Inter Company Flow

NCOAUG 2009Intercompany FlowIntercompany Flow

Ravi Sagaram

Agenda

� Introduction

� Intercompany (IC) Shipping Flows

� 2 OUs

� 3 OUs

� IR ISO Process

� Intercompany (IC) Procurement Flows

� 2 OUs

� 3 OUs

� Questions and Answers

Introduction

� It is quite common now a days for companies to do business globally taking the advantage of cost, operations, tax benefits etc. These companies use Multiple Orgs and Multiple OUs for their operations.

� When one OU offers goods to another OU, it may call for � When one OU offers goods to another OU, it may call for intercompany transaction flow. The financial ownership in these cases may not follow the physical flow of the goods.

� Intercompany transaction flow establishes relationship between the physical flow of the goods and the financial flow

Introduction Cont…

� Oracle applications provides mainly 2 types of intercompany transaction flows.

� Shipping Flow

� Procurement Flow

� In the shipping flow, intercompany flow is generated automatically when the booking OU is different from the shipping OU.booking OU is different from the shipping OU.

� In the procurement flow, Intercompany flow is generated automatically when the purchasing OU is different from the receiving OU

� Intercompany Invoicing is generated automatically by the system in the above cases

Inter Company Shipping Flow

INTERCOMPANY SHIPPING FLOW


� Intercompany Transaction flow for shipping is triggered when the Booking OU of a sales order is different from the shipping OU

� Booking OU books sales orders. The shipping OU ships goods to the customers directly.

� The Shipping OU records an Intercompany AR Invoice against the � The Shipping OU records an Intercompany AR Invoice against the Selling OU at the transfer price.

� The Selling OU records Intercompany AP invoice for the payment.

� These two invoices are recorded by the system using the intercompany transaction flow


Sample Org Structure used in the examples

Set of Books

Legal Entity

Operating Unit

Inventory Org 1.2.3….


India China

Flow with 2 OUs

� Order is Booked in one OU

� It is shipped out of a different OU

IndiaBooking OU

ChinaShipping OU


IndiaBooking OU

USOU

ChinaShipping OU

Flow with 3 OUs

� Order is Booked in one OU

� It is shipped out of a different OU

� There is a financial OU in between these two OUs

Booking OU OU Shipping OU

Inter Company Shipping Flow with 2 OUs

Material Transactions Flow with 2 OUs

USBooking OU

ChinaShipping OU

Logical IC Sales Issue

Logical IC

Customer

PhysicalSales Order

Issue

LogicalSales Order

Issue

Logical IC Shipment Receipt

Inter Company Shipping Flow with 3 OUs

Material Transactions Flow with 3 OUs

IndiaBooking OU

ChinaShipping OU

Logical IC

Sales Issue

USIntermediate OU

Logical IC

Sales Issue

Customer

PhysicalSales Order

Issue

LogicalSales Order

Issue



Inter Company Shipping Flow Logical Material Transactions

Logical Material Transactions with 2 OUs

Inter Company Shipping Flow Financial Flow with 2 OUs

• Financial Flow with 2 OUs

USBooking OU

ChinaShipping OU

IC AR in China OU against US OU @ Tr Price

IC AP in US OU

Customer

IC AP in US OU against China OU @ Tr Price

AR invoice to Customer

Inter Company Shipping Flow Financial Flow with 3 OUs


IndiaBooking OU

ChinaShipping OU

IC AR in China OU on US OU @ Tr Price

USFinancial OU

IC AR in US OU on India OU @Tr Price

Customer

IC AP in US OU on China OU @ Tr Price

AR invoice to Customer

IC AP in India OU on US OU @ Tr Price

Inter Company Shipping Flow– Transfer Price

IndiaBooking Org

ChinaShipping Org

IC Trxs flow between China and US OUs @$110(transfer price)

Transfer Price with 2 OUs

Cost = $100Markup = $10Transfer Price = $110

Cost = $110Customer Price = $120

Inter Company Shipping Flow – Transfer Price

IndiaBooking Org

US ChinaShipping Org

IC Trxs flow between China and US @ $110

IC Trxs flow betweenUS and India@ $120

Transfer Price with 3 OUs



Cost = $120Customer Price = $130

Inter Company Shipping Flow Financial Transactions

OU-USAFinancial OU

ICCOGS

Inventory110

OU-IndiaBooking OU

Inventory$110

Clearing$110

OU ChinaShipping OU

IC

COGS($100)Inventory

$100

DR CR

IC

Receivables

IC

Revenue)Inventory120

Clearing$120

DR

DR

CR

CR

1

2

1

11

IC

Accrual

110

COGS110

110 Receivables

$110

Revenue)

