itc wp internal orders with intercompany invoicing

INTERNAL ORDERS WITH INTERCOMPANY INVOICING

A White Paper prepared by IT Convergence

Author Hernan Hamburg

Copyright IT Convergence 2012


IT Convergence White Paper 2 / 15

TABLE OF CONTENTS

Introduction ............................................................................................................................................................................... 3

Why Should I use Internal Orders with Intercompany Invoicing? .............................................................................................. 3

Internal Orders with Intercompany Invoice Flow ....................................................................................................................... 4

Internal Orders with Intercompany Invoice – Key Setups ....................................................................................................... 12

Internal Orders with Intercompany Invoice – Identifying Prices and Costs.............................................................................. 13

Intercompany Function............................................................................................................................................................ 14



Introduction

Internal Orders with Intercompany Invoicing is not a new function, in fact, it’s been around for quite some time in different Oracle versions. However Oracle has made major improvements to Intercompany functionality in Release 12, and this new globalized scenario will help companies lower costs and improve operating efficiencies.

This paper discusses the fundamentals behind Oracle R12 Intercompany Invoicing and highlights this transaction flow.

Why Should I use Internal Orders with Intercompany Invoicing?

Intercompany Invoicing is a necessary evil that companies must manage when they reach a certain size. On the one hand it is a fundamental process that insures that internal resources get allocated properly and transparently. However, properly documenting Intercompany transactions can seem like added unnecessary bureaucracy and red tape to what is, after all, and internal process. Fortunately, Oracle R12’s enhancements help you keep this process manageable. Internal Orders with Intercompany Invoicing provides an option to companies with multiple operating units that transfers material from one Inventory organization that belong to one operating unit to another Inventory organization that belong to another operating unit. Here is a quick look at some of the specific features of Oracle R12 Intercompany Invoicing:

Automatization – Internal Orders with Intercompany Invoicing reduce manual operations involved in a typical transfer. This flow automatically creates Sales Orders and generates the Intercompany Invoices in Account Receivables and Account Payables. In addition, if you use Advanced Supply Chain Planning you can even create the Internal Requisition automatically. This means that the only human interaction points are actual picking and shipping of the goods and the receiving them inside the Inventory organization.

Accuracy – Fewer mistakes will be made since Oracle handles most of the flow’s operations.

Flexibility – You can add / disable different Operating units to use this flow at any given time. You can also run this flow in parallel with other options, like creating a Purchase orders in the requesting operating unit and manual Sales order within the sourcing Operating unit.

Oracle has recently added functionality in R12 such as “shipping documents” that further enhance the Intercompany Invoicing flow. R For example this enhancement in Oracle Shipping that allows you to easily modify documents in XML gives you the flexibility to gather all the information you need. In addition the performance for the concurrent “Create Intercompany AR invoices” and “Create Intercompany AP Invoices” has been improved.



Internal Orders with Intercompany Invoice Flow

Flow Steps:

1) Internal Requisition

Navigation: (PO) Requisitions → Requisitions



Type: Internal Requisition

Destination Type: Inventory

Organization and Location: This is the inventory org requesting the goods

Source and Organization: This is the inventory org providing the goods.

This is done on the requesting Operating Unit.

2) Create Internal Orders

Navigation: (PO) Reports -> Run

This is done in the requesting Operating Unit.



3) Order Import

Navigation: (OM) Orders, Returns → Import Orders → Order Import Request

Order Source: Internal

Operating Unit: Optionally enter the Operating Unit. This is normally done if you have global operations and want to create internal orders in specific time zones.



4) Pick Release

Navigation: (OM) Shipping → Release Sales Orders → Release Sales Order

This form allows many combinations to execute the pick release. For this case specific the picking rule has an automatic shipment rule. As a result both Pick and Ship confirm happens in one step.



