A customer rebate is money that a supplier commits to pay back to a customer once agreed contractual conditions - typically purchase volume, growth, or program participation - have been met over a defined period.
How customer rebates work on the sell side
The supplier tracks customer purchasing against contracted tiers, accrues the rebate as a liability, and settles at period-end. Well-run sell-side operations track this continuously; less mature operations discover the true cost at true-up.
The exposure most sales teams under-see
Customer rebate exposure typically compounds as the year progresses. Sales teams that price new deals without visibility into running rebate liability under-price the incremental margin cost of expanded relationships.
