

On the Deduction event you can find the journal number

Find the journal

Go to the closed transactions

Validate the transactions

As the result, we owed to the customer 137.50 USD