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Cash Pooling in Cash Management – R12

Cash Pooling Techniques are used by the Organizations to optimize the funds by consolidating bank balances across multiple bank accounts.

Benefits of Cash Pooling Techniques:

– Minimizes the idle funds by consolidating balances
– Helps to decrease external borrowing costs and increase investment returns
– Allows users to group bank accounts into pooling structures to manage funds effectively

Oracle supports following types of cash pools:

1. Self-Initiated Physical Cash Pools:

When Organizations want to monitor individual bank account balances manually and then physically move cash to or from their accounts based on their preferences, Self-Initiated Physical Cash Pools structure can be used.

We can define the rules in pool definitions, to automatically determine when bank account transfers should be made and for what amounts.

2. Bank-Initiated Physical Cash Pools, or Zero Balance Accounts(ZBA’s):

Bank-Initiated Physical Cash Pools are used When Organizations want to sweep all end-of-day balances automatically to or from the main accounts.

This kind of services will leave zero balances at the end of way. That is the reason, Bank-Initiated Physical Cash Pools are often called as Zero Balance Accounts.

3. Notional Cash Pools:

If Organizations want to track the net balances across all accounts along with individual accounts, then Notional Cash Pools will be used.

In 11i, this functionality was available to Oracle Treasury users, but now it is supported by Oracle Cash Management in R12.

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Types of Invoices in Oracle Payables

Types of Invoices in AP:

The different types of invoices available in Payables are:

1. Standard Invoices: Standard invoices are the invoices issued by a supplier to the buyer, representing the amount due for the products or services the supplier has provided to the buyer.

Standard invoices can be either matched to a purchase order or not matched.

A standard invoice must be positive amount.

2. Mixed Invoices: Mixed invoices are the invoices which can have either positive or negative amounts and can be matched to both purchase orders and invoices.

For example, if there is a mixed invoice for $-1000, you can either match it to an invoice with $-1000 or to a purchase order with an amount $1000.

3. Credit Memo: Credit memo is an invoice raised by the supplier to the buyer with negative amount. It reduces the supplier balance and reduces the liability.

For example the customer has returned some of the goods that he purchased, the supplier sends a credit memo to the buyer to adjust the balance.

4. Debit Memo: Debit memo is an invoice raised by the customer to supplier with negative amount.

The functionality of Debit Memo is same as Credit Memo. Both are to reduce the liability.

The purpose of Debit Memos is to record a credit for a supplier who does not send you a credit memo.

Unlike in AR, both Credit memo and Debit memo are with negative signs in Payables.

5. Prepayment: Prepayments are the invoices raised to record advance payments to a supplier or employee.

6. Expense Reports: Expense reports are the invoices that represent amount due to an employee for all his business related expenses.

7. Retainage Release Invoices: Retainage release is the act of releasing, or paying, that portion of a payment that was withheld until a substantial portion or all of the service procurement work is completed. The amounts retained during the life of the contract must be released and paid to the supplier or sub-contractor once all or a substantial portion of the work is completed.

Oracle Payables uses the Retainage Release Request to create a type of invoice called Retainage Release. A retainage release invoice has lines, which are copied from the original standard progress invoices, which show an amount left to be released.

Retainage release invoices can only be entered manually in the Invoice Workbench window.


8. Withholding Tax:  After you apply withholding tax to an invoice, you can optionally create invoices to remit withheld tax to the tax authority.
                          
Payables can automatically create withholding tax invoices, or you can perform this
task manually. If you choose to automatically create withholding tax invoices, you must choose whether to do this during Invoice Validation or during payment processing.


9. PO Price Adjustment Invoices:  PO Price Adjustment Invoices are used for recording the difference in price between the original invoice and the new purchase order price.

For example, If a supplier sends an invoice for a change in unit price for an invoice you have matched to a purchase order, PO Price Adjustment Invoices can be used to adjust the invoiced unit price of previously matched purchase order shipments or distributions without adjusting the quantity billed.

PO price adjustment invoices can be matched to both purchase orders and invoices.

