Trade allowance management - mbs.microsoft.com allowance management 2 Trade allowance management Trade allowance management helps companies, typically manufacturers, manage sales promotion

Microsoft Dynamics AX

Trade allowance

management Trade allowance management helps

companies manage sales promotion

programs that offer retail customers pay-for-

performance monetary rewards for achieving

volume and behavioral goals.

Demo script

Olga Turovceva Mulvad

June 2016

Send feedback.

www.microsoft.com/dynamics/ax

mailto:[email protected]

http://www.microsoft.com/dynamics/ax/

Trade allowance management 1

Contents

Target audience 2

Demo scenario 3

Background 3

Demo overview 3

Demo data and instructions 4

Demo instructions 4

Demo pre-steps 4

Demo step-by-step 5

Demo 1 – Review the promotional fund and a trade allowance agreement 5

Demo 2 – Perform sales under the planned merchandising event and generate bill-back claims 10

Demo 3 – Process claims and pass them as deductions to A/R 11

Demo 4 – Settle the deduction that is due and customer short-pay in the Deduction workbench 16

Demo 5 – Analyze the effectiveness of the promotion and fund consumption 17


Trade allowance management

Trade allowance management helps companies, typically manufacturers, manage sales promotion programs that

offer retail customers pay-for-performance monetary rewards for achieving volume and behavioral goals. The

feature’s capabilities are designed for companies that focus on comprehensive promote-to-profit processes, from

promotion fund budgeting and allocation, to allowance contract setup, to claims creation and processing, to

payment processing, to promotion effectiveness analysis.

The demonstration scenarios in this document provide a broad overview of the new feature and will familiarize you

with the typical set of tasks that are involved in managing a sales promotion program. In these scenarios, several

types of users who have operational and decision making responsibilities will use the new trade allowance

management functionality to achieve their respective goals:

● Allocating discretionary funds to the selected accounts, and setting up trade allowance agreements for

promotions, based on bill-backs and one-off lump sum payments (for an agreed service)

● Running the negotiated promotion contracts through ongoing sales and generating bill-back claims

● Calculating, approving, and processing the generated claims, and passing them on to Accounts receivable (A/R)

as deductions for payment settlement

● Reconciling the customer’s short-pay with the deduction that is due

● Tracking use of the promotional fund, and evaluating program profitability and effectiveness

Target audience

The demos in this document are intended for business decision makers in enterprise companies, in capacities such as

marketing executive, sales manager, chief financial officer (CFO), and accounting manager, who have the following

responsibilities:

● High-level budgets and fund allocation

● Planning and analyzing sales promotions

● Managing staff that processes bill-back claims, runs payments based on merchandizing events, and settles short-

pays and deductions

People in these roles are looking for ways to achieve these goals:

● Better use marketing promotion funds.

● Flexibly accommodate different types of promotion programs and allowances.

● Reduce administrative burden and errors that are associated with monitoring promotion performance and

processing claims.

● Improve cash flow forecasts by accruing for future liability.

● Have a quantified basis for ongoing and future negotiations with customers about promotions.


Demo scenario

Background

The following set of demo scenarios takes place at Contoso, which is a manufacturer of consumer electronics.

Contoso direct customers are wholesalers and retailers that sell audio and video equipment all over the country. As is

a common practice in the industry, Contoso’s Marketing and sales department designs various incentive programs

that offer “pay-for-performance” monetary rewards to customers for achieving specific volume targets and/or

behavioral goals, while also helping them maximize their profits.

Because multiple promotions and merchandizing events are running simultaneously, Contoso marketing executives

are eager to exercise better control over their rebate and allowance programs, and to maximize returns on every

marketing dollar that is spent.

The following demos illustrate how trade allowance management supports Contoso marketing executives in their

goals.

Demo overview

Demo 1 – Review the promotional fund and a trade allowance agreement

This demo walks you through a fund that represents the budgeted expenditure for the promotion, its allocation to

customers and items, and its assignment to a trade allowance agreement. This demo also explains how users, such as

sales and marketing managers, can define different merchandising events to reflect the negotiated forms of rewards

that will be granted to the customers.

Demo 2 – Perform sales under the planned merchandising event and generate bill-

back claims

When sales orders are received from a customer who is part of the promotion program and whose order details

qualify for the bill-back, the program identifies the future bill-back payments and generates claims for every order

line that is invoiced. This demo illustrates this automatic process, and also explains how the order processor can

review the expected bill-back and communicate it to the customer when the order is taken.