$110

IC

Payable

$110

IC

Rec

120

IC

Rev

120

120 $120

COGS$120

Inventory$120

IC

Accrual

$120

IC

Payable

$120

Rec

$130Rev

$130

3

4

1

5

6

1) Logical IC Issue in China OU + Logical IC receipt in US + Logical IC issue in US to India OU + Logical Receipt in India OU + Logical Issue to Customer

2) Auto Invoice in OU China

3) Import AP Invoice in US OU

4) Run Auto Invoice in US OU

5) Import AP Invoice in India OU

6) Run Auto Invoice in India OU

Inter Company Shipping Flow – Transfer Price

Transfer Price Logic

� Use External API

� Use Advanced Pricing

� Use Static Price List attached to the ‘Bill To’ customer or Customer Site

Inter Company Shipping FlowTransfer Price

External APICREATE OR REPLACE package body MTL_INTERCOMPANY_INVOICES as/* $Header: INVICIVB.pls 120.2 2006/03/29 05:41:10 sbitra noship $ */function get_transfer_price (I_transaction_id in number,

I_price_list_id in number,I_sell_ou_id in number,I_ship_ou_id in number,O_currency_code out NOCOPY varchar2,x_return_status OUT NOCOPY VARCHAR2,x_msg_count OUT NOCOPY NUMBER,x_msg_data OUT NOCOPY VARCHAR2,I_order_line_id IN NUMBER default null) return number is

l_transfer_price number := 0;begin

O_currency_code := null;x_return_status := FND_API.G_RET_STS_SUCCESS;x_msg_count := 0;

� API MTL_INTERCOMPANY_INVOICES.GET_TRANSFER_PRICE

� If the external API returns value greater > 0 for the transfer Price, then the value returned by the API is used for the transfer price

x_msg_count := 0;x_msg_data := null;if (I_ship_ou_id = 81 and I_sell_ou_id = 147) then

beginselect nvl(unit_selling_price,0) * 4into l_transfer_pricefrom oe_order_lines_all where line_id = I_order_line_id;exceptionwhen others then null;end;

end if; if l_transfer_price <> 0 then

O_currency_code := 'USD';return(l_transfer_price);

elsereturn (NULL);

end if;exceptionwhen others then raise;end get_transfer_price;

� If the return value is 0 or null, then the system will ignore this value and look for other conditions to get the transfer price

� You can use this API to easily plug in variable transfer price like cost + x% or based on customer selling price etc. This is a very powerful API and can be used easily without much customization.

Inter Company Shipping FlowTransfer Price

Advanced Pricing

� Profile ‘INV: Advanced Pricing for Intercompany Invoice’ decides the usage of advanced pricing

� Set the profile to ‘Yes’ in the from OU for using the advanced pricing

� If the profile is set to No, then � If the profile is set to No, then the system will use the static price from the price list associated with the Bill to Address of the IC Customer

� In the advanced pricing, use the qualifiers for the system to figure out the price list to be used.

Inter Company Shipping FlowSetups

� Setup Intercompany Transaction Flow for shipping

� Inventory � Setup � Organizations � Intercompany Transaction Flow

� In the Shipping Flow, Start OU represents the shipping Org and end OU represents the Booking OU.

� Advanced accounting has to be checked for creating logical transactions and IC invoices and for transactions and IC invoices and for defining more than one node in the shipping flow. Without advanced accounting checked, we can create IC flow only between 2 OUs.

� An inventory Organization should be defined and associated with all the OUs in the nodes even if there is no physical flow of inventory. This is to create logical inventory transactions

Inter Company Transaction Flow -- Setup

� In the Intercompany relations, specify the IC AR invoice customer, invoice type, IC COGS A/C and Currency Code. Similarly specify the IC AP supplier, supplier site, Inventory Accrual AC and Expense Accrual Account

� The currency for the IC invoices can be of the � To operating unit, � To operating unit, � or from OU � or order currency

Inter Company Shipping Flow with IRISO

Hongkong OUIR

US OUISO

Shipping OU

IR ISO Process

� System is designed only for 2 OUs in IR ISO Process

� The transfer type in the shipping networks should be setup to Intransit to enable the intercompany invoicing for IR ISO process