10. Quick invoices: Used for quick, high-volume invoice entry for invoices that do not require extensive validation and defaults. After entry, you import these into the Payables system. Validation and defaulting occur during import

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Accounting setup in Oracle General Ledger – R12

Accounting setup is used to set up the accounting structure which controls transaction processing across Oracle Financial Applications . With Accounting setup manager we can define and maintain the accounting setup for Legal Entities,

              Ledgers,
              Operating Units,
              Subledger Accounting,
              Intercompany and Intracompany Balancing, and
              Reporting Currencies
Responsibility:   General Ledger
Navigation:       Setup : Financials : Accounting Setup Manager → Accounting Setups
Click on Create Accounting setup to setup the Accounting structure.
There are three steps in Accounting setup process.
1. Assign Legal Entities: 
Here we may create or assign existing LE to the accounting structure. We need not assign legal entity if there is no legal entity context.

If legal entities are involved, we need to define separate accounting setup for each legal entity, which require it’s own primary ledger. So ledgers have to be defined for each legal entity separately.

The need for other legal entity depends on Chart of Accounts, calendar, Currency, Accounting Method and Ledger processing options. If a legal entity requires any one of the above attributes to be different, a separate primary ledger is required.

Chart of accounts refers to the number of segments that a Chart of accounts structure consistes of.
Calendar refers to the type of accounting calendar that a legal entity uses. Ex: Monthly or Quarterly Calendar.
Currency refers to the primary currency that a legal entity belongs to.
Accounting Method refers to the subledger accounting methods based on the different accounting standards that a legal entity operates.
Ledger Options refers to the options that control how journals and transactiones are processed for a ledger.
Ex: Journal approval, Suspense account, Average balances, Intracompany balancing option, etc.

If we assign Legal entities to the accounting structure, we must assign specific balancing segment values to legal entities to identify and secure transactions by legal entity.

2. Define Accounting Representations: 
Here we need to define Primary and Secondary ledgers to make the Accounting representation.

Primary Ledgers are mandatory. We need to define the primary ledger for each legal entity and accounting setup.

Secondary ledgers are optional.  Secondary ledgers have to be assigned to the accounting setup or primary ledger to maintain multiple accounting representations for the same legal entity. A secondary ledger can differ in one or more of the following attributes from primary ledger.
Chart of Accounts,
Currency,
Calendar,
Accounting Convention

Secondary ledgers can be maintained at different levels such as:
Subledger level
Journal level
Balance level
Adjustments

In this step we can map the ledgers to  chart of accounts and assign currency, calendar, subledger accounting method and reporting currency.

Reporting currencies have to be assigned when you want diferent currency representation to primary or secondary ledgers.  Reporting currencies must share same chart of accounts,calendar,accounting method and ledger processing options as their source ledger. Reporting currencies can be assigned at different levels.
Subledger level
Journal level
Balance level

We can not use subledger level reporting currencies for secondary ledgers.

3. Save Accounting structure: This step is to review and complete the accounting setup.
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Purchasing Concepts in R12

Purchasing provides you the features you need to satisfy the following purchasing needs. You should be able to:
  • Review all of your purchases with your suppliers to negotiate better discounts
  • Create purchase orders simply by entering a supplier and item details
  • Create standard purchase orders and blanket releases from both on-line and paper requisitions
  • Quickly and effectively manage procurement in a global business environment using global agreements that can be shared across the entire enterprise
  • Create accurate and detailed accounting information so that you charge purchases to the appropriate departments
  • Check your funds availability while creating purchase orders
  • Review the status and history of your purchase orders at any time for all the information you need
  • Communicate purchase orders to suppliers flexibly using a number of options
  • Inform your suppliers of your shipment schedule requirements
  • Record supplier acceptances of your purchase orders. You always know whether your suppliers have received and accepted your purchase order terms and conditions
  • Create your purchase orders by providing a quantity and price for each item you are ordering. Alternatively, you should also be able to create your purchase order simply by providing an amount if you are ordering a service that you cannot break down by price and quantity
  • Create purchase orders that leverage flexible pricing structures or implement complex pricing from Oracle Advanced Pricing

Purchase Order Types

Purchasing provides the following purchase order types: Standard Purchase Order, Planned Purchase Order, Blanket Purchase Agreement, and Contract Purchase Agreement. You can use the Document Name field in the Document Types window to change the names of these documents. For example, if you enter Regular Purchase Order in the Document Name field for the Standard Purchase Order type, your choices in the Type field in the Purchase Orders window will be Regular Purchase Order, Planned Purchase Order, Blanket Purchase Agreement, and Contract Purchase Agreement.

