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Oracle R12 A/P Accruals OAUG Cost Mgmt SIG Meeting March 15, 2011

Oracle R12 A/P Accruals OAUG Cost Mgmt SIG Meeting March 15, 2011. Douglas Volz Douglas Volz Consulting doug@volzconsulting.com. Introduction. Learn about the Oracle inventory and expense accrual processes for Release 12 Find out about the available improvements

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Oracle R12 A/P Accruals OAUG Cost Mgmt SIG Meeting March 15, 2011

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  1. Oracle R12 A/P AccrualsOAUG Cost Mgmt SIG MeetingMarch 15, 2011 Douglas Volz Douglas Volz Consulting doug@volzconsulting.com

  2. Introduction • Learn about the Oracle inventory and expense accrual processes for Release 12 • Find out about the available improvements • Discuss the underlying business processes • Discuss current problems you may have Slide 2

  3. Agenda • Welcome to Our Session! • Cost Management SIG Business • Release 12 A/P Accruals • Why are these accrual processes so important? • Periodic vs. perpetual accruals • Basic accounting entries for the A/P accruals • Setup steps for the accrual processes • Using the Accrual Reconciliation Reports • Using the expense accrual processes • Summary of Release 12 Enhancements • Conclusions Slide 3

  4. OAUG Cost Management SIG Business • Collaborate11 – April 10th to 14th • OAUG Cost Mgmt SIG MeetingApril 11, 2011, 9:15am to 10:15am Room W311H • Oracle OpenWorld Call for Papers – March 9th to March 27th • OpenWorld 2011 October 2-6, 2011 • Call for papers url: https://oracleus.wingateweb.com/portal/cfp/cfpLogin.ww;jsessionid=abcKMIA3cEszN7U97gH6s • Open vacancy for OAUG Cost SIG Membership Chairperson • Questions, concerns, ideas for the OAUG Cost Mgmt SIG: • Doug Volz doug@volzconsulting.com • Jerry Devore jerry.devore@gmail.com • Sharon Widmer s_widmer@comcast.net Slide 4

  5. Release 12 A/P Accruals Slide 5

  6. Why Are These Accrual Processes so Important? • Valuable integration control • Monitors accuracy of receiving and payables processes • Provides a vital barometer over these activities • Helps to ensure accurate inventory counts • Ultimately affects your profits Slide 6

  7. What Are These Accrual Accounts? • Principle of accrual accounting • Timing difference between receiving and invoicing • Represents the accrued liability from your vendors or suppliers Slide 7

  8. Periodic Versus Perpetual Accruals • Periodic accruals occurs at month-end • With computers came perpetual accruals • Perpetual accruals ensure that valued quantities equals accounting entries • Don’t accrue expenses upon receipt (unless you are a governmental agency or heavily into Project Control) Slide 8

  9. Why Not Use Perpetual Accruals for Expenses? • Receiving inspection then includes both assets and expenses • Have to reclass balances • Doubles the accrual entries that you need to reconcile • Significantly more entries to review, research, and correct • Increased processing for the Accrual Reconciliation programs Slide 9

  10. Background Information for A/P Accruals • May have multiple lines per PO • May have multiple scheduled receipts and PO releases per line • May have multiple PO distributions per line or scheduled receipt • Four stored accounts per PO distribution PO HEADERS (PO_HEADERS_ALL) PO LINES(PO_LINES_ALL) PO SHIPMENTS(PO_LINE_LOCATIONS_ALL) PO RELEASES(PO_RELEASES_ALL) PO DISTRIBUTIONS (PO_DISTRIBUTIONS_ALL) Slide 10

  11. More Background Information Type of Account Charge Account Accrual Account Variance (IPV) Account Budget Account Slide 11

  12. Accrual Accounting Entries – Perpetual Accruals • Releases 10 to 11.5.9 • Purchase order receipt • A/P Invoice match • PO Return to vendor • A/P Invoice correction • PO Receipt delivery • Expense A/P accrual • Release 11.5.10 • Transfer to Regular (consignment) • Internal Orders / Logical Transactions • Retroactive Price Adjustments Release 12 Slide 12

  13. Accounting Entries for a PO Receipt • Receive one item @ $100 PO unit price Account DebitCredit Receiving Account 100 A/P Accrual Account 100 Receiving Value Account Inventory A/P Accrual Account 100 100 Slide 13

  14. Accounting Entries for an A/P Invoice Match • Same item, $80 invoice unit price, $100 PO unit price AccountDebitCredit A/P Accrual Account 100 A/P Trade Payables 80 Invoice Price Variance 20 A/P Accrual Account A/P Trade Payables 100 80 Invoice Price Variance 20 Slide 14

  15. Accounting Entries for a PO Return to Vendor • Same item, $100 PO unit price AccountDebit Credit A/P Accrual Account 100 Receiving Account 100 A/P Accrual Account Receiving Account 100 100 Slide 15

