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Oracle Procure to Pay (P2P) and Order To Cash(O2C) Cycles

The different types of ordering methods followed across the organizations are discussed below and must follow one of these categories:

Make to Order:

A business production strategy that typically allows consumers to purchase products that are customized to their specifications. The make to order (MTO) strategy only manufactures the end product once the customer places the order. This creates additional wait time for the consumer to receive the product, but allows for more flexible customization compared to purchasing from retailers’ shelves.

Make To Stock:

A traditional production strategy used by businesses to match production with consumer demand forecasts. The make-to-stock (MTS) method forecasts demand to determine how much stock should be produced. If demand for the product can be accurately forecasted, the MTS strategy can be an efficient choice.

Assemble to order:

A business production strategy where product ordered by customers can be produced quickly and are customizable to a certain extent. The assemble-to-order (ATO) strategy requires that the basic parts for the product are already manufactured but not yet assembled. Once an order is received, the parts are assembled quickly and sent to the customer.

Make To Assemble:

A manufacturing production strategy where a company stocks the basic components of a product based on demand forecasts, but does not assemble them until the customer places an order. This allows for order customization. MTA production is basically a hybrid of two other major types of manufacturing production strategies: make to stock (MTS) and make to order (MTO).
Oracle has developed this ERP solution which truly covers these both cycles Purchase to Pay and Order to Cash. Oracle EBS comprises of the Standard Core Business Management applications like General Ledger, Payables, Receivables, Cash Management, Fixed asset, Purchasing, Order Management, Inventory, Discrete Manufacturing, Process Manufacturing , HRMS and many more. The application mentioned are so integrated that it handles the beginning to end of both Assets (Order Management and Receivables) and Liabilities (Purchasing and Payables). These Assets and Liabilities are finally pushed and calculated in Oracle General Ledger. The base or the heart of Oracle EBS is Oracle General Ledger. Let me  call GL an intrinsic.

Order to Cash Cycle:

Order to Cash means Customer’s Order Placing to Vendor’s Cash Receiving. When your final product is ready to be sold, you market it. The customer gets fascinated with the marketing campaign and decides to buy your product and from here starts the O2C cycle.
  1. Oracle Order Management: Customer places the order.
  2. Oracle Order Management: You enter the customer order
  3. Oracle Inventory: Check the available unit and the quantity ordered by the customer.
  4. Oracle Order Management: You ship the product to customer site and decreases the Finished Goods inventory.
  5. Oracle Receivables: The customer receives the product and you invoice the customer.
  6. Oracle General Ledger: You record your revenue and receivables.
  7. Oracle Receivables: The customer pays and you receive the cash/check.
  8. Oracle Cash Management: Oracle Receivables sends the customer receipt for Bank Reconciliation. After reconciliation, Oracle Cash Management send the actual bank balance or Oracle General Ledger.
  9. Oracle General Ledger: You have the actual bank balance.

Following Accounting entries will be generated for O2C

  • Sales order creation – No entries
  • Pick release:
    Inventory Stage A/c…………………Debit
    Inventory Finished goods a/c……..Credit
  • Ship confirm:
    Cogs A/c ……………………………Debit
    Inventory Organization a/c………Credit
  • Receviable:
    Receviable A/c………………………Debit
    Revenue A/c………………………Credit
    Tax ………………..…………………Credit
    Freight…………..….……………….Credit
  • Cash:
    Cash A/c Dr…………………………Debit
    Receivable A/c……………………….Credit

Procure to Pay:

