In this blog I will demonstrate how configure Rebate for customers using rebate agreements and use deduction workbench to apply rebates against customer deductions

A. Configuration -

a. Rebate program types-

First step in setting up rebates program types. D365 FO offers variety of different program types,

Rebate: 

This type of rebate involves providing financial incentives to customers, usually through checks or deducting the rebate amount from the customer's invoice. It's a straightforward method that is used to motivate customers to take various actions, such as making a large purchase or reaching a certain sales target.

TMA: 

They accumulate over time and are typically passed on to customers through credit notes. They are often used by manufacturers or suppliers to provide incentives to retailers or distributors to support marketing and merchandising efforts.

Freight: 

Freight rebates are accrued based on predefined zones and are not passed on directly to customers. Instead, they are used for internal reporting purposes, helping businesses track and manage the costs and incentives associated with shipping costs.

Billback: 

Billback rebates are specifically designed for wholesalers and distributors to cover the costs associated with promotions. Unlike other rebate types, they are not available for customer rebate agreements and are primarily used in B2B relationships.

In this scenario, I am covering program types ‘Rebates’, once I choose program type I will enter Default accrual account and expense account. 

Accrual account: Select the account to use to accrue rebates to be paid to the customer.

Expense account: Select the account to use for disbursing rebate payments to customers.

b. Create rebate agreement – 

In order to create rebate agreement, I will go to Sales and marketing > Customer rebates > Rebate agreements

In this example I will create record for single customer and single item with minimum quantity 1 and start date as 04/14/2024 and never to expire. And I am taking example of ‘Payment type’ as ‘Invoice customer deductions’

In the lower section, D365 FO defaults records and allows me to make edits, in this example I am taking Amount type as ‘Percentage’ with value 10. This means  whenever invoice is posted customer is given rebate of 10 % on sales invoice amount whenever customer buys item 1000 more than 1 quantity.

Once data is entered, click on validate to enable the rebate agreement.

Note – 

Although rebate agreement table allow same quantity rate while saving the record, however D365 FO will throw error while validating the rebate agreement as shown below, 

Rebate has overlapping quantity range with one or more other rebate.

B. Process

Let’s look at the rebate agreement configs in action. In order to look at the rebate calculated, create sales order with a customer account selected on sales order header and item id selected on sales line as show below,

I. Create sales order and enter details 

II. Invoice sales order

Click on Invoice tab, invoice journal to validate invoice has been posted successfully.

C. Rebate and process rebate transactions -

I. View calculated rebate - 

Once sales order is invoiced, D365 FO calcualates the rebate transaction based on rebate agreement. Rebate transactions can be viewed from Sales and marketing > Customer rebates > Rebates as shown below,

Once I identify the associated rebate (Based on customer account/invoice no/ sales order) I can verify more details by clicking on Rebate Id

II. Process rebates -

In order to process rebate I need to go to customer master from Accounts Receivable > All customers > Customer record. Go to 'Collect' tab to to view Settle transactions / Undo settlement.

Select appropriate customer record and click to view details about the customer,

In this case I clicked on Settle transactions screen,

Select function button under toolbar above grid as shown above screen and select 'Rebate program'

From this screen I can either credit note for the rebate that customer has availed or I can pass this to vendor account associated with customer account. 

For this example, I am selecting 'Create credit note', so I can apply this rebate against the deductions. Once I am click 'Create credit note', rebate is transferred to customer transactions as credit note transactions which can be viewed from customer transactions screen,

D. Create customer payment and customer deductions-

A customer who is owed a rebate can decide not to wait for a rebate payout. Instead, the customer can send a payment that includes a deduction for the amonut of the rebate. To handle this type of transaction, you can use the deduction workbench to match deductions to open credit transaction, split deductions, deny deductions and write-off deductions.

In this case I will go to Accounts Receivable > Payments > Customer payment journal

On Action pane select lines, Enter the transaction date, company account, and customer account number. In the invoice field select invoice against which customer has provided payment and deductions and select offset account

After entering this information, save the record. and click on 'Deductions' button under toolbar above the grid,

On the deduction page, click new and enter info. Deduction ID is auto generated unless customer want their deduction no to be used, select type and enter the amount as shown below,

Once information is entered, save the record and close the form. Now the customer payment journal shows below records,

Once I am satisfied I will post the customer payment journal with deductions.

E. Deduction workbench

In order to link rebate to the deductions go to Sales and marketing > Trade allowances > Deductions > Deduction workbench as shown below.

In this case I will select deduction posted during customer payment and rebate posted during sales invoice. and click Match button under Maitain toolbar,

As soon as I click on Match, D365 FO closes the transaction and transactions can be seen under customer transaction screen as shown below,