  16. Accounting Entries for an A/P Invoice Correction • Same item, $80 invoice unit price AccountDebitCredit New Charge Account 80 Old Charge Account 80 New Charge Account Old Charge Account 80 80 Slide 16

  17. Accounting Entries for PO Receipt Deliveries AccountDebitCredit Delivery to stock inventory (PO Receipt) Material (Subinv/Org) Account XXX Receiving Account XXX Delivery to WIP inventory (Outside Processing Receipt) Job OSP Account XXX Receiving Account XXX If using standard costing you may have PPV entries as well Slide 17

  18. Purchase Order Accounting Accrual Summary by T Account Transaction Receipt Delivery to Stock Invoice Match Delivery to Stock Invoice Match Invoice Match Receiving Value Inventory A/P Accrual 100 100 100 100 Material Value Invoice Price Variance 100 20 Trade Payables 80 Slide 18

  19. Accounting Entries for Inventory Consignment AccountDebitCredit Delivery to stock inventory (PO Receipt for ”Transfer to Regular”) Material (Subinv/Org) Account XXX AP Accrual Account XXX Transfer to WIP inventory (Backflush from Subinventory above) AccountDebitCredit WIP Material Account XXX Material (Subinv/Org) Account XXX Available feature since Release 11.5.10 Slide 19

  20. Accounting Entries for Internal Orders Receipt into Inventory (Internal Order Intransit Ship) AccountDebitCredit Subinv. or Org Accounts XXX AP Accrual Account XXX Intercompany Invoice Match (Payables) AccountDebitCredit I/C A/P Accrual Account XXX Trade Payables Account XXX Reported on Miscellaneous Accrual Report Slide 20

  21. Month-End Period Accruals • For expenses only AccountDebitCredit Charge Account XXX Expense A/P Accrual Account XXX • Release 11i, run the Receipt Accruals Period End program • Creates entries directly into the G/L Interface lines • Then run Journal Import • Release 12, run the Receipt Accruals Period End program • Creates Receiving Accounting Distributions • Then run Create Accounting Program to create SLA entries and • Run Transfer Journal Entries to G/L program, or (optionally) transfer to G/L at same time as Create Accounting is run • Next accounting Period, reverse the Accrual: • R11i: In the G/L find the G/L Batch Header and click on Reverse Batch • R12: The reversal entry is automatically done for you Slide 21

  22. Where You Setup the Accrual Processes • Setup in Oracle Purchasing • Setup in Oracle Inventory Slide 22

  23. Setup in Oracle Purchasing • Use the Define Purchasing Options Form Set the Expense Accrual Account Set the Accrual Options for Expenses Slide 23

  24. Setup in Oracle Purchasing • Use the Define Receiving Options for each Org: Receiving Account Retroactive Price Adjustment Slide 24

  25. When Defining Purchase Orders • Much safer, harder to find the Accrue on Receipt Flag You have to set up the Accrue on Receipt field on your folder form before you can see the Accrue on Receipt settings Slide 25

  26. Setup in Oracle Inventory • Organization Parameters ─ Inventory AP Accrual Account Set your PPV and IPV Accounts Set your Inventory A/P Accrual Account Slide 26

  27. Setup in Oracle Inventory (cont’d) • Intercompany Accrual Accounts Separate inventory and expense accrual accounts for intercompany A/P accruals Slide 27

  28. New R12 Setup For A/P Accruals • List of A/P Accrual Accounts to Reconcile Slide 28

  29. Caution • Use separate accounts for each type of system account: • Expense A/P Accrual Account • Inventory A/P Accrual Account • Receiving Account • Expense Purchase Order Charge Accounts • Other inventory, WIP and price variance accounts • Teach Payables staff to not use the A/P Accrual Account • This account should be always assigned automatically • Or set up G/L security rules to prevent use Slide 29

  30. 11i issues Poor Performance Full data load causing years of accrual distributions being loaded and reloaded again Inflexibility and Confusion Forms and Reports are data dumps. Difficult to identify the transaction to write off Data can not be exported in excel format. Possibility for Errors Manual write-off to GL can lead to errors and mistakes No Summary Reporting R12 Enhancements Enhanced Performance Incremental data load using from and to date to load data with outstanding accrual balances only Support writing off balances Increased Usability Headers and lines separation Summarization display AP PO data only Miscellaneous data only Data exportable to excel Will help user for investigation Mass write-off Automatic Accounting Creation No more manual adjustment to GL Write-off will post to SLA as any other distributions R12 Accrual Reconciliation and Write-OffMajor Enhancement Slides courtesy of Oracle Cost Development Slide 30

  31. R12 Accrual Reconciliation and Write-OffMajor Enhancement Recap • Performance enhancement: • Incremental load • Accrual data only with outstanding balance • Usability enhancement: • Information categorized using specific windows and reports • AP and PO Accrual data • Miscellaneous AP and Inventory • Writing off accrual balance at PO distribution • Ability to export Accrual data reported in excel format • Mass write-off • Remove possible financial mistakes: • Automatic accrual write-offs posting to the GL Slides courtesy of Oracle Cost Development Slide 31

