A Sell Through Allowance (STA) is a rebate that the manufacturer gives the retailer on specific products after they have been sold. The sale of the products must be accounted for and reported to the manufacturer. The manufacturer suggests a new retail price, but the actual retail price used is at the retailer’s discretion.
Inventory costs display net of the STA (Net Promo Cost) for the salespeople on the floor, as it is a competitive closing tool and protects profit margins. Sales of STA items during promotions reflect the Net Promo Cost for daily and monthly sales reporting to accurately indicate the store’s gross profit dollars. Items that are returned after or during STA promotion take Net Promo Cost and salesperson’s commissions into account.
For taxation purposes, the accounting processes recognize the income and corrected cost during the promotion’s time period and set up a receivable to be collected at a later date. The invoice can contain detail or a report can be created to be attached with it. An invoice to the manufacturer is created after completion of sell through period or on a monthly basis.
Actual landed inventory value in stock is unchanged by the STA.
The STA management process allows for STA reporting at regular intervals filtered by End Date in order to view any STA’s soon to expire. This allows the user to proactively determine if an extension needs to be set ahead of time. This process ensures salespeople always have current information since they will not be able to see STA’s once they have expired.
At the point of sale, the user can see items that have STA’s (the part number is underlined), allowing them to look up the STA value as well as the cost net of STA (visible only on demand so that customers will not see it if they can look at the screen). The margin based on the STA reduced value is available to view.
When the STA billing is performed, the STA amounts accumulated in the STA clearing account are moved to the A/R or A/P ledger account to await manufacturer’s payment (based on configuration options selected).
ENABLING SELL THROUGH ALLOWANCES
To enable Sell Through Allowances complete the following steps:
- Select the following menu path: Setup Wizard > Inventory > Sell Through Allowances and check the Enable Sell Through Allowances flag.
- Check Allow Salespeople to include sell through allowances in Invoice costs and margins, if you want the salespeople to see the Net Promo Cost and margin when creating the invoice.
- Select the Default Accounting Method. Reduce Cost of Goods is normally used in Canada. Post as Income is normally used in the United States.
- Enter the Default Clearing Account (Asset). First, create this asset account in the general ledger if you have not already done so. The STA value is posted to this clearing account so that, in conjunction with the cost of goods sold, they offset the value removed from the inventory ledger account. When the STA billing is performed, the STA amounts accumulated in the STA clearing account are moved to the A/R or A/P ledger account to await manufacturer’s payment based on the Manufacturer’s Billing Method selected.
- Select the Manufacturer Billing Method from one of the following 5 choices:
- A/R Detail Invoice - Shows one line per sale of STA product with sales invoice number on the STA rebate or billing invoice to manufacturer
- A/P Detail Credit - Shows one line per sale of STA product with sales invoice number on the STA rebate bill to manufacturer
- A/R Consolidated Invoice - Shows one line with total quantity of all STA rebates on billing invoice to manufacturer
- A/P Consolidated Bill - Shows one line with total quantity of all STA rebates on bill to manufacturer
- Variable - Allows you to choose either A/R Invoices or A/P Credit bills to be used for the STA rebates
- Enter a Lookup word that will automatically be assigned to the STA billing invoices when created. This will allow you to run A/R Aging reports filtered by this lookup word to isolate just STA related outstanding billing invoices.
- Select an Invoice Sub-Type from the drop-down choice list. Note that the Invoice Sub-Type must first be created in Setup Tools > Printing Options > Invoice Setup > Sub Types Tab. This invoice sub-type is automatically attached to STA billing invoices and will allow you to create Invoice Reports with detail and profit analysis for all sales invoices with this STA sub-type.
- Tax on Sell Through Rebate - Check the taxes to be applied on the STA rebate (billing) invoice to manufacturer.
- Allow future STA’s to be viewed and put on Estimates/WO for _0_ Days (0 for none). Enter a value for the number of days into the future the system will look for STA’s that have not yet started.
- Automatically select STA’s on invoices when only 1 STA is available. This option is normally checked. It will automatically detect and select the STA unless there are more than one STA’s available on the same part.
- Force STA’s to be selected on invoices. This option is normally checked.
ADDING OR CREATING SELL THROUGH ALLOWANCES
To add or create a Sell Through Allowance for an inventory item, complete the following steps:
- Edit an existing inventory item.
- Select the Sell Through Allowances tab in the item record as shown in the figure below:
- Click Add to open the Sell Through Allowance Billing setup window as shown in the figure below:
- Enter the STA number in the Number field, or use the part number as the default STA number.
- Enter the Start Date and the End Date for the STA.
- Enter a brand in the Brand field. This is typically the manufacturer’s name which is stored in the supplier data base.
- Enter the Bill To name in the Bill To field. This is typically the manufacturer’s name which is stored in the Supplier data base, but it may be different than the Brand Name.
- In the Retail section, enter a New Price, or select one of Retail Discount $ or Retail Discount %. These selections automatically replace the standard retail price with the discounted price specified until the expiry date of the STA.
- In the Cost section, enter the Cost Rebate $ amount, or select one of Cost Rebate %, or New Cost. These selections specify the amount of the rebate that will automatically appear on the STA billing invoice to the manufacturer for every unit that is sold during the effective STA date range.
- Add on Part (optional) is used to specify an item that is added to the invoice as another line item to show the discount separately.
- Invoices that have billed STA's can no longer be voided or turned to Estimates or Work Orders.
- Estimates or Work Orders can no longer be converted to final invoices if the STA has expired. The user is prompted to delete the item first and re-add it to the invoice.
You might be thinking that this is all very helpful, however I have 400-500 Sell Through Allowance Inventory Items and their allowances change every Month or two. How can I effectively manage this situation? Good news, we have developed a STA Data Load which can update your parts.
Follow this link to the article on how to use it:
employee: Sell Through Allowance Load
Sell Through Allowance Load
SELLING ITEMS WITH SELL THROUGH ALLOWANCES
When selling STA items, the discounted retail price will automatically show if it was specified in the Sell Through Allowance Billing setup for that item. When using the typical STA configuration setup (as shown in the section above called Enabling Sell Through Allowances), the STA discount is automatically deducted from the Landed Cost of the item.
If you do NOT check the flag next to the option Allow salespeople to include sell through allowances in Invoice costs and margins in the Setup Wizard, the Sell Though Allowances notification dialog box will appear when selling an item with an STA.
To create the STA billing invoices to the manufacturer for all STA items sold complete the following steps:
- Select the following menu path: Promotions and Sell Through Allowances > Sell Through Allowance Billing
- Click View to report on all Active Status STA’s, all Billed Status STA’s. Optionally you can select specific statuses, enter specific STA numbers to report on, or specify a Brand and Bill To name to report on.
- Once the report is generated you can double-click on any row to open the Sell Through Allowance Billing window for the selected.
- If the status of the STA is Active you can click the Create A/R Invoice button to create the billing invoice.
- Click Save to save and print the invoice.