Procure to Pay means Procuring Raw Materials, or semi finished goods required to manufacture the final or finished Goods to Paying the Supplier from whom the material was purchased. But this is not just two steps. It involves many steps which are mentioned below:
  1. Oracle Purchasing: You enter Suppliers of different materials and products you want to purchase to  manufacture a finished good that your organization plans to sell.
  2. Oracle Purchasing: You prepare a Request for Quotation (RFQ) and send it to different suppliers to get the best and/or economical price for the product.
  3. Oracle Purchasing: Suppliers sends their quotations and you upload those quotations in Oracle Purchasing to get the best three quotes and further to get the one best quote.
  4. Oracle Purchasing: You prepare a Purchase Order(PO) against the best RFQ to buy the goods from the supplier who quoted the suitable price and sends the PO to that supplier
  5. Oracle Purchasing: The supplier receives the confirmation of purchase from PO and ships the ordered goods. You receive the goods enter a Goods Received Note (GRN) in Oracle Purchasing.
  6. Oracle Inventory / Oracle Assets: It’s up to you whether you want to receive the goods at your head office or you Inventory directly. In either case you move the received goods to your different Raw Material Inventory from Oracle Purchasing to Oracle Inventory and the Item Count increases. If the item is Asset Type then it will move to Oracle Assets at the time of Invoice creation in Oracle Payables.
  7. Oracle General Ledger: Once you move the goods to Oracle Inventory, it sends the Material Accounting to Oracle General Ledger.
  8. Oracle Payables: After this the supplier sends you the invoice for the purchased goods and you Enter or Match the invoice against the PO from Oracle Purchasing in Oracle Payables. As said before, if the item is Asset in nature then it will move to Oracle Asset.
  9. Oracle General Ledger: When you enter the invoice it means that you have created a Liability against that supplier and also you have recorded the expense incurred or asset purchased. Oracle Payables sends the invoice accounting to Oracle General Ledger.
  10. Oracle Payables: You pay the invoice and settle the Liability.
  11. Oracle General Ledger: The liability is settled and your cash movement account is updated.
  12. Oracle Cash Management: As you pay the invoice Oracle Payables sends the payment information to Oracle Cash Management for Bank Reconciliation. Once reconciled, Oracle Cash Management sends the updated Bank/Cash accounting entry to Oracle General Ledger.
  13. Oracle General Ledger: Your cash at bank is updated with actual balance.
  14. Oracle Process Manufacturing(OPM) / Oracle Discrete Manufacturing(ODM): You start the manufacturing of your final product. Both OPM or ODM requests the different raw materials from you inventory organizations and manufactures a finished good.
  15. Oracle Inventory: As the raw materials are issued to OPM and ODM the inventory sends the issuing material accounting to General Ledger and decreases the Item Count from the Raw Material Store. As the finished good is prepared, Oracle Inventory receives the finished good in Finished Good Store and increase the Item Count.

Following Accounting entries will be generated for P2P:

  • Purchase Requisition creation No entry
  • Purchase Order creation no entry
  • Inventory Receipt:
    Inventory A/c…………….Debit
    AP Accrual A/C………Credit(This A/c We are giving in Financial Option)
  • At the time of Matching the Invoice with Purchase Order
    AP Accrual A/c………….Debit
    Supplier A/c…………..Credit
  • At the time of making payment to supplier
    Supplier A/C…………… Debit
    Bank A/c…………….Credit
This is how the P2P and O2C cycle works, but this is not the only way, obviously there are many other applications with different cycles.
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Key Things in Oracle Accounts Payables

