Loyalty programs are an excellent strategy to keep customers engaged with a company, and cashback is one of the most popular benefits offered. In addition to rewarding customers for their purchases, cashback also brings significant benefits to the company providing it. However, it doesn't come without risks, so it's very important to be aware to ensure your expectations are correct about it.
Challenges
One of the biggest challenges of a cashback program is the need to carefully manage the company's finances to ensure there is enough money to pay the rewards. It's crucial to have adequate working capital to cover the program's expenses and handle unforeseen events, like delays in customer payments. Working capital is the amount of money a company needs to finance its daily operations and is crucial for the success of any business, regardless of its size or industry.
Don't expect your loyalty program to sell itself, marketing it is necessary. But it's very important that the marketing is honest, clear, and transparent. A well-designed and transparent loyalty program can increase the company's credibility in the eyes of the customers. Transparency and clarity in the provided information help build customer trust. This happens because customers feel more comfortable engaging with a program that is transparent about its terms and conditions, as well as avoiding misunderstandings and ensuring customers understand the program's rules and benefits.
Another important challenge is finding a suitable cashback platform that can embrace your business and that is easy to use. It's important to check which partner companies the cashback platform has, as the more partner companies, the more chances of finding products you need and can save on. Some cashback platforms offer additional features such as coupons and extra discounts, which can be a differentiator when choosing the ideal platform. Additionally, it's important to verify if the cashback platform uses security technology to protect your personal and financial information. Before choosing a cashback platform, it is advisable to check the reviews and opinions of other users.
Tax aspects of cashback
In Brazil, cashback is considered a form of discount, which means companies must pay taxes on the total purchase value before the discount is applied, including the cashback value. This happens because it is seen as a reduction in the original price of the goods or services.
Companies offering cashback must collect the Tax on the Circulation of Goods and Services (ICMS) and the Social Integration Program and Contribution for the Financing of Social Security (PIS/COFINS) on the total sale value before the cashback discount.
However, companies can deduct the cashback value from Corporate Income Tax (IRPJ) and Social Contribution on Net Profit (CSLL), provided they meet certain conditions. For example, companies must offer cashback only on cash purchases and cannot consider its value as a deductible expense when determining Real Profit. Additionally, it is advisable to consult an accountant or lawyer specialized in tax matters to obtain specific guidance on the tax treatment of cashback in your company.