How I Learned to Stop Rebating and Love Trade Allowance Agreements

Trade Allowance Agreements in Microsoft Dynamics 365 for Finance and Operations (D365FO) offer users a powerful tool to handle sales promotions, which can influence a company’s customers towards desirable volume and behavioral sales goals. Out-of-the-box, D365FO offers three types of promotion types—Bill Back, Off-Invoice, and Lump Sum—working alongside other tools present in D365FO’s Sales and Marketing module.

Setting up Trade Allowance Agreements

User-created agreements begin like many business processes: with a fund budget, before setting up individual merchandising events (or allowance contracts) to create claims against. These claims are then processed for payment or deduction. D365FO offers trade promotion-specific analytical tools to gauge program effectiveness as well.

Sales promotions are often multi-faceted, allowing several types of users to interact with the agreement. Finance and marketing departments can work together to allocate discretionary funds before setting up the agreement. For instance, a bill-back merchandising event that, once enacted, will produce claims to be passed on to AR to process as customer deductions. Management can then track the promotional fund for effectiveness and program profitability through the reporting tools within the Sales and Marketing module.

Once program negotiations are complete, the Trade Allowance Agreement can be created. After setting up an agreement’s header and choosing relevant customers and items, the user can move to the agreement’s lines section to define an individual program(s).

Individual Merchandising Events

Individual Merchandising Events are created where a user can select items from the agreement’s header specific to each created event. The result of these events is similar to D365FO’s Rebate functionality, where specific customer/item combinations drive the result of the agreement.

Sikich recently demoed this functionality to a potential client utilizing the bill-back event type. Bill-backs are a form of rebate relevant to Proof of Performance scenarios where users can define rules stating how the bill-back will be applied (i.e., sales order creation date, gross v. net, quantity v. amount, etc.). A specific Rebate Program is defined in the Trade Allowance Management Parameters setup as the default rebate program for bill-backs.

Defining Specifics for the Bill-Back Program

Once you’ve selected the customer and items for a bill-back event, you can amend its Amount tab, where you define the specifics of the program. For example, if you are trying to drive increased units sold, you can offer a 5% rebate on quantities sold below 1,000 units, and an 8% rebate on quantities sold between 1,000 and 2,000 units, etc. Once it’s been approved and confirmed, the user will see its processing in the Sales Order Line Price Detail when issuing an order to the relevant customer with the relevant items from the agreement.

This scenario assumed a “short-payment” coming from the customer when settling the issued invoice from the last paragraph. At the time of payment posting, the user utilized a deduction payment journal to process the short-payment and apply the deduction before matching its application via the Deduction Workbench in the Sales and Marketing module.

Bill-backs are just one of the three out of the box event types. Each event type reacts differently and has specific uses for companies. Stay tuned for an in-depth dive into the Lump Sum and Off-Invoice event types.

Have any questions about Bill-Backs in D365FO? Please reach out to our team at any time.