Oracle Accounts Payable’s is part of Oracle Financials, which is part of Oracle’s E-Business Suite.
Oracle Payables business process flow is setup, suppliers, invoices and payments, inquiry and reporting and period-end processing. The Oracles Payables business flow is setup, supplier entry, invoice entry, payments or disbursements generation, inquiry and reporting and period-end processing. Each organization must define its specific operating environment.
What are all the Modules Interacting with AP? 
Cash Management
Oracle iExpenses
General Ledger
Oracle Assets
Subledger Accounting (R12)
HRMS
Project Accounting
Purchasing/iprocurement
Global Accounting Engine (11i)
Define Payment Terms and their Types
Payment Terms are defined to automatically create payment schedule lines for an invoice.  The due date for every invoice    shall be determined by the Payment Term associated with it. Multiple scheduled lines and multiple levels of discount can be defined in payment terms. There is no limit to number of Payment Terms that can be defined for an organization.
While scheduling, the payment term determines the following with regard to an invoice:
a.    Number of installments in which the invoice needs to be settled
b.    Amount in each installment
c.    Due Date of each installment
d.    Discounts available for early payment of each installment.
Navigation: Setup> Invoice> Payment Terms
The due date of every installment is determined by TERMS DATE BASIS. The Terms Date can be any of Invoice Date, Invoice Received Date, Goods Received Date or Systems Date. In a case where the PO Payment term differs from the Invoice payment term, the payment term which has better ranking shall take precedence. Changing the Payment Terms in an invoice after the payment lines are scheduled changes the scheduled payment lines. 
What is terms date basis?
Terms Date Basis is to calculate due date.
Due date is calculated 4way. Eg: payment term is 30days
  • Due date = Sysdate + 30days
  • Due date = Invoice date + 30days
  • Due date = Goods Receive Date + 30days
  • Due date = Invoice Received date + 30days
How many types of Invoices we can create in Oracle Payables?
A. Standard
B. Debit Memo
C. Credit Memo
D. Pre-Payment
E. Expense Report
F. Withholding Tax Invoice
G. Miscellaneous Invoice
What are the types of Invoice Matching in AP
Invoice matching can be two-way (invoice to PO), three-way (invoice to PO to receipt) and four-way (invoice to PO to receipt to inspection of goods)
What is the difference between Debit and Credit Memo?
Debit Memo will raise the Customer.
Credit Memo will raise the Vendor.
How many Holds AP have?
System Holds: Tax, Quantity Match, Po amount with Invoice Amount
Manual Holds: Invoice Limit, Hold on Invoice

Can you Release Manual Holds? If Yes, How?
Yes. Holds – Release Holds

How many ways you can pay the Invoice Amount?
Apply in Full
Schedule Payments
Installments

How many key flexfields are there in Payables?
No key flexfields in PO,AP
What are the mandatory setups in AP?
1- Financial Options
2- Define Suppliers
3- Define Payment Terms
4- Define Payment Methods
5- Define Banks and Banks Accounts And Banks Accounts Documents
6- Open AP Accounts Periods
What is pay date basis?
The Pay Date Basis for a supplier determines the pay date for a supplier’s invoices.
• Due
• Discount
What are the Payment Methods available?
• Check – You can pay with a manual payment, a Quick payment, or in a payment batch.
• Clearing – Used for recording invoice payments to internal suppliers.
• Electronic – You generate an electronic payment file that you deliver to your bank to create payments. Use Electronic if the invoice will be paid using EFT or EDI.
• Wire – Used to manually record a wire transfer of funds between your bank and your supplier’s bank.
What is the difference between quick payment and manual payment?
Quick Payment: It allows you to make a single payment against one or more invoices at a time to one supplier through payables.
Manual Payment: This is the process of entering the check details which has been paid manually in some emergency requirements into the payment form and selecting the invoices of the concerned supplier and check whether the total of the invoices and the paid amount at the header are same and save.
What are Aging Periods?
Aging periods are nothing but the periods that we setup to control and maintain the supplier outstanding bill towards the invoice. From this we can able to study the due date of the supplier form the generation of invoice.
Steps to transfer the data from AP to GL
 R12
     a) Run Create Accounting with the parameter Transfer to GL as Yes.
     b) Run Create Accounting with the parameter Transfer to GL as No and run Tranfer Journal
        Entries to GL.
        1. Create Accounting
        2. Transfer to GL (includes Journal Import)
        3. Post to GL
     Parameters:
        a. Error Only : Yes (Only erred events will be picked up. Try to use No)
        b. Report : In Detail (if we make it detail then it will show with the detail output.)
 11i
     a) If AX is installed
         Submit AX Posting Manager.
         1. Translate Events
         2. Tranfer to GL
         3. Journal Import
         4. Post to GL.
     b) If AX is not installed
         1.Payables accounting process
         2.Payables transfer to general ledger
         3.Journal import
         4.Post journals
Oracle Technical AP Tables
What are the Interface Tables in AP?
AP_INVOICES_INTERFACE
AP_INVOICE_LINES_INTERFACE
AP_INTERFACE_CONTROLS
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AP_SUPPLIERS_INT
AP_SUPPLIER_SITES_INT
AP_SUP_SITE_CONTACT_INT
AP_SUPPLIER_INT_REJECTIONS
What is the API to cancel single AP Invoice?
AP_CANCEL_PKG.AP_CANCEL_SINGLE_INVOICE
What is the API to find invoice status?
AP_INVOICES_PKG.GET_APPROVAL_STATUS
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AP invoice details with supplier name, payment terms

