What is a rebate in procurement?

A rebate in procurement refers to a payment made back to the buyer, typically contingent upon specific terms, such as meeting a minimum purchase volume or maintaining a certain sales level over a designated period. This amount is often in addition to any discounts that are already applied, reinforcing the buyer's loyalty or incentivizing further business with the supplier.

In many cases, rebates are structured within contractual agreements and can be seen as a strategic tool for both suppliers and buyers. They can help suppliers maintain ongoing relationships and sales volume, while buyers benefit from receiving additional financial returns based on their purchasing behavior. Understanding rebates is crucial in procurement as they can significantly impact overall cost savings and budgeting for purchases.