Demo 3 – Process claims and pass them as deductions to A/R

Generated bill-back claims represent the intended future payments to the customers. Before the promotion owner

commits to this liability, he or she might want to review the claims, calculate the amounts if bill-backs are given on a

cumulative basis, approve the claims, and finally pass them on to the A/R team, so that they can be included in the

regular process for settlement or payment.


Demo 4 – Settle the deduction that is due and the customer short-pay in the

Deduction workbench

Because they are mindful of their cash flow, customers often short-pay their sales invoices in anticipation of the bill-

backs. In this demo, the credit and collection manager uses the Bill back workbench to handle a situation where a

previously registered deduction from a customer must be matched with the company’s deduction entry that

represents the bill-back payment.

Demo 5 – Analyze the effectiveness of the promotion and fund consumption

It’s important that sales and marketing managers understand the actual costs and achieved turnover of a trade

promotion when they are evaluating the effectiveness of their promotional initiatives and overall marketing

strategies. This demo presents the reports and analytical views that are available in the trade allowance management

feature to help decision makers get an overview of the performance of a promotion program. These reports and

views also help guarantee that decision makers have data at hand when they negotiate future deals and make

decisions about new sales incentives.

Demo data and instructions

Demo instructions

The demo scenarios are run on Contoso demo data, in the USMF legal entity. The demo data in this legal entity

includes setup parameters that have been preset to support the steps in the demos.

Data for demos 2 through 5 build on each other and depend on completion of the previous demos.

Even though the demos address key pain points and challenges for different roles, they can all be completed by the

system administrator.

Demo pre-steps

Before you start the demos, make sure that the following parameters are set on the Accounts receivable

parameters page:

● On the Prices tab, the Enable price details option is selected.

● On the Margin alerts tab, the Enable margin alert option is selected.


Demo step-by-step

Demo 1 – Review the promotional fund and a trade allowance

agreement

Let’s start by becoming familiar with how Contoso’s marketing and sales managers have captured the company’s

upcoming promotional campaign in Microsoft Dynamics AX by setting up a discretionary fund and specifying a trade

allowance agreement, based on negotiations with target customers.

First, we will take a closer look at the Loyalty promotion fund to understand its conditions and expected usage. Then

we will examine the details of the TV promotion agreement, which has two types of merchandizing events and

performance goals that customers have agreed to achieve to receive bill-back and lump sum rewards.


1 Click Sales and marketing > Trade

allowances > Funds > Funds.

2 Click the General FastTab to see the

Promo_Loyalty fund.

The General FastTab specifies the following

details, among others:

● The fund is valid for the period from

January 1, 2014 (1/1/2014) to January 31,

2014 (12/31/2014).

Note: Before you start this demo, you can

change the dates so that they are more

current.

● The budgeted amount for the fund is

USD 1,000,000.

● The fund status is Approved, and the fund

is ready to be allocated to promotion

agreements.

3 Click the Customers FastTab.

The Customers FastTab shows the customer

hierarchy, which was previously created. This

hierarchy contains three customers that

managers are targeting the fund money at.

The total fund amount is distributed among

the three customers as follows: USD 300,000,

USD 300,000, and USD 400,000, respectively.

4 Click the Items FastTab.

The Items FastTab shows the items that

Contoso plans to include in its promotion

program. This fund specifies item T0020,

which is a new model of a TV set.

After the fund definition is in place, the next step in promotion planning is to register promotion contracts (which

are known as trade allowance agreements), allocate funds, and define performance goals for each merchandizing

event.



allowances > Trade allowance agreements.

6 Open agreement TP000004.

7 Click Header to switch to the Header view.

The General FastTab specifies that the

following details, among others:

● The agreement is valid for the period from

February 1, 2014 (2/1/2014) to December

31, 2020 (12/31/2020), as specified by the

Order to and Order from fields.

● The agreement status is Internal

approved, which indicates that the

agreement isn’t yet valid and can’t be

applied during sales order processing.

The Analysis section on the General FastTab

contains key fields that define the quantities

and costs that are used for promotion

evaluation:

● The Base units field specifies the quantity

of products that must be sold to the

selected customers before the promotion

is applied.

● The Calculated ship quantity value is

calculated based on the Lift percent

value, which is a planned target increase

for this promotion.

● We will come back to the Trade

allowance cost field in a few minutes.

8 Click the Customers FastTab.

In the list on the left, select and view

customer groups, which are set up as

predefined hierarchies, and then select the

whole hierarchy or specific accounts as

targets for this allowance agreement.

The sales manager has chosen to add

customer US-009, Owl Wholesales, from the

Loyal customer hierarchy to the TV

promotion campaign.


9 Click the Items FastTab.

As in the fund setup, the new product, T0020,

has been added to the agreement to

associate its sales with the agreed allowance.

