Posted in Marketing and Strategy Terms, Total Reads: 234
Definition: Vendor Rebate Receivables
Rebate generally amounts to returning a portion of purchase price to the buyer, generally on purchasing a specific quantity or value of goods in a specific period. Rebate is given after the payment is made in full.
Generally the products in a retail store or any marketplace are obtained from multiple sources, i.e. multiple vendors. Vendors in order to promote sales of particular goods provide the retailers with rebate on purchase of specific quantity or value of goods. These rebates ensure sales in a particular quantity and help in keeping the vendor’s inventory maintenance cost low. Since the rebate is provided post the payment of the invoice amount in full the rebate amount is considered to be part of the receivables for a company.
A similar case of vendor rebate receivables is also present for customers in a store on purchase of goods in a certain quantity. Vendor rebates generally result in lower costs for the retailers which if they want can be translated into or reflected in lower costs to the final customers.
It is generally prevalent in wholesale and Healthcare industries. Other than the volume based nature generally prevalent to ensure discount or contract pricing a suitable rebate agreement can also be signed between the 2 stakeholders (Vendors and Retailers or Customers) in order to decide the rebate and mode of rebate to be received. At times rebates may be in the form of vouchers which a retailer might use in future purchases to yield the benefit of the present purchase on a later date.
Eg. Walmart is one of the largest retailers in the world, it f¬unctions in the US under the name of Walmart US, and it sources its goods from vendors across the United States. In order to ensure that it has the minimum prices, it purchases in bulk from the vendors and receives vendor rebates from multiple partner vendors which are reflected in the low cost offered in the Walmart stores present across the United States.