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NCOAUG 2009

Intercompany 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
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

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 .  In the procurement 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.

Inter Company Shipping Flow INTERCOMPANY SHIPPING FLOW .

The shipping OU ships goods to the customers directly.  These two invoices are recorded by the system using the intercompany transaction flow .  The Shipping OU records an Intercompany AR Invoice against the Selling OU at the transfer price.Inter Company 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 Selling OU records Intercompany AP invoice for the payment.

2. .3….Inter Company Shipping Flow Sample Org Structure used in the examples Set of Books Legal Entity Operating Unit Inventory Org 1.

Inter Company Shipping Flow Flow with 2 OUs  Order is Booked in one OU  It is shipped out of a different OU India China Booking OU Shipping OU .

Inter Company Shipping Flow 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 India US China Booking OU OU Shipping OU .

Inter Company Shipping Flow with 2 OUs Material Transactions Flow with 2 OUs Logical IC Sales Issue US China Booking OU Logical IC Shipping OU Shipment Receipt Logical Physical Sales Order Sales Order Issue Issue Customer .

Inter Company Shipping Flow with 3 OUs Material Transactions Flow with 3 OUs Logical IC Logical IC Sales Issue Sales Issue India US China Booking OU Intermediate OU Shipping OU Logical IC Logical IC Shipment Receipt Shipment Receipt Logical Physical Sales Order Sales Order Issue Issue Customer .

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 IC AR in China OU against US OU @ Tr Price US China Booking OU Shipping OU IC AP in US OU against China OU @ Tr Price AR invoice to Customer Customer .

Inter Company Shipping Flow Financial Flow with 3 OUs • Financial Flow with 3 OUs IC AR in US OU IC AR in China OU on India OU @Tr Price on US OU @ Tr Price India US China Financial OU Booking OU Shipping OU IC AP in India OU on US OU @ Tr Price IC AP in US OU on China OU @ Tr Price AR invoice to Customer Customer .

Inter Company Shipping Flow– Transfer Price Transfer Price with 2 OUs IC Trxs flow between China and US OUs @$110 (transfer price) India China Booking Org Shipping Org Cost = $110 Cost = $100 Customer Price = $120 Markup = $10 Transfer Price = $110 .

Inter Company Shipping Flow – Transfer Price Transfer Price with 3 OUs India IC Trxs flow between US IC Trxs flow between China Booking Org US and India China and US Shipping Org @ $120 @ $110 Cost = $120 Cost = $110 Cost = $100 Customer Price = $130 Markup = $10 Markup = $10 Transfer Price = $120 Transfer Price = $110 .

Inter Company Shipping Flow Financial Transactions OU-India OU-USA OU China Booking OU Financial OU Shipping OU DR CR 1 DR CR 1 IC Inventory Inventory Clearing COGS($100) $100 $110 $110 DR CR 1 IC Inventory 1 IC IC 2 Inventory Clearing 120 COGS 110 Receivables Revenue) $120 110 $110 $110 1 1) Logical IC Issue in China COGS Inventory IC IC 3 $120 Accrual OU + Logical IC receipt in $120 Payable 110 US + Logical IC issue in $110 US to India OU + Logical 5 Receipt in India OU + IC IC Logical Issue to Customer Accrual Payable IC IC $120 $120 4 2) Auto Invoice in OU China Rec Rev 120 120 Rec Rev 6 $130 $130 5) Import AP Invoice in India OU 3) Import AP Invoice in US OU 6) Run Auto Invoice in India OU 4) Run Auto Invoice in US 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 .

