Discount Agreements

From this Maintenance, the user will be able to set up any Discount Agreement the company has signed with a specific Vendor.

A Discount will be given by a vendor every time the Company will buy from this vendor a specific item or any item included in a Category specified by the agreement.

Unlike the Periodic Rebate Agreements, the Volume Rebate Agreements, or the Coop Advertising Agreements, the Discount Agreements will be taken directly on the face of the invoice. The discount on invoice is automatically applied against the cost of the product. An automated journal entry will be done by the system to record the discount on invoice accordingly.

i.e: Company X has a Discount Agreement with vendor Y. Every time a product included in a Category eligible to the discount as per the agreement is purchase from this vendor, the system will calculate the cost of the product net from the discount on invoice. Therefore, the total invoice payable to the vendor will always be net from the discount. The discount is earned immediately by the Company and will not be payable on a later date by the Vendor.

The journal entry will be generate by the system only once the item is received in the Receiving Slips Entry. The system will generate a journal entry and post it to the General Ledger accounts set up in the GL Reference Menu.

This rebate is also completely independent from the volume of purchases. These kind of agreements will be signed between two parties to build customer loyalty.

If any modifications are made to an existing Discount Agreement - all changes are saved and can be visualize on the History tab of the Maintenance. This tab will show the user the whole list of changes, which field was changed, and the change was made by which user on what date/time. Therefore, it is easy to keep track of any changes done on a Discount Agreement.

Creation of a Discount Agreement

The first step to generate a new Discount Agreement will be to select the Vendor.

The Discount Agreement can be created by Group of items, or for a specific product depending on the type of Agreement signed.

i.e : Company X has a Discount Agreement with his vendor Y for any Gypsum products. Every time the Company ordered Gypsum from this vendor, the Company will have a discount of invoice of 2%. However, if the Company order specifically a Gypsum 1/2 X 4 X 12 from this vendor, the discount on invoice applied on this product will be 2.5%.

To set up a Discount Agreement for a Group of Product - the user will need to do the set up in the first part of the Maintenance:

To set up a Discount Agreement for a specific Product - the user will need to do the set up in the second part of the Maintenance:

During the calculation of the Discount on invoice, the system will always take in consideration the most precise level in term of Product Category. Therefore, if a Volume Rebate is set up for a specific item - the system will look at the Rebate set up on this item first while calculating the rebate applicable, even if the item is included in a Volume Rebate for a Group of Products.

If a Volume Rebate is set up as well on different level of Group Item - the system will consider first the rebate set up for a CAT 4, then CAT 3, CAT 2 and finally CAT 1.

Setting up a Discount on invoice for a Group of Product

To add a new Discount Agreement for a Group of Product, the user need to press the Add Bottom of the first part of the Maintenance.

Cat 1 to 4: From these fields, the user will define all category of items that are eligible to the Periodic Rebate. The 4 levels of Categories are defined as follow:

                    Category 1: Major;

                    Category 2: Intermediate;

                    Category 3: Minor;

                    Category 4: Double Minor.

As explained above, the Discount on invoice will always be applied first to the most precise category (CAT 4), to the most global category (CAT 1).

By pressing F2 with the cursor positioned on One of the category - the system will default the Discount on invoice applicable to all Category created in the system.

To learn more about the definition of these 4 levels of Group Items, please refer to the Inventory Maintenance.

Start Date: This date should match with the Starting date of the Discount Agreement. The system will start to calculate a Discount on invoice on any Item purchase and receive included in the agreement as of this date.

End Date: This date should match as well with the Ending date of the Discount Agreement. The system will calculate a Discount on invoice on any item purchase and receive included in the agreement until the date specified over here. Therefore, if the Agreement is amended and extended, it is really important that the user updates the information from this screen.

Discount 1 - 2 - 3 - 4: The system allows you to add up to 4 discounts. The user most enter the percentage (%) of rebate as per the agreement. The system will look to the percentage entered in these field when it will calculate the Discount on each transaction.

Deg: Can be selected only if the agreement included more than one level of discounts. If selected, the system will calculate the overall discounts entered under the Discount 1 1 to Discount 4 fields on a degressive basis. If this option is not selected, and the agreement included more than one level of rebates, the Periodic Rebate will be a summed of all level of discounts.

i.e: In the example above, there are 4 levels of Discounts: 1) 2%; 2) 1.5%; 3) 1%; 4) 0.5%.

If the Degressive options is selected, the system will calculate the discount following this equation: (1 x 0.02) + ((1 - 0.02) x 0.015) + ((1 - 0.02 - 0.015) x 0.01) + (1 - 0.02 - 0.015 - 0.01) x 0.005).

The overall Discount on invoice will be 4.913%.

On the opposite side, if the Degressive option is not selected, the system will calculate the discount using the following equation: 0.02 + 0.015 + 0.01 + 0.005.

The overall Discount on invoice will be higher and equals 5 %.

Result: The field will populate automatically by the System and should represent the total Discount on invoice based on all Discounts entered under the fields Discount 1 to 4. The result will also be influenced if the Degressive option is selected or not.

Setting up a Discount on invoice for a Specific Product

To add a new Discount Agreement for a Specific Product, the user need to press the Add Bottom of the second part of the Maintenance.

Product: From this field, the user will select from the item that is eligible to a Discount Agreement. By pressing F1 with the cursor positioned in this field, the system will open the Search Window of the Inventory Maintenance.

The other settings of a Discount on invoice for a Specific Product done exactly the same way as Setting up a Discount on invoice for a Group of Product. The only difference is where the Discount on invoice needs to be set up in this maintenance. Please refer to the section above for more detail regarding each individual field of this Maintenance.