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laddnichols
Level 1

Vendor Product Rebate Handling

Can anyone help?  Our Vendors sell us products at a stated distributor cost.  However, they give us a REBATE contract with product costs at a lower cost that we can use for CERTAIN customers (only approved customers, i.e., membership). When we purchase the product, we pay the stated distributor cost. When we sell the product to these CERTAIN customers , they allow us to use the lower contracted REBATE cost as our cost that we use to set our margin from.  Then we submit "tracings" to the vendor for each product and sale for these approved customers.  With that they send us a check for the difference of the stated distributor cost and the contracted REBATE cost.  Here is an outline of how it works for a particular product:

 

  • Stated Distributor cost for product:                                            $83.00
  • Contracted Rebate cost from Vendor:                                     - $37.00
  • We submit the tracings to vendor and they rebate:               $46.00

How do we handle this in QuickBooks? For the following:

 

The product? I would like to recognize the true lower cost ($37) of the product for these sales and show the profitability at our sale price.  We may sell it for 30% margin, above the contracted rebate cost. Most of the sales will be from the contracted rebated cost, but not all.  The only way I can figure is to set the item up 2 times in QB, one at the contracted rebated cost and the other at the distributor cost.  Then make the sales to the types of customers using the correct product, (the only difference would be the cost and a designator in the item number to make it easy to track.  Is there a less cumbersome way to handle this? Each of these vendors may have 100's of codes that we have to set up.

 

The REBATE check? How do we handle the rebate check, if we want to make sure it hits the correct products and customers?

 

We are a medical supply distributor and this is common practice in the industry, I am sure there are other QB users who have come across this issue...please help???

Solved
Best answer February 27, 2019

Best Answers
Rustler
Level 15

Vendor Product Rebate Handling

@laddnichols 

 

In QB the item has a cost, cost is what you pay for it, that is true in accounting too.

You did not pay 37, so the item cost is not changed.

You sell the item, and if that means you incur a loss on the sale due to membership pricing, that is fine. When you deposit the rebate check that will make up for the loss.

 

create an income account called rebate income and a service item named that way that links to the rebate income account.

Use that item on a sales receipt to record receiving the rebate, and deposit the payment to the bank

 

You can set up a price level list for membership pricing, and set the sales price to the membership price. That price level list can be assigned to the the customers that are members so they always get the membership price.

 

the numbers might look like

Member sales
item at purchase cost posts to COGS, 83.00
sales price for member (37+30%) posts to income, 48.10

at this point you have a loss on the P&L,
income 48.10
less cogs, 83.00
net profit (loss), (34.90)

 

post rebate check to income, 46.00
P&L now looks like
income, 94.10
cogs, 83.00
net profit (loss), 11.10

View solution in original post

4 Comments 4
Rustler
Level 15

Vendor Product Rebate Handling

@laddnichols 

 

In QB the item has a cost, cost is what you pay for it, that is true in accounting too.

You did not pay 37, so the item cost is not changed.

You sell the item, and if that means you incur a loss on the sale due to membership pricing, that is fine. When you deposit the rebate check that will make up for the loss.

 

create an income account called rebate income and a service item named that way that links to the rebate income account.

Use that item on a sales receipt to record receiving the rebate, and deposit the payment to the bank

 

You can set up a price level list for membership pricing, and set the sales price to the membership price. That price level list can be assigned to the the customers that are members so they always get the membership price.

 

the numbers might look like

Member sales
item at purchase cost posts to COGS, 83.00
sales price for member (37+30%) posts to income, 48.10

at this point you have a loss on the P&L,
income 48.10
less cogs, 83.00
net profit (loss), (34.90)

 

post rebate check to income, 46.00
P&L now looks like
income, 94.10
cogs, 83.00
net profit (loss), 11.10

View solution in original post

laddnichols
Level 1

Vendor Product Rebate Handling

 

 

thanks for for taking the time to reply. Makes perfect sense.  Appreciate the answer

SJ11
Level 1

Vendor Product Rebate Handling

Hello,

 

We need to produce report for the rebate filings. Can you please advise which report you use that has all the data for filing for the rebate?

 

Thank you

MaggieWimberly
Level 2

Vendor Product Rebate Handling

Thank you for asking this question.  We are in the exact same position.  Here is why this solution is not the best for our company.

1  The rebate comes in at least one month after the products have been sold.

2. We have hundreds of items in QB that are rebated for two reasons: we have certain membership customers that we receive rebates for and some that are rebated bc of our level of sales in dollars.

 

For years, we have been using the solution of showing a loss until the rebate is booked which then shows a profit, but the GM wants to look at the item level mostly for the second type of rebate (where we aren't charging a contracted price, but we have a back-end rebate.)  We want to be able to make quick adjustments to pricing to meet competitor's pricing without losing our shirts.  

 

One product (let's call it 1A )- we have a 5% markup (roughly), with a sales rebate from the maker that varies between 5% & 7% depending on volume purchases, etc.  But when we receive our rebate, yes, we know that item 1A has this portion of $X of the total rebate, but there are a hundred products on the list of the rebate voucher.  In our industry, our clients will switch suppliers for a dime, but sometimes lowering our cost by a dime means we lose money, which we can't do.  If we can get a more accurate historical cost after rebate income is applied, then we can make better pricing decision to remain competitive.

 

Is this something that QB can do?  We have the labor to enter the portioned-out rebate - that doesn't need to be automated.  Maybe a value adjustment against inventory, but that has to be wrong bc it would screw up the value of the inventory sitting on the shelf, yes?  

 

Thank you for helping us think out of the box.

 

Maggie

 

 

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