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  • Writer's pictureJoel White

Improve Margins Through Vendor Rebates

In volatile economic environments, organizations shift focus to cutting costs as a way to hedge against uncertain revenue performance. Cost cutting often feels painful and demoralizing, and done wrong may sacrifice longer term growth for short term overreaction. Let's review one way to creatively cut costs with minimal internal angst and possible long-term benefits.

Look for opportunities to negotiate rebates with vendors and subcontractors who augment your capabilities and/or provide services and technologies required for your projects.

These rebates benefit both gross and net margin, leverage spend that already exists, provide operational efficiencies through consolidating vendors, and represent one of the most painless cost reduction measures you can take in the near term (no re-org, downsizing, etc.). In this economic environment, vendors are more eager than usual to agree to these rebates in return for the business development benefits they receive from strong partnerships.

Rebates for "pass through" vendors are perfectly ethical from my perspective, as long as you are transparent about them when asked and your financial due diligence indicates they are not marking up their standard pricing to pay you a rebate.

Pro tip: account for these rebates as a reduction to COGS, not SG&A.


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