Morsa publishes this guide. Morsa is software with an AI agent that works in your ERP, email and Teams; it keeps the rebate sheet current and drafts each claim for an analyst to approve.
Quick answer
The sheet: one agreements tab with a row per program, and one monthly tab with a row per program per month.
The accrual: each month, qualifying purchases times the rate of the tier you expect to reach for the year. Re-forecast quarterly and true up.
Before year end: check every tiered program for a tier within reach. November is when it still pays to look.
With 25 programs: rank them by dollars at risk and work the top five first.
Choosing software to do this is a separate decision; rebate management software for distributors compares the tools and their prices.
The rebate management process in six steps
Record the agreement. One row per program on the agreements tab, with every term the vendor will hold you to (columns below). Update it the day an amendment arrives.
Measure qualifying purchases monthly. Use the same ERP report each month: receipts or vendor invoices by vendor, net of returns, across every branch and every vendor number. Pick one basis, receipt date or invoice date, and write it on the agreements tab; the vendor’s statement uses one too.
Accrue at the expected tier. Multiply the month’s purchases by the rate of the tier the projected year reaches. Re-forecast each quarter and true up, as in the worked example.
Claim on the vendor’s terms. Some vendors calculate and pay on their own; others pay only on a claim. Before you claim, compare your figure with the vendor’s statement; differences usually come from date basis, returns, drop shipments, freight lines or a second vendor number. File in the vendor’s format with its backup, by its due date, and log the date sent.
Match the payment to the claim. A check, a credit memo or an approved deduction. Chase any shortfall with the claim and backup attached.
Reconcile monthly. The rebate receivable in the ledger should equal the open balances on the sheet. Close or write off old claims with a reason.
The tracking sheet, with an example row
Set up the agreements tab with these columns: vendor and vendor numbers, program type, dates, what qualifies, tiers and rates, retroactive or incremental, date basis, how it pays, claim due and owner, and proof required. Here is the row for the fastener program used in the worked example below:
Column | Example |
|---|---|
Vendor and vendor numbers | Fastener supplier; billed under 10442 and 10587 |
Program type | Volume tier, retroactive |
Dates | 1 January to 31 December 2026 |
What qualifies | All fastener lines, all branches, net of returns; freight excluded |
Tiers and rates | 1% from $400,000, 2% from $600,000, 3% from $800,000 |
Date basis | Vendor invoice date |
How it pays | Credit memo after year end |
Claim due and owner | Vendor calculates; check its statement by 15 February; purchasing manager |
Proof required | None unless you dispute; then your purchase report by invoice |
Set up the monthly tab with one row per program per month and these columns: program, month, qualifying purchases, year to date, projected year, expected rate, accrued to date, claimed, received and open balance. The fastener program’s March row: $65,000 purchases, $190,000 year to date, $760,000 projected, 2%, $3,800 accrued, nothing claimed or received, $3,800 open.
Worked example: accruing the fastener program
The same program: retroactive, calendar year, 1% from $400,000, 2% from $600,000, 3% from $800,000. Each quarter you project the year by scaling year-to-date purchases to 12 months. The table shows quarters to keep it short; the monthly tab carries the same entries month by month.
Q1
Purchases: $190,000
Year to date: $190,000
Projected year and rate: $760,000, so 2%
Accrual entry: 2% of $190,000 = $3,800
Accrued to date: $3,800
Q2
Purchases: $205,000
Year to date: $395,000
Projected year and rate: $790,000, so 2%
Accrual entry: 2% of $205,000 = $4,100
Accrued to date: $7,900
Q3
Purchases: $230,000
Year to date: $625,000
Projected year and rate: $833,333, so 3%
Accrual entry: 3% of $625,000 less $7,900 = $10,850
Accrued to date: $18,750
Q4
Purchases: $160,000
Year to date: $785,000
Projected year and rate: Actual $785,000, so 2%
Accrual entry: Reverse $3,050
Accrued to date: $15,700
Q3’s entry is two parts: 3% of Q3’s $230,000 ($6,900) plus one more point on the first half’s $395,000 ($3,950). In Q4, purchases slowed and the year closed $15,000 short of the 3% tier. Reaching it would have paid 3% of $800,000, or $24,000: $8,300 more for $15,000 of purchases, worth it only for stock you would buy anyway.
