Volume credits taken before they are earned
A buyer prematurely deducts an annual growth rebate credit against their invoice payments before the contractual purchase volume threshold has been met. The buyer assumes they will hit the target by year-end and takes the credit early — but the contract says rebates are earned at threshold, not before.
Many distributor contracts include tiered volume rebates: 'Buyer earns a 3.0% annual growth rebate if total net purchases exceed $5.0M in the contract year.' The intent is to reward loyalty. In practice, the buyer's procurement team programs the 3% rebate into their AP system from Day 1 of the contract year, deducting it from every payment. By Q2, the buyer may have purchased $1.8M — well below the $5.0M trigger. The rebate hasn't been earned, but the money has already been deducted.
Section 9.1 typically reads: 'Buyer shall earn a volume rebate of 3.0% on aggregate net purchases provided total purchases in the contract year exceed $5,000,000.00. Rebates are calculated and payable quarterly in arrears, subject to verification of cumulative purchase volume.' The controlling language is 'exceed $5,000,000' and 'quarterly in arrears' — the rebate is payable after the threshold is proven met, not before.
Axiom calculates year-to-date cumulative purchases from the buyer's invoice and PO history. If the YTD total is below the §9.1 trigger at the time of deduction, the rebate is classified as premature and the full amount is flagged as recoverable. The dispute letter includes a YTD purchase calculation, cites the contract year threshold, and requests reversal of the unearned rebate credit.