REBATE

[Former Member]

can any one tell me the differce between REBATE and DICOUNT.with eg.

[former_member188826]

<b>Rebate</b> is used in enticing customers <b>to promote sales</b>.(e.g Mail-in-Rebate - Here you pay more at the time of purhase and send in the seller, the details of your purchase to claim the rebate)

<b>Discount</b> is used to incentivise customers to <b>make them pay earlier</b>. (present value of amount to be received later is usually considered while determining the discount)(e.g pay within 10 days to claim 2 % discount)

[Former Member]

A

rebate is a special discount which is paid retroactively to a customer. This discount is based on the customer's sales volume over a specified time period.

You define the details of the rebate in a rebate agreement. In the agreement you specify, for example

· who receives the rebate payment

· on what criteria the rebate is based (customer, customer and material, and so on).how long the rebate agreement is valid

Definiton of rebate in SAP

[Former Member]

Usually the terms of payment is more guided by the interest rates. Imagine a scenario where the company is always starving for funds and is living on borrowed money. It will be attractive for those customers only when the cash discount is higher than their cost of borrowal in other words the rate of interest. For a customer flushed with funds any discount is welcome. Since most of the commercial activities are short term in nature we dont really compare the present value rather we go by the interest rate. If it is on long term nature like project related we go by the present value method. For those cases terms of payment does not really matter since it will involve stream of payments.

[Former Member]

Discount has been explained already.

I would like to give one more example on rebate:

Rebates could be based on either qty or value.

Qty based:

Many vendors offer qty based discount:

They offer different price structure based on qty.

Qty Price

1-10000 50USD each

10001- 20000 45USD each

beyond 20001 40 USD

For any order upto 10000 usd units you will be paying 50usd for each piece and once once ur order goes beyond 10000 and below 20000 u get a rebate of 5 usd for ur earlier orders and when it goes beyond 20001 you get a further discount of 5 usd.

Value based:

1- 1000000 USD nil

100000-500000 2%

500000-1000000 4%

As explained in this column rebates are captured on an accrual basis since it may or may not happen. It acts like a provisional entry. Where as in the case of cash discounts no provisional entry is passed in the books. Cash discounts are booked into the system when the payment is actually received from the customer.

[Former Member]

Hi Jabeen

Discount will effect immediately

Rebate will be on accrula basis

Discount Example :- 5% cash discount of 1000 Rs Purchase. so when ever customer is purcashing 1000/- he will get discount of 50/- Rs.

Rebate Example :- If you purchase 100000/- Rs purchase then only you will get 10% discount.

So you need to capture accurals on each bills and once the customer reaches 100000/- you have to deduct 10% discount. You will not deduct untill you reach the specified limit(100000/-)

Rebate Example 2:- If you sell 50 Laptops in a month you will get 1000/- off per laptop.

If you sell 30 Laptops you will get 750 off per laptop

If you sell 20 Laptops you will get 500 off per laptop

if you sell 10 Laptops you will get 100 off per laptop.

This can be configured using Rebate in SAP

Best Regards

Ashish Jain

[Former Member]

Hi Jabeen,

I guess:

Rebate is an arrangement between the buyer and seller, wherein the buyer is obligated to purchase goods over a period of time. If the buyer does so, the seller would then refund a percentage of the purchases made by the buyer as rebate.

Discount reflects in the invoice itself at the time of purchase.

Please correct me if i am wrong.

P K

[Former Member]

As per my openion

Rebate will be on accrual basis and discount will be immediate effect.

Ex. As per the understanding with the customer we will tell him we will give rebate if you take the goods from us for a period of time, after completion of the period we will calculate the rebate amount and will be issued credit note to the customer.

Discount will be immediately effect in the bill itself.

BSR