Part of the earned rebate reduces the cost of stock still on the shelf and part reduces cost of goods sold; your accountant sets the split [2].
Retroactive against incremental, same program and year. Retroactive pays 2% of all $785,000: $15,700. If the agreement were incremental, each rate would apply only inside its band: 1% of the $200,000 between $400,000 and $600,000 plus 2% of the $185,000 above it, $2,000 + $3,700 = $5,700. Read the wording before you accrue.
Program types, and the trap in each
Program | How it pays | What to watch |
|---|---|---|
Retroactive volume tier | Once you pass a tier, all the year’s purchases earn its rate | A small shortfall at a tier edge costs a full point on everything |
Incremental volume tier | Each rate applies only to purchases inside its band | Pays far less than retroactive on the same purchases |
Growth rebate | A rate on purchases above last year’s | Last year’s base must match the vendor’s figure |
Product or line rebate | A rate on named SKUs or product lines | The right item under a different SKU does not count |
Sell-side rebate (ship and debit, special pricing agreement or SPA) | Paid per sale to a named customer or job, at an agreed cost | Each sale needs a claim; nothing arrives unless you file it |
Marketing or co-op funds | A share of purchases set aside for approved marketing | Spend it inside the window and keep the proof |
Most distribution ERPs, Prophet 21 among them, calculate some of this; the rebate software guide covers what each does.
Ranking 25 programs by dollars at risk
For each tiered program, dollars at risk is what the next tier would pay minus what the current projection pays. For claim-based programs, it is the value of claims not yet filed or not yet paid. Sort the list, largest first, and review the top five every month.
The fastener program looked safe at the end of Q3, projecting $833,333. A monthly look in November compares the $800,000 tier with year to date plus the buys planned before 31 December; when that sum falls short, $8,300 is at risk and the program goes to the top of the list.
The five places rebate money leaks
Tier edges. Nobody looks at the projection in the fourth quarter, as in the example above.
Purchases nobody counts. A second vendor number, a branch that buys direct, an acquired company or drop shipments stay off the report, so the year looks smaller than the vendor’s figure.
Claims never filed. Sell-side and co-op claims pay only when filed: a claim for every SPA sale, common in HVAC and electrical distribution. An expired claim window is money gone.
Short payments nobody matches. A credit memo for less than the claim gets applied and forgotten unless someone compares it with the claim; the three-way match tool does the same check for invoices.
Stale agreements. A mid-year change to tiers or qualifying items goes into an email, not the sheet, and every accrual after it is wrong.
Tracking every program each month and chasing the credits
Each month, Morsa pulls qualifying purchases from your ERP (Eclipse, Prophet 21, NetSuite, Business Central or another) under every vendor number, updates each program’s row and projected tier, and flags any tier within reach.
On each claim date it drafts the claim with the backup; the analyst approves it and it goes from their own mailbox.
It matches each check or credit memo to its claim and drafts the chase for any shortfall.
To see it on your own programs, book a 30-minute walkthrough.
What to do this week
List every active vendor program and who owns it.
Build the agreements tab, starting with the five largest programs.
Pull year-to-date qualifying purchases for each tiered program, project the year and rank by dollars at risk.
For any program within 5% of its next tier, decide with purchasing whether planned buys should land before year end.
Reconcile the rebate receivable account to the sheet and chase the oldest open claim.
Sources
FASB, EITF Issue No. 02-16, Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor (abstract, paragraph 7 on rebates for cumulative purchases): https://storage.fasb.org/abs02-16.pdf (read 8 November 2026)
PwC Viewpoint, Financial statement presentation guide, 3.6 Operating expenses (consideration from a vendor, ASC 705-20): https://viewpoint.pwc.com/dt/us/en/pwc/accounting_guides/financial_statement_/financial_statement___18_US/chapter_3_income_sta_US/36_operating_expense_US.html (read 8 November 2026)