Standard Purchase Orders

You generally create standard purchase orders for one-time purchase of various items. You create standard purchase orders when you know the details of the goods or services you require, estimated costs, quantities, delivery schedules, and accounting distributions. If you use encumbrance accounting, the purchase order may be encumbered since the required information is known.

Blanket Purchase Agreements

You create blanket purchase agreements when you know the detail of the goods or services you plan to buy from a specific supplier in a period, but you do not yet know the detail of your delivery schedules. You can use blanket purchase agreements to specify negotiated prices for your items before actually purchasing them. Blanket purchase agreements can be created for a single organization or to be shared by different business units of your organization (global agreements). You can encumber funds for a blanket purchase agreement.

Global Blanket Agreements

You may need to negotiate based on an enterprises’ total global purchase volume to enable centralizing the buying activity across a broad and sometimes diverse set of businesses. Using global agreements (a special type of blanket purchase agreement), buyers can negotiate enterprise-wide pricing, business by business, then execute and manage those agreements in one central shared environment. Enterprise organizations can then access the agreement to create purchase orders that leverage pre-negotiated prices and terms. You can encumber funds for a global agreement.

Blanket Releases

You can issue a blanket release against a blanket purchase agreement to place the actual order (as long as the release is within the blanket agreement effectivity dates). If you use encumbrance accounting, you can encumber each release.

Contract Purchase Agreements

You create contract purchase agreements with your suppliers to agree on specific terms and conditions without indicating the goods and services that you will be purchasing. You can later issue standard purchase orders referencing your contracts, and you can encumber these purchase orders if you use encumbrance accounting.

Global Contract Agreements

You can use global contract agreeements (a special type of contract purchase agreement) to centralize a supplier relationship. Buyers throughout the enterprise can then leverage this relationship by referencing this global contract agreement in your standard purchase orders.

Planned Purchase Orders

A planned purchase order is a long-term agreement committing to buy items or services from a single source. You must specify tentative delivery schedules and all details for goods or services that you want to buy, including charge account, quantities, and estimated cost.

Scheduled Releases

You can issue scheduled releases against a planned purchase order to place the actual orders. If you use encumbrance accounting, you can use the planned purchase order to reserve funds for long term agreements. You can also change the accounting distributions on each release and the system will reverse the encumbrance for the planned purchase order and create a new encumbrance for the release.

Purchase Order Types Summary

  Standard Purchase Order Planned Purchase Order Blanket Purchase Agreement Contract Purchase Agreement
Terms and Conditions Known Yes Yes Yes Yes
Goods or Services Known Yes Yes Yes No
Pricing Known Yes Yes Maybe No
Quantity Known Yes Yes No No
Account Distributions Known Yes Yes No No
Delivery Schedule Known Yes Maybe No No
Can Be Encumbered Yes Yes Yes No
Can Encumber Releases N/A Yes Yes N/A

Reference: http://docs.oracle.com/cd/E18727_01/doc.121/e13410/T446883T443953.htm
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Invoice Grouping Rules in Receivables R12

Grouping Rules group Revenue and Credit transactions into  Invoices, Credit memos and Debit Memos. Autoinvoice program uses the Grouping Rules to group similar sales orders into a single invoice. We need to assign matching attributes while defining the Grouping Rules. These attributes include mandatory and optional parameters. Mandatory parameters are pre-defined by Oracle, where as optional attributes are optional and can be assigned based on the business requirements. Following is the list of all Mandatory and Optional attributes which can be assigned to the Grouping Rules.