10 Click the Funds FastTab.

The Loyalty promotion fund has been

associated with this contract. An event cost

allocation of 100 percent means that this

promotion will be financed exclusively from

one fund. Alternatively, a promotion

agreement can draw on several funds, and

can use equal or differential percentage

allocation.

11 Click Lines to switch to the Lines view.

The Merchandizing events tab shows the

two types of event (bill-back and lump sum)

that are covered by this agreement.

12 Select the merchandizing event of the Bill

back type, and then click the Amounts tab.

The upper section defines the rules that the

bill-back will be applied, generated, and paid

under. In our example, the rules specify the

following conditions for the bill-back claim:

● It’s based on the creation date of the sales

order (the Calculation date type value is

Created).

● It’s calculated based on the sales order

line’s amount before discounts, not the

net amount, which includes discounts (the

Taken from value is Gross).

● It’s based on the volume of the sold

products, not the amount (the Rebate line

break type value is Quantity).

● It’s calculated per period of a month (the

Cumulate sales by value is Month).

● It’s settled as a deduction, not by using

A/P (the Payment type value is Customer

deductions).


In the Trade allowance lines section, you

specify the quantity or amount ranges that

the customer must achieve for definitions of

bill-back rewards. In our case, the bill-back

amount that is offered varies as follows,

depending on the quantity that is purchased:

● USD 50 per unit of measure when the

purchased quantity is between one and

100 units

● USD 100 per unit of measure when the

purchased quantity is between 100 and

200 units

13 On the Merchandizing events tab, select the

merchandizing event of the Lump sum type,

and then click the Amounts tab.

The fields on this tab specify the agreement

that Contoso will pay the customer

USD 20,000, in the form of a deduction, when

the customer achieves specific performance.

At this point, the lump sum hasn’t yet been

paid, as indicated by the approval status of

Open.

Because both merchandizing events represent

the planned costs of the promotion that can

be calculated, let’s go back to the Trade

allowance cost field on the agreement

header.

14 Click Header to switch to the Header view.

The Trade allowance cost field in the

Analysis section is set to USD 40,000. This

value is calculated based on the lump sum of

USD 20,000 and on bill-back amounts. The

bill-back amounts, in turn, are estimated

based on a planned promotional quantity of

200 units, each of which costs USD 100 in

rebate.


15 On the Action Pane, click Confirmed.

The agreement’s status is set to Confirmed,

and Dynamics AX can now apply the

agreement to sales orders that meet the

agreement’s conditions.

Demo 2 – Perform sales under the planned merchandising event

and generate bill-back claims

Demo story: The trade allowance agreement that authorizes customer US-009, Owl Wholesales, to receive a bill-

back when it places orders with Contoso for item T0020, TelevisionD30042", for any quantity in the range of one to

200 units, is in place. The customer now makes its first purchase.

1 Click Sales and marketing > Sales orders >

All sales orders.

2 On the All sales orders list page, on the

Action Pane, in the New group, click Sales

order.

3 In the Customer account field, select

US-009, and then click OK.

4 On the Sales order page, enter three order

lines for item T0020, and specify a quantity

60, 50, and 40, respectively.

Note: You can post the first two sales order

lines before you start this demo. By having

three lines for the same item, you can

generate the three separate bill-back claims

that you will use later.


5 Select the third order line, and then click

Sales order line > View > Price details.

6 On the Price details page, click the Rebates

FastTab.

On the Rebates FastTab, the sales clerk can

see that a bill-back from the valid trade

allowance agreement (rebate program ID

Loyalty) for the total amount of USD 2,000 is

applied to the line. This amount is calculated

as the line quantity of 40 units multiplied by

USD 50, which is the bill-back amount per

product unit that applies when the line

quantity falls in the break range of 1–100.

This amount is also shown in the Rebate

amount field in the Margin estimation

section of the Price details page.

7 Close the Price details page.

8 On the Sales order page, on the Action Pane,

on the Invoice tab, in the Generate group,

click Invoice.

9 On the Posting invoice page, click OK.

The sales invoice has now been posted, and a

corresponding bill-back claim has been

generated for each invoice line.


allowances > Bill back workbench.

Notice the three claims that have a status of

To be calculated.

The next steps in the bill-back handling process are to review, calculate, and approve claims, and convert them into

deductions.

Demo 3 – Process claims and pass them as deductions to A/R

Demo story: The Bill back workbench is where the promotion agreement owner periodically reviews and processes

the claims that are generated. It’s also where the A/R administrator converts the approved claims into deductions or

regular payments, depending on the claim payment method.


