We are all looking for ways to maximize profit and squeeze whatever we can from our operations. But at some point the traditional methods of doing so, hit the wall.
As the expression goes you can't get blood from a stone.
So today we explore some new and innovative ways to keep your company from leaving money on the table. Maximizing those profits so you can not only compete with , but rather blow away your competition.
This excerpt was taken from the TEVA 6-K document with regards to revenue recognition.
If you don't know who TEVA is - check out the link .
Revenue is recognized when title to, and risk and reward for, a given product are transferred to the customer, with provisions for estimated chargebacks, returns, rebates, discounts and shelf stock adjustments established concurrently with the recognition of revenue, and deducted from sales. Provisions for chargebacks, returns, rebates and other promotional items are included in “sales reserves and allowances” under current liabilities. Provision for doubtful debts and prompt payment discounts are netted against “Accounts receivable.”
TEVA is not unique here, all larger companies, put aside revenue to allow for "Chargebacks, returns, rebates, discounts and shelf stock adjustments". Discounts well we understand that, everyone wants a better price. And Returns well that makes sense they are returning the products. But what about these others?
- Chargebacks/Rebates
- Shelf Stock Adjustments
As a distributor, do you know what they are?, How they work and how to maximize the amount you can get from them?, Does your manufacturer or distributor partner have these hold backs as well?
If so the question you have to ask yourself is...
Am I leaving money on the table?
Lets start with what they are in simplest terms.
1. Chargebacks and Rebates
For most distributors a chargeback or rebate request is an additional amount of money they can request from a manufacturer or wholesaler, for selling an item to a customer or group of customers. in exchange for reporting this sale they can them claim a "Rebate" or Chargeback to effectively lower the original "cost" or price they paid to the manufacturer or wholesaler.
There are thousands of variations to the scheme and hundreds of companies who sometimes are in the middle like a GPO or other purchasing group. But the long and short of it. is that it's another way to access better pricing and costing on product and allow you to make more money.
2. Shelf Stock Adjustments
Shelf-stock adjustments are payments/rebates granted to customers based on the existing inventory of a customer following actual or anticipated decreases in the invoice or contract price of the related product. Not as popular in the Medical Surgical space , but standard in pharmaceuticals. And it's becoming a standard in the Consumer space so it may be a requirement soon enough.
Look at companies like Earny that offer a new mobile application that connects with your email and Amazon accounts in order to track your online purchases and find your e-receipts, then price check those items to see if you got the best deal. If it finds a lower price, Earny will request a refund on your behalf and the difference (minus the company’s 25 percent cut), will be credited back to your payment card.
Nothing new there as credit cards have offered price protection for a while, but the technology spin is what today is all about.
Sure these rebate and shelf stock programs exist , but they assume a fair amount of work to file these claims and as such the programs are usually not maximized. Especially by smaller distributors who lack the manpower and time to properly monitor all these programs.
Well enter the technology sector to save you time and money (Yay us!!)
Just like earny, The MDS-Nx system can scan thru your sales for the last 90-120 days and find those rebates that you did not know you had.This is after it automatically calculated your net rebate during sales order and quote entry. As you add new contracts the system allows you to "rescan" your shipments to determine the best possible rebate for a shipment/sale.
In addition when new product is received and there is a price drop the MDS-Nx system alerts you, Offering the opportunity to create a Return to Vendor Shelf Stock Adjustment.
Of Course with Integrated Financials each transaction can be matched to a specific GL code so you to can create a Revenue account except instead of a liability. And on your balance sheet it will show as an asset as you are making more money.
So if you are ready to stop leaving money on the table, and automate the process of getting those extra dollars. Just give us a call.
For more information on TSH or MDS call The Systems House, Inc. at 1-800- MDS-5556. Or send a message to sales@tshinc.com
Click here and tell us how we can help you with your business solutions.