  32. New R12 Table Structure • Permanent table structures • CST_ACCRUAL_ACCOUNTS (holds valid accrual accounts) • CST_AP_PO_RECONCILIATION (matched AP/PO entries w/outstanding balances) • CST_MISC_RECONCILIATION (unmatched AP and INV entries) • CST_RECONCILIATION_BUILD (accrual load submissions) • CST_RECONCILIATION_SUMMARY (summary of CST_AP_PO_RECONCILIATION) • CST_WRITE_OFFS (write-off transaction header table) • CST_WRITE_OFF_DETAILS (write-off transaction details table) Slide 32

  33. R12 Accrual Reconciliation and Write-OffFunctional Flow Slides courtesy of Oracle Cost Development Slide 33

  34. R12 Accrual Reconciliation and Write-OffFunctional Flow: Define your Accrual Account Slides courtesy of Oracle Cost Development Slide 34

  35. R12 Accrual Reconciliation and Write-OffFunctional Flow: Run Accrual Load Program Slides courtesy of Oracle Cost Development Slide 35

  36. R12 Accrual Reconciliation and Write-OffFunctional Flow: Accrual Load Program • Accrual data load run as a standalone concurrent program • Incremental load: Load is run for a specific date range. Transactional data picked up only from the data range specified • Accrual data is summarized and accrual balances are calculated at the PO distribution level • PO, A/P and Write Off balances as well as last activity date • Zero balance accrual data are deleted from the table, this should eliminate 80%+ of the data Slides courtesy of Oracle Cost Development Slide 36

  37. R12 Accrual Reconciliation and Write-OffFunctional Flow: Run Summary Accrual Reconciliation Report Slides courtesy of Oracle Cost Development Slide 37

  38. R12 Accrual Reconciliation and Write-OffFunctional Flow: Summary Accrual Reconciliation Step3 Report: Summary Accrual Reconciliation Slides courtesy of Oracle Cost Development Slide 38

  39. R12 Accrual Reconciliation and Write-OffFunctional Flow: Run AP and PO Accrual Reconciliation Report Slides courtesy of Oracle Cost Development Slide 39

  40. R12 Accrual Reconciliation and Write-OffFunctional Flow: AP and PO Accrual Example - Reconciliation Report… We decide to write this balance off for these un-billed receipts Slides courtesy of Oracle Cost Development Slide 40

  41. R12 Accrual Reconciliation and Write-OffFunctional Flow: AP and PO Accrual Example - Write-Off Window… We begin by looking for the PO balance we want to write off… Submit the Write Off and the balance disappears online Slides courtesy of Oracle Cost Development Slide 41

  42. R12 Accrual Reconciliation and Write-OffFunctional Flow: AP and PO Accrual Example - AP PO Write Off… If you resubmit the AP PO Accrual Reconciliation report… ….The PO#5418 disappeared Slides courtesy of Oracle Cost Development Slide 42

  43. R12 Accrual Reconciliation and Write-OffFunctional Flow: AP and PO Accrual Example - View Write Off for AP PO… If you query the write off View Window, you will find your write off transactions… All Write off transactions for the PO Distribution balance will be displayed Slides courtesy of Oracle Cost Development Slide 43

  44. R12 Accrual Reconciliation and Write-OffFunctional Flow: AP and PO Accrual Example - Write Off Reversal … You can reverse the write off transaction if you think error has been made… A write-off reversal transaction has been created to offset the previous write off Slides courtesy of Oracle Cost Development Slide 44

  45. R12 Accrual Reconciliation and Write-OffFunctional Flow: AP and PO Accrual Example - Write Off Reversal… From AP PO Write Off Window, the PO balance re-appears… The PO balance is again available for write off Slides courtesy of Oracle Cost Development Slide 45

  46. R12 Accrual Reconciliation and Write-OffFunctional Flow: AP and PO Accrual Example - Write Off Reversal… AP PO Accrual Reconciliation Report shows the PO balance again… The PO balance shows up again Slides courtesy of Oracle Cost Development Slide 46

  47. R12 Accrual Reconciliation and Write-OffAccrual Reconciliation Process: Accrual Data life Cycle Slides courtesy of Oracle Cost Development Slide 47

  48. R12 Accrual Reconciliation and Write-OffAccrual Reconciliation: Major Benefits • Write Off Activity is tracked by a Write Off transaction • Enhance the control of the write off activity • Enhance audit ability • Only accrual data with outstanding balance will be kept in the accrual reconciliation tables • Decrease the volume of data • Enhance the performance • Enhance the usability Slides courtesy of Oracle Cost Development Slide 48

  49. R12 Accrual Reconciliation and Write-OffFunctional Flow: Run Miscellaneous Accrual Reconciliation Report Slides courtesy of Oracle Cost Development Slide 49

  50. R12 Accrual Reconciliation and Write-OffMiscellaneous Accrual Reconciliation Report Slides courtesy of Oracle Cost Development Slide 50

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