1 On the Bill back workbench page, review the

first claim line.

The starting rebate amount for this claim is

USD 3,000 (50 units multiplied by the

applicable bill-back amount of USD 50.)

Notice that, for the second and third claims,

the rebate amounts are USD 2,500 and

USD 2,000 respectively.

Although the quantity of each claim’s sales

invoice lines falls in the agreement’s first

quantity break (1–100), the customer

cumulatively purchased 150 units of TV sets

within a month. Therefore, the customer is

entitled to a larger bill-back (USD 100 per

unit), as specified by the second quantity

break.

Therefore, the claims must be recalculated to

account for any cumulative effect.

2 On the Action Pane, click Cumulate.

3 In the Cumulate rebates dialog box, in the

Customer field, select US-009, and then click

OK.


As a result of the recalculation, Dynamics AX

creates three new claims for the amounts

(one for each unique combination of

customer, item, currency, unit of measure,

inventory dimensions, financial dimensions,

and sales tax group) to adjust the original

claims to the qualifying USD 100 per unit.

These adjustment claims have the same

reference to the sales order and invoice

number as the claims that are being adjusted

(that is, the claims that were originally created

from the sales document).

The status of the claims is changed to

Calculated.

4 On the Bill back workbench page, select the

fourth claim line (the adjustment claim), and

then click the rebate ID to view the details.

Note that, unlike the original claim, the

adjustment claim doesn’t have values in the

fields that describe the original sales order

line’s amounts and quantity.

5 Select all claims, and then, on the Action

Pane, click Approve.

The claims are now ready for A/R processing.

6 On the Action Pane, click Process.

7 In the Process rebates dialog box, in the

Customer field, select US-009, and then click

OK.


Together, the messages in the Message

Center and the fact that the status of the

claims has changed to Mark indicate that a

journal posting (the Rebate accrual journal, as

specified in the A/R parameters) has caused

the following events to occur:

● The claims have been transferred to the

temporary customer balance as

deductions.

● The Rebate accrual account has been

credited to represent the future liability

toward the customer.

● The Rebate expense account has been

debited in recognition of the cost that was

incurred in connection with the sales.

To complete the process, the A/R clerk will now handle the accrual deductions by transferring them to the

customers balance as a credit note (liability).

8 Click Sales and marketing > Customers >

All customers.

9 On the All customers list page, select

customer US-009.

10 On the Action Pane, click Collect > Settle

transactions.

11 On the Settle transactions page, click

Functions > Bill back program.

On the Rebate page, you will see the six bill-

back claims that you previously processed.

12 Click Edit, select the Mark check box for all

six lines, and then click Functions > Create

credit note.


The message bar informs the user that a

journal (AR consumption journal, as specified

in the A/R parameters) has been posted. As a

result, the real liability (credit) amount has

been moved to the customer balance.

Financially, this situation implies that the

following events have occurred:

● The customer’s Receivable account has

been credited.

● The Rebate accrual account has been

debited.

13 Close the Rebate page.

14 On the Settle transactions page, press

Shift+F5 to update the information.

Note that a transaction for USD –15,000 that

doesn’t have an invoice reference has been

added to the customer balance.

As part of this promotional agreement, customer US-009, Owl Wholesales, has also committed itself to running a

special brand awareness event on behalf of Contoso in its retail shops. After proof that the customer has fulfilled

its contractual obligations is received, the promotional program owner will authorize the agreed USD 20,000 to

the customer as a lump sum payment.



16 Open agreement TP000004.

17 On the Merchandizing events tab, select the

merchandizing event of the Lump sum type,

and then, on the Amount tab, click Approve.

A free text invoice for the customer is

automatically created and posted. As a result,

the open credit transaction is now added to

the customer balance.


Demo 4 – Settle the deduction that is due and customer short-pay

in the Deduction workbench

Demo story: Because it’s conscious of its cash flow, customer US-009, Owl Wholesale, monitors and tracks the bill-

backs that will be claimed from Contoso. Often, in anticipation of those bill-backs, Owl Wholesale chooses to short-

pay selected invoices. To avoid potential payment reconciliation issues in the future, the A/R clerk registers those

short-pays as deductions when he or she records the actual customer payments. After those customer deductions

are in the system, they can easily be settled against the claim amounts that are due from Contoso in the Deduction

workbench.

Let’s start by registering the customer’s short-pay in the Payment journal.

1 Click Accounts receivable > Payments >

Payment journal.

2 On the Payment journals list page, create a

new payment journal.

3 On the Payment journal page, create a new

payment journal line.