Mandatory Attributes:
AGREEMENT_ID
COMMENTS
CONS_BILLING_NUMBER
CONVERSION_DATE
CONVERSION_RATE
CONVERSION_TYPE
CREDIT_METHOD_FOR_ACCT_RULE
CREDIT_METHOD_FOR_INSTALLMENTS
CURRENCY_CODE
CUSTOMER_BANK_ACCOUNT_ID
CUST_TRX_TYPE_ID
DOCUMENT_NUMBER
DOCUMENT_NUMBER_SEQUENCE_ID
GL_DATE
HEADER_ATTRIBUTE1-15
HEADER_ATTRIBUTE_CATEGORY
HEADER_GDF_ATTRIBUTE1-30
INITIAL_CUSTOMER_TRX_ID
INTERNAL_NOTES
INVOICING_RULE_ID
ORIG_SYSTEM_BILL_ADDRESS_ID
ORIG_SYSTEM_BILL_CONTACT_ID
ORIG_SYSTEM_BILL_CUSTOMER_ID
ORIG_SYSTEM_SOLD_CUSTOMER_ID
ORIG_SYSTEM_BATCH_NAME
PAYMENT_SERVER_ORDER_ID
PAYMENT_SET_ID
PREVIOUS_CUSTOMER_TRX_ID
PRIMARY_SALESREP_ID
PRINTING_OPTION
PURCHASE_ORDER
PURCHASE_ORDER_DATE
PURCHASE_ORDER_REVISION
REASON_CODE
RECEIPT_METHOD_ID
RELATED_CUSTOMER_TRX_ID
SET_OF_BOOKS_ID
TERM_ID
TERRITORY_ID
TRX_DATE
TRX_NUMBER

Optional Attributes:
ACCOUNTING_RULE_DURATION
ACCOUNTING_RULE_ID
ATTRIBUTE1-15
ATTRIBUTE_CATEGORY
INTERFACE_LINE_ATTRIBUTE1-15
INTERFACE_LINE_CONTEXT
INVENTORY_ITEM_ID
REFERENCE_LINE_ID
RULE_START_DATE
SALES_ORDER
SALES_ORDER_DATE
SALES_ORDER_LINE
SALES_ORDER_REVISION
SALES_ORDER_SOURCE
TAX_CODE
TAX_RATE

The following Ship-To fields were mandatory grouping attributes in release 11i, but are optional in release 12 ORIG_SYSTEM_SHIP_CUSTOMER_ID
ORIG_SYSTEM_SHIP_ADDRESS_ID
ORIG_SYSTEM_SHIP_CONTACT_IDThis is because ship to information is now stored at the line level in R12. Therefore a single invoice could have different ship to information for each line.
Autoinvoice program matches all the mandatory parameters and group the transactions into invoices. If all the mandatory parameters are matched for two or more similar transactions, they will fall in a same invoice. If we define any optional attribute, Autoinvoice program matches optional attributes in addition to the mandatory attributes to group the transactions.

For Example: SALES_ORDER is the optional attribute assigned to a grouping rule, there Autoinvoice program matches all mandatory attributes + Sales Order for the transactions. For any two or more transactions, if all the mandatory attributes and Sales Order(optional attribute) are matching, only one invoice will be created for those transactions.

If your Grouping rule doesn’t include Sales Order and Ship To fields in Optional attributes, similar sales orders with different ship-to addresses but same bill to will be grouped into one invoice and AR transaction form will not show any value in Ship-To address as it can not determine which ship-to value to be picked from multiple sales orders.
Steps to create a Grouping Rule:

Responsibility: Receivables Manager
Navigation: Setup -> Transactions -> Auto Invoice -> Grouping Rules

Select Line Ordering Rules if you are using any. Optional grouping characteristics are optional. If we are not giving any optional Grouping Characteristics, Autoinvoice will only matches mandatory characteristics. We can assign Optional characteristics for Invoices, Credit Memos and Debit Memos.
 

If  we want to assign optional attributes for all invoices, credit memos and debit memos, First assign optional characteristics for invoice class and the place the cursor on Class Invoices ad use Down Arrow to define  attributes for other classes(Credit Memo and Debit Memo) as well.

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