Depletion Allowance (SPA)

Category: finance

A temporary financial discount or rebate provided by distributors to retailers based on the volume of product sold to customers.

Also referred to as a Special Purchase Allowance (SPA). Distributors use depletion models to clear out massive warehouse inventory blocks. The retail store pays the standard wholesale price upfront, and upon submitting point-of-sale data verifying the bottles were successfully "depleted" (sold to the public), the distributor issues a backend credit memo, dramatically altering the true net cost of goods sold.

Common Examples

• Our point-of-sale reporting tool transmits weekly batch files to the distributor to claim our multi-tiered depletion allowance credits.
• The auditor cross-referenced our gross invoice receipts with active depletion allowance memos to verify our actual net margins across the tequila category.