4 In the Name field, select CustPay, and then,

on the Action pane, click Lines.

5 On the Customer payments page, in the

Account field, enter US-009.

6 In the Credit field, enter 1,000.

7 On the Action Pane, click Deductions.

Next, register the fact that the customer

short-paid the amount of USD 15,000, in

anticipation of the upcoming bill-back.

8 On the Deduction page, create a new journal

line.

9 In the Type field, select Promotion.

10 In the Amount field, enter 15,000.

11 In the Trade allowance ID field, select

TP000004. In the Event ID field, select

ME000005.

12 Click Close.

The deduction has been added to the

customer payment.

13 On the Action Pane, click Post.

The collection manager is now responsible for settling the two transactions in the Deduction workbench.



allowances > Deductions > Deduction

workbench.

Note that the upper section of the page

contains a line that represents the short-pay

from the customer. The first line on the Open

transactions tab is the outstanding bill-back

payment that Contoso owes the customer.

15 Mark the deduction line, and then, on the

Open transactions tab, mark the first line.

16 On the Action Pane, click Maintain > Match.


allowances > Bill back workbench.

The status of the originating claims is now set

to Completed.

Demo 5 – Analyze the effectiveness of the promotion and fund

consumption

Demo story: Near the end of the loyalty promotion campaign that is aimed at selected customers (including Owl

Wholesales) and involves a selected product (TelevisionD30042"), sales and marketing managers meet to follow up

on the promotion’s progress and results. To get an overview of the program’s key statistics and the fund’s usage,

they use several reports and analytical views that are available in Trade allowance management.

First, the promotion owner will look at the event statistics and transactional history for the TV promotion program.


allowances > Trade allowance activity >

Trade allowance activity.

On the Trade allowance activity page, the

Overview tab shows the main details of the

trade allowance agreement, whereas other

tabs show more specific details about the

associated documents, payments, and other

events that are related to the program.


2 Click the Summary tab to see the total

quantity of products that have been sold

under the promotion, the sales amount that

has been invoiced, and the bill-backs and

lump sums that have been paid.

3 Click the Bill back credits tab to see the

details of individual bill-backs that have been

credited to the customer.

To get a more analytical overview of the various performance measures for the promotion, we will use the

Analysis view.




5 On the Action Pane, click Analysis.

Let’s walk through the sections of the

Planned analysis page and examine the

insights that they offer.

The figures that appear on the page describe

the planned results that were envisioned for a

particular allowance agreement and the

actual results that were achieved by the

promotion.

In our case, we plan the following results:

● The total cost of the promotion will be

USD 40,000. This value is calculated as a

bill-back discount of USD 20,000 plus a

lump sum of USD 20,000. (See the Cost

section of the page.)

● The product’s sales price is set at USD 400

per unit to account for the bill-back of

USD 100 as an expense that will reduce

our sales figures. (See the Per unit

(Planned) column in the Sales section of

the page.)

● This discounted product’s unit price is

incorporated into calculations of the

promotional sales by multiplying it by the

expected ship quantity and then

subtracting any lump sum payments: (400

× 200) – 20,000= USD 60,000. (See the

Promotional planned column in the

Sales section of the page.)

● The difference between this figure and the

sale without the promotion (500 × 100 =

50,000) is USD 10,000, which is the

Difference to base value. This value

indicates the turnover that Contoso

expects to achieve if the promotion goes

according to plan.


Now, let’s compare the planned results to the

actual figures that were delivered by the

promotional event.

The Quantity section shows, both graphically

and in tabular format, that the actual quantity

that was sold under the promotion is 150

units, and that this quantity represents a lift of

only 50 percent.

The Sales section shows, both graphically and

in tabular format, that the actual turnover (as

adjusted for the promotional costs) for the

targeted customer has totaled USD 40,000 to

date. Before the promotion, the customer

purchases totaled USD 50,000, although the

purchases were made in smaller quantities.

Therefore, unless Contoso reaches the

planned volume of 200 units of the new TV

model, the promotion can’t be considered a

big success.

6 In the Cost section of the page, click Actual

cost.

The report that appears summarizes and

compares the planned cost and actual cost of

the campaign per agreement, customer, and

merchandizing event.


Owners of the marketing fund also have a statistical report at their disposal.


allowances > Funds > Fund details report.

8 In the Fund ID field, select Promo_Loyalty.

9 Select all the options on the page, and then

click OK.

The report summarizes the planned and

actual fund consumption per customer and

merchandizing event.

Send feedback.

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Trade allowance management - mbs.microsoft.com allowance management 2 Trade allowance management Trade allowance management helps companies, typically manufacturers, manage sales promotion