� Also the Internal Order Required Option should be checked in the shipping networks to enable the intercompany flow for the IRISO Process

Inter Company Shipping Flow with 2 OUsProcess Flow

Step#

Selling OU Shipping OU

1 Book Sales Order

2 Ship Sales Order

3 Run the Material Transaction Manager and Cost Manager

4 From the receivables responsibility, run the program ‘Create Intercompany AR Invoices’. This will create records in the auto invoice interface tablesauto invoice interface tables

5 On successful completion of the above program, run the ‘Auto Invoice Master Program’ from the receivables responsibility. This will create IC AR Invoice

6 From Payables responsibility of the Selling OU, run the ‘Create Intercompany AP Invoices’

7 Then run the program ‘Payables Open Interface Import’ from Payables responsibility. This will create IC AP Invoices in the selling OU.

Inter Company Shipping Flow with 3 OUsProcess Flow

Selling OU Intermediate OU Shipping OU

1 Book Sales Order

2 Ship Sales Order

3 Run the Material Transaction Manager and Cost Manager

4 From the receivables responsibility, run the program ‘Create Intercompany AR Invoices’. This will create records in the auto invoice interface tables


6 From Payables responsibility of the intermediate OU, 6 From Payables responsibility of the intermediate OU, run the ‘Create Intercompany AP Invoices’.

7 Then run the program ‘Payables Open Interface Import’ from Payables responsibility. This will create IC AP Invoices in the intermediate OU.

8 From the receivables responsibility, run the program ‘Create Intercompany AR Invoices’. This will create records in the auto invoice interface tables


10 From Payables responsibility of the Selling OU, run the ‘Create Intercompany AP Invoices’.

11 Then run the program ‘Payables Open Interface Import’ from Payables responsibility. This will create IC AP Invoices in the selling OU.

Inter Company Shipping Flow Programs for creation of IC AR invoices

Parameters for the program ‘Create Intercompany Invoices’

Parameters for Auto InvoiceParameters for Auto Invoice

Inter Company Shipping Flow Programs for creation of IC AP invoices

• Parameters for ‘Create Intercompany AP Invoices’

• Parameters for ‘Payables Open Interface Import’

Intercompany Procurement Flow

INTERCOMPANY PROCUREMENT FLOW

Inter Company Procurement Flow

• Purchase Order is Booked in one OU and Goods are received in a different OU with an Intermediate OU for accounting.

USPurchasing OU

HongkongOU

ChinaShipping OU

IC Trxs flow between

IC Trxs flow betweenUS and HK OUsPurchasing OU OU Shipping OUbetween

China and HK OUs@transfer price

US and HK OUs@transfer price

Supplier

US Places POOn Supplier Goods shipped to

China OU directlySupplier sendsInvoice to US OU

Inter Company Procurement Flow Financial Flow with 3 OUs

• Material Flow with 3 OUs

USPurchasing OU

ChinaReceiving OU

Logical Receiptof goods

HongkongIntermediate OU

Logical Receiptof goods

LogicalReceipt

of goods

Supplier

Logical Issue ofgoods

PO is raisedOn the Supplier

Logical Issue ofgoods

Supplier shipsThe Goods

Inter Company Procurement Flow Financial Flow with 3 OUs


USPurchasing OU

ChinaReceiving OU

IC AP in China OU on HK OU @ PO/Tr Price

HongkongIntermediate OU

IC AP in HK OU on US OU @PO/Tr Price

AP Invoice

Supplier

IC AR in HK OU on China OU @ PO/Tr Price

PO is raisedOn the Supplier

IC AR in US OU on HK OU @ PO/Tr Price

Supplier shipsThe Goods

AP InvoiceIn US OU

On Supplier

Inter Company Procurement Flow Setups

Procurement Flow Setup (Intercompany Transaction Flow)

� Navigation Inventory �Setup � Organizations �Intercompany Transaction Flow

� The Start OU is the Receiving OU

� The End OU is the Procuring OU

� Pricing Options are at PO price or transfer Price

� Check the Advanced Accounting for generating IC transactions Flow even for one node.

Inter Company Procurement Flow Setups

� You can define Multiple nodes

� For each OU pair in a node, you can define the AR invoice details and AP invoice details

� The Currency code can be of from OU, or to OU or can be of currency of PO

Questions and answers

Questions and Answers

Contact Information

Ravi Sagaram

[email protected]

[email protected]

630-849-9888 mobile630-849-9888 mobile

Inter Company Flow

Documents

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