The way you process rebates depends on differences in the purchase order cost and rebate cost, and how the vendor pays the rebate amount.
Process rebates using either the suggested or alternative method described below:
Suggested Method for Rebate Tracking
Create a balance sheet account named "Rebates Receivable" in the General Ledger.
Define rebate information for customers in Customer Maintenance, and set up sell and cost overrides in Sell Matrix Maintenance. The following guidelines apply to selling and buying rebate products:
When purchasing items, enter the purchase orders using the rebate cost (not normal cost).
When receiving purchase orders, receive them using the rebate cost (not normal cost).
When selling items, use the rebate cost, which is linked to the cost overrides defined in Sell Matrix Maintenance.
Post the difference between the normal and rebate cost to the Rebate Receivables G/L account. The debit amount is the difference between the normal cost and the rebated cost of the items.
For example, if a widget's normal cost and vendor invoice cost is $100.00 and the rebate cost is $80.00, the difference of $20.00 is the adjustment to the Rebates Receivable account.
Run the Customer Sales Rebates Report, and submit it to the vendor as a request for rebate payment. We recommend scheduling the report to run once a month.
Process the rebate payment from the vendor as follows:
If you receive a check for the rebate amount, post a Miscellaneous Cash Receipt. The amount is credited to the Rebates Receivable G/L account. The cash account is debited for the amount.
If you receive a credit memo for the rebate amount, enter a payable record in A/P Entry for the amount.
The Rebates Receivable account will display the pending or outstanding amount of rebates. The sum of the debits is the total rebate amount that has been processed to date.
Alternate Method for Rebate Tracking
Create a balance sheet account named "Rebates Receivable" in the General Ledger.
Define rebate information for customers in Customer Maintenance, and set up sell and cost overrides in Sell Matrix Maintenance. The following guidelines apply to selling and buying rebate products:
When purchasing items, enter the purchase orders using the purchase order cost.
When receiving purchase orders, receive them using the normal purchase order cost.
When selling items, use the rebate cost, which is linked to the cost overrides defined in Sell Matrix Maintenance.
Run the Customer Sales Rebates Report, and submit it to the vendor as a request for rebate payment. We recommend scheduling the report to run once a month.
Create a journal entry to adjust the General Ledger and reconcile the difference between the normal and rebated cost in the Inventory G/L account as follows:
Credit the Inventory G/L account. This account is defined in Inventory Management.
This records a pending or outstanding amount of rebate to be received from the vendor. The Rebates Receivable account is credited as each rebate amount is received.
Process the rebate payment from the vendor.
If you receive a check for the rebate amount, post a Miscellaneous Cash Receipt. The amount is credited to the Rebates Receivable G/L account. The cash account is debited for the amount.
If you receive a credit memo for the rebate amount, enter a payable record in A/P Entry for the amount.
The Rebates Receivable account shows the pending or outstanding amount of rebates. The sum of the debits is the total rebate amount that has been processed to date.
Note: If the vendor rebate payment received is for less than the original amount that was posted as a debit to Rebates Receivable, a G/L Journal Entry is required to correct the Inventory-COGS. (Debit Inventory-COGS and Credit Rebates Receivable) This entry clears the open rebate amount and reconciles the Inventory account for costs that were never rebated.
See Also