Ship and debit
Reviewed by Dasha ShakovVP Marketing, Proton
Updated
What is ship and debit?
Ship and debit is an arrangement in which a manufacturer lets a distributor sell to one customer or project below its normal cost, then repays the gap. The distributor ships at the agreed low price and submits a claim, the “debit,” to recover the difference between its invoice cost and the special cost.
How it works
The approval behind it is called a special pricing agreement or special pricing authorization (SPA), with its own number, customer, items, price and expiration date. The arrangement is common in electrical and electronic components distribution, and similar programs go by other names in other industries, such as claimbacks or billbacks; healthcare’s version is the contract chargeback. Claims filed late or under the wrong SPA number can be denied.
Ship and debit example
An SPA lets a distributor sell 400 fixtures to one contractor at a cost of $30 instead of the usual $38. After shipping, it claims $8 × 400 = $3,200 from the manufacturer.
Related terms
- ChargebackA chargeback is money taken back after a sale, either as a customer’s penalty on a supplier or as a distributor’s claim on a manufacturer.
- RebateA rebate is money paid back to a buyer after a purchase, once the buyer reaches agreed volume or growth targets over a period.
- Contract pricingContract pricing is a set of fixed prices agreed with a specific customer for specific items over a set period, after a negotiation, bid, RFP or GPO deal.
- Manufacturer’s representativeA manufacturer’s representative is an independent salesperson or agency that sells a manufacturer’s products on commission, without buying or stocking any.
- Margin leakageMargin leakage is profit a distributor loses through many small, often unnoticed gaps between the price or cost it should have had and what it got.
