Intercompany Solution For

ABC Inc
Vinod Menon
ERPSOFT LLC

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 Overview
1. Overview of Intercompany Challenges
for ABC Inc.

2. Issues on Oracle IC solution

3.Solution and Approach

5. Test Scenario and results

6. Setting Up the Solution

7. Next Steps 2
 ABC Inc - Requirements for IC
•Supplying Org standard cost + inter-org transfer charge MUST
equal supplying OU Internal P-L

•Commercial invoice reflects only std cost of supplying org (US)

•Bookings and backlog are understated

•Shipments (invoices) will not tie to booking/backlog decrease

•Internal req (DE) will be understated to std cost in purchasing

org; PPV forward will ALWAYS be favorable

•Legal / statutory risk with Commercial Invoice not equal to AR

Invoice?
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•VAT calculation for DE customer order could be overstated
 Issues on Oracle IC Solution
• Oracle solution default the shipping organization cost to the Internal
Requisition and covert into the functional currency.

• Oracle default the price list from the internal customer setup
( Customer level or Bill to) and the cost of the shipping org is
defaulted as the price. Oracle does not allow you to change this price
or price list since the ISO/IPR are not allowed to change.

• Oracle AR inter-company Invoice program will not read the Internal

Sales Order price and it will call the Pricing engine to search and find
the appropriate price. This may result is different price from ISO
price if the items are in multiple price list (depending on the
precedence of the item in the price lists ). Thus the AR and AP will
not match.

• Also standard functionality does not support or consider markup cost

during the IPR/ISO or AR inter-company solution.
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 Internal Fulfillment Model

Entity A Entity B
Shipment and IC
Shipping Entity
“Selling Entity” Invoicing
INV-Org B
INV-Org A

PO: Internal Requisition OM: Import Internal Sales Order

(Price = Cost from Org B + (Price = Cost from Org B + Transfer
Transfer Cost) Cost )
PO: Create Internal Order OM: Create WIP Jobs
WIP: Complete WIP Jobs
OM: Pick Release, Ship-Confirm, Inv
AP: Create IC AP Invoice from Interface, Costing
Entity B
AR: Create IC Invoice To Entity A

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 Solution and Approach
The solution is based on Oracle’s Advanced Pricing formula/Modifier and using
custom PL/SQL function.

1. Internal Requisition Price is calculated as “Cost from the Shipping

Organization + Inter-Org Transfer Charge setup between Shipping Org and
Requesting Org”. This Price is converted into the functional currency using
daily rate setup for ‘Corporate’.
2. Internal Sales Order Price is calculated as “Cost from the Shipping
Organization + Inter-Org Transfer Charge setup between Shipping Org and
Requesting Org”.
3. A DFF is setup at Shipping Network Screen to setup Inter-Org Transfer
Charge so that each org can have a different transfer charge.
4. Advanced Pricing has been setup for Inter-company so that advanced
pricing formula will be called while AR Inter-company invoice Program
calls Pricing Engine. ( It is a C Program !!!)
5. Internal Sales Order standard functionality of Calculate Price as “Freeze
Calculate” has been modified as “Calculate Price” so that advanced pricing
formula will be applied to the ISO.
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 Testing: Process Steps
- Rec. Org: Internal Requisition
- Ship Org: Import Sales Order
- Ship Org: Build the Product
- Ship Org: Pick and Ship
- Ship Org: Intercompany AR
- Rec. Org: Intercompany AP Invoices

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 Detail Process Steps
Receiving org - Internal Requisition:
- Enter Requisition, Approve: Will show cost of shipping org + Transfer
Cost as informational price of requisition, not the std cost which Oracle default

Receiving org – Create Internal Orders (request)

Shipping Org:
- Import Sales Order – parameter by requisition (menu option) – price is
calculated as cost + Transfer cost using the modifier ( Standard functionality
“ informational only, not IC price”).
- Complete the WIP Job.
- Pick release (after other required steps)
- Ship-Confirm (add freight if needed)
- Run Costing Manager
Shipping Org:
- Create intercompany AR Invoices (request)
- Run Auto-Invoice (request – source: internal)
Receiving Org:
- Create intercompany AP Invoices (request)
- Payables Invoice Import (Expense Report Import request) 8
The Scenario: Internal Requisition from DE OU
GERMANY(EUR) to US OU United States (USD)

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Setup Transfer Cost % at Shipping Network

DFF to store Transfer cost %

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Setup Inter-company Price List

Remember that for Internal Sales

Order , Price List is dummy. That
Means Pricing engine just validate
the item is in the Price List. The price
Is defaulted from Cost.

Make sure that the price is setup as

formula And precedence is setup as ‘1’.
This Will ensure that the AR inter-
company Invoice program uses this price
list and calculate the price
as cost + transfer cost using the formula

Also make sure that this price list is added

at Bill-to site of Internal customer and
Transaction Type used for Internal Sales
Order

Note: The same price list can be used for

all ‘USD’ orgs. If you setup multi currency
pricing the same price list can be used for
all the OU’s.
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Receiving OU: Internal Requisition
– enter and Before Saving

Cost defaulted from R05

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Internal Requisition –Save and Approve

Using our function:

Cost +2% which is
Transfer Cost %

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Internal Requisition: Create Internal Orders,
Reports, Run

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 Shipping OU: Import Sales Orders

Select Source: Internal; Requisition No.

can be entered in “Order Reference”.
Otherwise all internal sources will be
imported

Menu path: OM, Order Management, Orders/Return, Import Orders, Import Request 15
Shipping OU: Verify the Order and Release to WIP

Transfer % - 2
Cost - 214.88
Selling Price - 219.18

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Verify WIP Job and Release

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Complete WIP Job

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Pick Release Sales Order

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Ship-Confirm Sales Order

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 Create Intercompany AR Invoices

Menu path: INV, Reports, Inter-company Invoices, ”Create Intercompany AR Invoices”,

View Log 21
Review the Log to verify

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 The IC AR Invoice
After Run Master Auto-Invoice Program: Invoice is created

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The IC AR Invoice Header

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IC AR invoice Line

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 Create Intercompany AP invoices

Inventory, Reports, Inter-company invoices, Create AP Inter-company Invoices 26

Run Payables Import ( Expense Report Import)

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Verify IC AP Invoice

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Verify IC AP Invoice ( See Functional
currency)

Functional currency
amount EUR =
Internal Req amount

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Questions & Answers

Vinod Menon – Oracle ERP Specialist, Erpsoft LLC

Phone : (214) 912 7012
Email : vinod@erp-soft.net

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