Reducing Revenue Leakage through Rebate Process Improvement

This is a guest blog post from Alliance Life Sciences.

Administrative tasks associated with rebate processing aren’t typically viewed as revenue generators however, when managed effectively, they can provide benefits and contribute to the bottom line.  Left overlooked, a business can encounter compliance issues, misallocate time, and resources resulting in financial losses. Standardized rebate calculation processes, validation, and analytics become necessary for successful practices.

Maturity Assessment

Many organizations start with one product that can be easily managed with manual processes, however, company growth soon renders effective management of submission details impossible to efficiently maintain. Maturation requires small improvements in stages adding forward-thinking and cumulative value, understanding the gaps, and scrutiny become key to the progress, making verification of rebate submission details a highly recommended practice. Stages should be evaluated before moving on to determine if a more advanced process is financially viable and realistic based on existing resources. An assessment of contract strategies, number products, and transactional volumes should be considered.

  1. Foundational Stage

The pay to invoice methodology is the easiest and least intensive way to meet the terms and conditions set forth in the contract language.  Compliance and prompt payment are not issues, but accuracy suffers resulting in the largest amount of revenue loss. Manual analysis overcomes this issue but is impractical when dealing with larger amounts of data.

With invoices varying from only a few easily scrutinized records to several hundred lines of summarized data, an analyst cannot determine the accuracy of the invoice if multiple pricing strategies like base rebates, price protection, market share rebates, and admin fees are being used.

  1. Operational Stage

Calculations are needed to translate contract terms and ongoing maintenance is critical because the precision of not updating deteriorates rapidly.  When contract terms are computed, a basis of comparison is established to measure submitted data. By comparing an invoice to an internally calculated standard, analysts determine the correct payment more efficiently.

An operational foundation implements metrics to systematically gauge performance levels. These measurements provide the analytics to support decisions, launch new projects, allocate resources, and provide insights into revenue trends.  Routine checks of process efficiency is crucial to ensure that standards are effectively keeping up with new strategies and neglecting these checks provides detrimental results.

  1. Optimal Stage

With many industry factors causing it, the most common issue experienced is overbilling coming from incorrect invoice data. Performing manual and automated validations are the most effective way to find, reject, and correct these errors. Although invalid lines can be corrected and resubmitted, the manufacturer has visibility to the rejections and can estimate submissions based on behavior patterns of their customers.  This process allows utilizing dollars for an additional quarter to their advantage rather than prematurely paying an inflated rebate amount.

Effective revenue management is about ensuring that optimal controls are in place. Maintaining status quo is easy, but it comes at the expense of ignoring process shortcomings that erode, organizations often miss the opportunities to improve their processes and incur revenue leakage. Therefore, it is critical to determine your place in the rebate processing lifecycle. Exploring the associated optimization strategies initiates growth in a way that is both measured and proactive, augmenting efficiency while yielding significant bottom line results.

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