Select DISTINCT(aps.invoice_id), ai.SOURCE, ai.invoice_num, aps.due_date, aps.gross_amount, aps.hold_flag, aps.payment_method_lookup_code, aps.payment_status_flag, aps.org_id, aps.inv_curr_gross_amount,
ai.invoice_type_lookup_code invoice_type, ai.invoice_date, po.vendor_name, pos.vendor_site_code_alt legacy_system_site_number, ai.invoice_amount,
ai.invoice_currency_code, ai.exchange_rate, ai.payment_method_lookup_code, ai.pay_group_lookup_code, ai.terms_id, ai.doc_sequence_value, ai.doc_category_code,
ai.validated_tax_amount,ai.payment_currency_code,ai.pay_curr_invoice_amount,ai.invoice_currency_code,ai.invoice_amount, apt.NAME payment_terms_name
from apps. AP_PAYMENT_SCHEDULES_ALL aps,
apps.ap_invoices_all ai,
apps.po_vendors po,
apps.po_vendor_sites_all pos,
apps. AP_TERMS_TL apt
where aps.invoice_id = ai.invoice_id
AND apt.term_id = ai.terms_id
AND po.vendor_id = ai.vendor_id
AND pos.vendor_site_id = ai.vendor_site_id
AND ai.org_id = ‘xxx’ — org id
AND apt.enabled_flag=’Y’
AND apt.language=’US’
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Supplier , Supplier Bank and Supplier bank branch – Oracle Apps 11i

Select a.bank_account_name, a.bank_account_num, a.iban_number, a.bank_account_type,
a.currency_code, a.bank_account_name_alt, a.org_id, a.creation_date,
b.bank_name, b.bank_branch_name, b.bank_num , b.eft_swift_code,
b.address_line1, b.address_line2, b.city, b.county, b.state, b.zip,
b.country, c.vendor_id,d.vendor_name,d.segment1 AS SUPPLIER_NUM
from apps.ap_bank_accounts_all a,
apps.ap_bank_branches b,
apps.ap_bank_account_uses_all c,
apps. PO_VENDORS d
where a.org_id=xxxx
AND a.bank_branch_id = b.bank_branch_id
AND a.bank_account_id = c.external_bank_account_id
AND c.vendor_id=d.vendor_id
 AND c.end_date IS NULL
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I/C AP & AR Invoice from SO

Select a.order_number Sales_Order, d.trx_number IC_AR_INVOICE, e.INVOICE_NUM IC_AP_INVOICE, g.segment1 PO_NUMBER,
b.ordered_item, b.invoice_interface_status_code,
b.invoiced_quantity, b.flow_status_code
From apps. oe_order_headers_all a,
     apps. oe_order_lines_all b,
     apps. HR_ALL_ORGANIZATION_UNITS c,
     apps. RA_CUSTOMER_TRX_ALL d,
     apps. AP_INVOICES_ALL e,
     apps. OE_DROP_SHIP_SOURCES f,
     apps. PO_HEADERS_ALL g
Where
b.header_id = a.header_id
AND f.LINE_ID = b.line_id
AND d.org_id=c.organization_id
AND a.order_number=’10090178′ //SO number
AND c.name LIKE ‘XXX%UK%’ //Operating unit
AND d.ct_reference= to_char(a.order_number)
AND e.INVOICE_NUM = d.trx_number
AND f.po_header_id=g.po_header_id
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