5) Create Intercompany AR Invoices

Navigation: (INV) Reports → Intercompany Invoicing

Concurrent Name: Create Intercompany AR Invoices

Parameters:

Shipping/Procuring Operating Unit: Select the Operating unit that has shipped the goods



6) Autoinvoice

Navigation: (AR) Interfaces → Autoinvoice

Program Name: Autoinvoice Master Program

Parameters:

Invoice Source: Intercompany

Default Date: System Date



7) Create Intercompany AP Invoices

Navigation: (INV) Reports → Intercompany Invoicing

Concurrent Name: Create Intercompany AR Invoices

Parameters:

Shipping/Procuring Operating Unit: Select the Operating unit that has received the goods



8) AP Invoice

Navigation: (AP) Other → Requests → Run

Concurrent Name: Payables Open Interface Import

Parameters:

Source: Intercompany



Internal Orders with Intercompany Invoice – Key Setups

Pre-Requisites:

Operating Units

Inventory Organizations

Account Payables

Account Receivables

Purchasing

Inventory

Order Management

Advanced Pricing

Shipping

SLA

Locations

Profile Options:

INV: Intercompany Invoices for Internal Orders. Set value to Yes

QP: Multi Currency Installed

CST: Transfer Pricing Option

INV: Advanced Pricing for Intercompany Invoicing

INV: Intercompany Currency Conversion

Define AR Transaction type (or use an existing one)

Define OM Order Type (it is recommend to use the “Line Flow – Generic, Ship only” workflow

Assign OM Order Type a sequence

Add the OM Order Type on the Purchasing Options

Select Source Internal On the Purchasing Options



Verify the Purchasing document Type “Requisition Internal” is fully setup

Setup Shipping Networks

Verify Items are assign to the Inventory Organization involved in this process. Make sure these organizations share the same Inventory Master Organization.

Setup Price List if need it

Define an Internal Customer on both Operating units involved on this process

Define Supplier on the requesting Operating Unit

Setup Intercompany Relationships

Internal Orders with Intercompany Invoice – Identifying Prices and Costs

Every organization needs to understand where its prices and cost are coming from. Oracle R12 Internal Orders with Intercompany Invoicing provides four elements that help and organization define its prices and identify its costs:

Internal Requisition

Internal Sales Order

Shipping

Intercompany Invoice

Internal Requisition

Oracle populates the Internal Requisition “Price“ field based on the Item cost as determined by the sourcing Organization. If the Currency in the source organization is different than the currency of the Requesting operating unit, an exchange rate will be applied based on the setup of the profile options.

Internal Sales Order

The Price flag for Internal Sales Order is No. In other words, you will see the field called “Calculate Price Flag” as Freeze Price.

The Selling price for the internal sales order lines will be coming from the internal requisition. In other words, it will be the item cost of the source organization.

Shipping

The Shipping part of the flow will create an internal Inter Org Transfer (based on the Shipping networks setup).



The cost used here will depend on the profile option CST: Transfer Pricing

If the value selected is No, Oracle will use the item cost

If the value selected is other option, Oracle will use a price list using the Transfer pricing functionality.

Intercompany Invoice

The AR Invoice will get the Price from a Price List. This can be either defaulted from the Internal Customer Bill to Site or based on the use of Qualifiers depending on the setup of the profile option INV: Advanced Pricing for Intercompany Invoicing

Intercompany Function

Implementing Internal Orders with Intercompany Invoicing comes with its unique set of challenges, just as any Oracle workflow does. Hopefully this paper has given you some guidelines which will help you get started on the right foot. In the event that you should need further assistance, please feel free to contact us at 1-800-675-0032 and we will be happy to assist you.

http://www.itconvergence.com/portal/page?_pageid=33,15589&_dad=portal&_schema=PORTAL



Bibliography

Oracle Inventory User Guide, Release 12.1, Part No. E13450-04, August 2010

Oracle Order Management Implementation Manual, Release 12.1, Part No. E13406-04, August 2010

Oracle Order Management User’s Guide, Release 12.1, Part No. E13408-04

Oracle Shipping Execution User’s Guide, Release 12.1, Part No. E13431-04

Oracle Purchasing User Guide, Release 12.1, Part No. E13410-05

ABOUT THE AUTHOR:

Hernan Hamburg has been an Oracle Functional Consultant since 1998 and has implemented and supported Oracle Applications worldwide. He is presently Senior Principal Consultant at IT Convergence.

LEGAL DISCLAIMER:

The information contained herein should be deemed reliable but not guaranteed. The author has made every attempt to provide current and accurate information. If you have any comments or suggestions, please contact us: [email protected].

Worldwide Inquiries: IT Convergence: IT Convergence White Paper: Internal Orders with Intercompany Invoicing April, 2012

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