The fourth quarter is the window period for major domestic trade customers to negotiate the annual framework agreement (annual framework): channel merchants are locking next year's supply plates, and factories are locking next year's production capacity and refunds. If we talk well about the annual framework, orders will be stable and production arrangements will be leisurely in the coming year; if we talk poorly, we mean "the quantity is not maintained, the account period is prolonged, and the rebates will be given in vain." This article breaks down the three types of terms that are most likely to go wrong in the annual framework agreement-quantity guarantee, rebate, and account period-and explains clearly how to write and abide by it.
1. Think clearly first: Why do you want to sign the annual frame
The annual frame has only one value to the factory: moderate profits are exchanged for predictable order flow, allowing planning of production capacity layout and raw material procurement. So calculate three accounts before negotiating: how much this customer actually picked up goods last year, what percentage of your production capacity accounted for, and how much gross profit contributed. The rebates and account period costs allowed by the annual framework must be earned back from the "certainty of production scheduling." If a customer picked up goods last year only accounted for 5% of your production capacity, but he wants the account period and rebate from a major customer, this account is not valid. Conversely, for core customers whose delivery accounts for more than 20% of the production capacity, the annual framework must be discussed before competing products. At the end of the year, channel providers will allocate the share of next year's suppliers. If you are a step later, the terms will be passive.
2. Quantity requirement clause: ladder writing, two-way constraints
Quantity is the core of the annual frame, and the writing determines success or failure. A common mistake is "Customers 'annual purchase shall not be less than 10 million yuan, and rebates will be cancelled if they fail to meet the standards"-unilaterally constraining customers, and most major customers' legal affairs are directly crossed out. A more viable way to write is ladder parity:
- Divided rebate:When the actual delivery amount reaches 80% of the annual target, 2% will be refunded; when the full amount reaches the target, 3.5% will be refunded; if the excess exceeds 120%, 5% will be refunded. Give customers the motivation to move upwards, and also give them a boundary when they fail to meet the standards.
- Monthly breakdown:If the annual target is broken down into quarters, and the factory has the right to adjust supply priorities or terminate exclusive supply arrangements if it is 75% lower than the plan for two consecutive quarters. Prevent customers from making cakes at the beginning of the year and disappearing in the middle of the year.
- Capacity reservation consideration:If a customer requires priority in supply during the peak season, they will be required to make a quarterly deposit or promise a minimum delivery amount. Production capacity is your strongest bargaining chip, don't give it away in vain.
3. Rebate terms: Priority will be given to the replacement of goods and payment will be made after the ticket is issued
The rebate redemption method is more likely to cause disputes than the proportion. Priority should be given to "goods compensation": after reaching the rebate position, it will be converted into a pro rata deduction for the first batch of goods picked up in the next year. The factory's cash flow pressure will be the least, and customers are willing to accept it. If the customer insists on cash rebates, the time point and prerequisites for cashing must be clearly stated-based on the "actual amount returned" rather than the "invoiced amount". Otherwise, the customer will still have to pay the rebate even if the goods are sold and the payment is not settled. In addition, it is stated that rebates cannot be offset against overdue accounts, and the two accounts are handled in two separate lines.
4. Accounting period terms: Accounting period and quantity quantity must be bundled together to discuss
Accounting period is always the most severe item in the annual frame. The bottom line idea is: for every 15 days the account period is extended, there must be corresponding compensation in the price or rebate; for credit exposure exceeding 90 days, the amount will either be reduced or credit instruments will be introduced to hedge. There are three recommended articles on writing:
- The benchmark accounting period is clear whether it is "delivery" or "delivery":It is verbally stated that the monthly settlement is 60. In the case of a dispute, one party said that it will be calculated when the ticket is received, and the other party said that it will be calculated when the goods are received. The difference is two months. The contract states that it will count from death.
- Delayed liquidated damages are linked to supply rights:If the deadline exceeds 15 days, the factory has the right to suspend supply and will not be regarded as a breach of contract; the interest on the overdue period shall be stated at 3 to 5 thousandth of a day. A billing period clause without penalties is equivalent to no clause.
- Large households insure credit insurance:If a single customer receives more than 10% of annual sales, it is recommended to apply for domestic trade credit insurance, and the premium is included in the quotation cost. If the customer does not accept the risk-inclusive quotation, it means that he is not sure about payment.
5. Three red lines that must be maintained
- Price not to frame losses for the year:The annual frame price is locked for a year, and you can only watch as raw materials rise by 15%. The quotation must include raw material linkage clauses: the price of main raw materials fluctuates by more than 5% from the signing date, and the supply price will be adjusted accordingly.
- Unlimited priority supply commitments are not accepted:Production capacity in peak season is shared by all customers, and writing "Party A's needs are first met" will cause you to be beaten on both sides in case of delivery default.
- Exclusive terms apply:If a customer wants regional exclusivity, he must correspond to the promised lower limit of delivery; if he only takes the exclusivity and does not reduce the quantity, it is equivalent to locking the path of other customers for him.
6. Common questions
1. Big customers said,"Other factories don't pay so much attention." How to promote it?
Break the terms into layers: the core red lines (accounting period starting point, overdue penalties, raw material linkage) are not allowed, and other terms (rebate stalls, redemption methods) can be used as negotiation space. In practice, the more mature the legal system is, the more major customers accept clear reciprocity terms. Most of those who shout that "no other factory is like this" are trying to obscure the parts that are beneficial to them.
2. The customer requires that the annual frame price be 10% lower than the cash spot price. How to judge whether it can be accepted?
Calculate two accounts: one is the cost of account period, which is converted into price according to annualized capital cost; the other is whether the scale dilution brought by the increase of quantity and price hedging can cover 10 points. If both payments are not fair, they will bargain and use rebates instead of direct price reductions. Rebate is linked to compliance with standards. The actual profit transfer is conditional and safer than a naked reduction of 10 points.
3. What if the customer changes the purchasing person halfway through the signing of the New Year and refuses to recognize it?
The main body of the contract is for the company and not for the individual. The signature, power of attorney, and statement of statement are sent to the official letter of the official account, and the verbal commitments of the person in charge of the procurement are all confirmed in the supplementary agreement or email. A written reconciliation is done every year in the middle of the year, which is not only risk control, but also the basis for year-end rebate settlement.
