Consider tech to manage pricing and rebates

THE EVENTS of the last three years have made it increasingly challenging for businesses to plan for the future, especially when it comes to pricing. Supply chain disruption and demand volatility have created hyper-reactive buying patterns, which have a significant downstream impact, often shifting the problem from retailers to suppliers and distributors. To cope through the months ahead, manufacturers and distributors need to ensure they have the infrastructure in place to deliver real-time pricing and rebate management to withstand more market volatility.

Managing pricing and rebates is not an easy task for most businesses though. In times gone by, companies could draw on historic data to create a solid forecast for the months ahead. However, with the current economic uncertainty, this is no longer a viable option. The reality is that for most manufacturers and wholesalers, it’s hard to make nuanced price changes. Even some of the largest FMCG businesses are still managing their pricing with spreadsheets, which makes it extremely difficult to see actual margins for each product, channel, and customer.

There are other factors at play that make it even more challenging for manufacturers and distributors, such as the complexity of managing buy-side and sell-side pricing, with its matrix of individual promotions and rebates. The time spent managing dozens of pricing and rebate spreadsheets is a major drain on resources, and it’s almost impossible to get a real-time view of profitability.

Intelligent, automated pricing can help to address these challenges and eliminate the complexity of pricing management. Cost data is automatically linked to pricing, enabling businesses to instantly see where margins are being achieved, or where pricing needs to be changed to improve revenue or profitability, by customer, channel, all the way through to product line. Pricing can be easily set according to pre-determined rules, with adjustments linked to payment or return terms. Intelligent pricing also eliminates the risk of human error of under-pricing, which is said to cost the average manufacturer millions each year.

Furthermore, access to automated pricing reduces the amount of time that teams spend on pricing administration. Changes can be made quickly and are applied immediately, which means that sales teams have more time to get out to meet customers. By giving sales agents the ability to model deals on the spot, they can ensure they’re committing to a price that will deliver the margins needed and agree terms that reduce risk. Sales performance can’t be based on deal value alone when that revenue could be unstable and subject to cancellation.

Rebate management is one of the most unwieldy aspects of manufacturing and wholesale financial management. On average, $2.65m is lost in unclaimed rebates every year. By moving to an automated system, manufacturers can eliminate lost revenue by calculating and claiming or paying whenever the payment is due. It can also reduce the number of days rebates are outstanding by making a claim as soon as an amount is owed, improving vital cash flow. Manufacturers can also visualise rebate revenue on a daily basis by recognising revenue as being earned rather than when it is received, so it can instantly be factored into pricing decisions. Meanwhile, accurate and detailed claim reports can improve collections by making it easier for suppliers to give approvals.

Ultimately, as we face further difficult trading conditions and market volatility, it will only become more important for manufacturers and distributors to get their pricing right. Ensuring that a pricing strategy is consistent in both its accuracy and agility will be crucial in helping to build financial resilience.

John Moss, CEO, Flintfox 

For more information, visit www.flintfox.co.uk