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Distributor Pricing and Rebate Terms Glossary

Pricing and rebate language is where distributor ERP projects stall, because the same word means different things in sales, purchasing and finance. This glossary gives short working definitions and the usual trap for each term, so setup decisions are made with shared meaning.

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Term	Meaning	Where it appears	Watch out for
List price	Published price before any customer or volume discount	Price book, catalog	Not the same as the price most customers pay
Multiplier	A factor applied to list price to get a sell price, such as 0.62 of list	Customer or product group pricing	Check whether it is applied to list or to cost
Matrix pricing	Sell price derived from a grid of customer class and product class using cost plus or list minus rules	Pricing setup	Cell overlaps give unpredictable results
Cost plus	Sell price equals a cost basis plus a percentage or amount	Contract and matrix pricing	State which cost basis is used
Contract price	A price agreed for a customer and item, often for a fixed period	Customer contracts	Expiry dates need a review process
Quantity break	Price that changes at defined order quantities	Price pages	Decide if the break uses line quantity or order quantity
Replacement cost	Current cost to buy the item again from the vendor	Costing, pricing basis	Moves with every vendor price change
Average cost	Weighted average of what was paid for on-hand stock	Inventory valuation	Lags behind market price
Standard cost	A fixed planning cost reviewed on a schedule	Costing	Variance accounts need a monthly look
Last cost	The cost on the most recent receipt	Costing, quoting	One odd receipt can skew it
Rebate	A payment from a vendor or to a customer after a volume or growth threshold is met	Vendor agreements, customer programs	Accrue it as sales happen, not when paid
Growth rebate	Rebate paid only on volume above a prior-period baseline	Vendor agreements	Baseline definition drives the payout
Tiered rebate	Rebate rate increases as volume passes tier thresholds	Vendor agreements	Know if the rate applies to all volume or only the excess
Retroactive rebate	When a tier is reached, the higher rate applies back to the first dollar	Vendor agreements	Accrual estimates can swing near a threshold
Ship and debit	Distributor sells at a lower price to win a deal and claims the difference from the vendor	Vendor claims	Needs approval before the sale in most programs
Special pricing agreement (SPA)	Vendor-approved special cost for a named customer or project	Vendor programs	Match to the exact quantity and date range
Price protection	Vendor credit for stock on hand when the vendor lowers its price	Vendor agreements	Claims usually have a short filing window
Stock rotation	Right to return slow stock to a vendor, often capped at a percent of purchases	Vendor agreements	Returns often need prior authorization
Spiff	A cash incentive paid to a salesperson or counter staff for selling a product	Vendor and internal sales programs	May be taxable compensation
Freight allowed	Order value above which the vendor pays freight	Purchasing terms	Check whether threshold is per order or per shipment
Terms discount	Early-payment discount such as 2/10 net 30	Accounts payable and receivable	Annualized value is high, so capture it
Core charge	A deposit on a returnable core, refunded when the used part is returned	Parts distribution	Track it separately from item revenue
Restocking fee	A fee charged on returned goods to cover handling	Return policy	Must be in the customer terms to be enforced
Gross profit floor	A minimum margin below which a quote needs approval	Quote approval rules	Floors should vary by product class

Terms vary by vendor and country. Always follow the wording in the signed vendor agreement or customer contract.

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How to use the glossary

Use it as a pre-read for a pricing workshop or a vendor agreement review. Search a term, read the meaning and the watch-out, and then confirm with the actual document in front of you. When your team uses a term differently, write your own meaning in the exported sheet. That sheet becomes the pricing data dictionary for the ERP configuration and for report definitions.

Cost basis decisions

The most expensive confusion is the cost basis. Replacement cost, average cost, last cost and standard cost can differ by several percent on volatile items, and margin reports built on the wrong one mislead sales. Pick the basis for each use: quoting often uses replacement cost, valuation often uses average or standard, and rebate accrual follows the vendor agreement. Document these choices.

Rebates and claims

Vendor money arrives in three ways: rebates after volume, claims such as ship and debit or price protection, and terms discounts. Each needs its own tracking, because the evidence differs. Rebates need purchase totals per period, claims need the customer, quantity and approval reference, and discounts need the invoice and payment dates. Mixing them in one spreadsheet is a common reason money goes unclaimed.

Rebates: accrue monthly against purchases
Claims: file inside the vendor window
Terms discounts: pay by the discount date
Keep the signed program documents with the claim

Common mistakes

Teams often load multipliers without recording which price they apply to, let contract prices run past their expiry, and treat a retroactive rebate tier like a marginal one. Another frequent error is paying spiffs outside payroll. A short review of the terms in this table before go-live catches most of these.

Frequently Asked Questions

What is the difference between margin and markup?

Markup is profit as a percent of cost, while margin is profit as a percent of the selling price. An item bought at 80 and sold at 100 has a 25 percent markup and a 20 percent margin. Mixing them is a very common pricing error.

What does ship and debit mean?

The distributor sells to a customer at a price below its normal cost, then bills the vendor for the difference, usually after getting the vendor's approval on the deal. The claim needs proof of the sale, quantity and approval reference.

Is a retroactive rebate better than a tiered one?

A retroactive rebate pays the higher rate on all volume once a tier is reached, so it is more valuable near a threshold. A marginal tier pays the higher rate only on the volume above the threshold. Read the agreement to know which applies.

Which cost should I use for quoting?

Many distributors quote from replacement cost because it reflects what the next unit will cost. Others use average cost to keep prices stable. Choose one policy per product class and apply it consistently so margin reports can be compared.

If your price lists, contracts and vendor programs are scattered across files and ERP screens, we can discuss a read-only review of how they are used in your own data.

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