Chargeback is the term most often used in Health care industry and Ship and Debit Software is the term used mostly in all other industries. It is contractual agreement between suppliers and customer (mostly first level distributors) where specific products are shipped and invoiced to end customers (end users) at a lower price than usual. The difference in price is then claimed from the supplier to protect distributor margins. Distributor side of the chargeback or ship and debit is what we call Customer Chargeback in IMA360.
This enables suppliers to negotiate their prices directly with end customers based on market conditions while protecting distributor profit margin.
There are three main types of contracts:
This typically happens when customer is big enough for supplier to negotiate directly. Supplier and end customer negotiate the contract and supplier communicate the pricing information to distributors to make sure end customer is billed at the contract price and distributor is eligible to claim the money back from supplier.
This is usually the case when end customer is part of bigger purchasing group. These could be GPO, Buying Groups, IDN etc. In this case Supplier and purchasing group negotiate the contract and distributor bill the end customer at the contracted price and claim the chargeback from supplier.
This generally is to allow distributor more control to be able to react to market conditions. Supplier and distributor negotiate the contract giving the authority to the distributor to react to local market conditions by buying at uniform price but sell at different price and then claim the money from supplier.
Common problems with the Process
Managing this process is quite challenging for distributors carrying thousands of products, servicing thousands of customers with different types of contracts.
A few of the main challenges are listed below
Retro contracts approvals
Sometimes contracts negotiation takes time resulting in sales already in place without correct contract price which leads to credit and debit the end customer.
Chargeback contracts continues to grow, and complexity is continuing to increase. Distributors and Suppliers needs to assess their current systems to make sure they can keep up the pace and are truly automated from end to end.
Without proper analytics this can lead to profit erosion for both sides and it’s critical that proper price controls are in place which can analyze the contracts to makes sure deal is profitable.
Validation and Audit Trail
Validation controls established at each step of the process to ensure rebate are processed rapidly and accurately. Ability to route any contract change to approval process ensuing contract compliance. Provide audit trail for each rebate calculation by customer by product and up to the billing line level detail.
How IMA360 Can Help
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