G_RET_STS_SUCCESS. if (I_ship_ou_id = 81 and I_sell_ou_id = 147) then  If the return value is 0 or null. transfer price x_return_status := FND_API. exception when others then raise. x_msg_data := null.GET_TRANSFER_PRICE x_return_status OUT NOCOPY VARCHAR2. This return(l_transfer_price). end if.  API I_ship_ou_id in number. I_price_list_id in number. x_msg_count OUT NOCOPY NUMBER. x_msg_data OUT NOCOPY VARCHAR2. end get_transfer_price. x_msg_count := 0. . price exception when others then null. begin then the system will ignore this select nvl(unit_selling_price.pls 120. plug in variable transfer price if l_transfer_price <> 0 then like cost + x% or based on O_currency_code := 'USD'. customization.0) * 4 value and look for other into l_transfer_price from oe_order_lines_all conditions to get the transfer where line_id = I_order_line_id. CES. customer selling price etc.Inter Company Shipping Flow Transfer Price CREATE OR REPLACE package body MTL_INTERCOMPANY_INVOICES as External API /* $Header: INVICIVB. is a very powerful API and can else be used easily without much return (NULL). I_sell_ou_id in number. end if.2 2006/03/29 05:41:10 sbitra noship $ */ function get_transfer_price (I_transaction_id in number. then the value returned begin by the API is used for the O_currency_code := null. Price.  You can use this API to easily end. MTL_INTERCOMPANY_INVOI O_currency_code out NOCOPY varchar2.  If the external API returns value I_order_line_id IN NUMBER default null) return number is greater > 0 for the transfer l_transfer_price number := 0.

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 Flow Transfer 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.

 An inventory Organization should be defined and associated with all the OUs in the nodes even if there is no physical flow of inventory. we can create IC flow only between 2 OUs.  Advanced accounting has to be checked for creating logical transactions and IC invoices and for defining more than one node in the shipping flow. Without advanced accounting checked.Inter Company Shipping Flow Setups  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. This is to create logical inventory transactions .

specify the IC AR invoice customer. IC COGS A/C and Currency Code.  or from OU  or order currency . Similarly specify the IC AP supplier. Inventory Accrual AC and Expense Accrual Account  The currency for the IC invoices can be of the  To operating unit. invoice type. supplier site.Setup  In the Intercompany relations.Inter Company Transaction Flow -.

Inter Company Shipping Flow with IRISO IR ISO Process  System is designed only for 2 Hongkong OU US OU IR ISO OUs in IR ISO Process Shipping OU  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 .

run the ‘Auto Invoice Master Program’ from the receivables responsibility. run the program ‘Create Intercompany AR Invoices’. run the ‘Create Intercompany AP Invoices’ 7 Then run the program ‘Payables Open Interface Import’ from Payables responsibility. This will create IC AR Invoice 6 From Payables responsibility of the Selling OU. This will create IC AP Invoices in the selling OU. .Inter Company Shipping Flow with 2 OUs Process 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. This will create records in the auto invoice interface tables 5 On successful completion of the above program.

run the ‘Create Intercompany AP Invoices’. run the ‘Auto Invoice Master Program’ from the receivables responsibility. . 7 Then run the program ‘Payables Open Interface Import’ from Payables responsibility. This will create records in the auto invoice interface tables 9 On successful completion of the above program. run the program ‘Create Intercompany AR Invoices’. This will create IC AR Invoice 10 From Payables responsibility of the Selling OU. run the ‘Auto Invoice Master Program’ from the receivables responsibility. 8 From the receivables responsibility. This will create IC AR Invoice 6 From Payables responsibility of the intermediate OU. This will create IC AP Invoices in the selling OU. This will create records in the auto invoice interface tables 5 On successful completion of the above program. 11 Then run the program ‘Payables Open Interface Import’ from Payables responsibility.Inter Company Shipping Flow with 3 OUs Process 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. This will create IC AP Invoices in the intermediate OU. run the program ‘Create Intercompany AR Invoices’. run the ‘Create Intercompany AP Invoices’.

Inter Company Shipping Flow Programs for creation of IC AR invoices Parameters for the program ‘Create Intercompany Invoices’ Parameters 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 .

US IC Trxs flow between Hongkong IC Trxs flow China Purchasing OU US and HK OUs OU between Shipping OU @transfer price China and HK OUs @transfer price US Places PO On Supplier Goods shipped to Supplier sends Supplier China OU directly Invoice to US OU .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.

Inter Company Procurement Flow Financial Flow with 3 OUs • Material Flow with 3 OUs Logical Receipt Logical Receipt of goods of goods Logical US Hongkong China Receipt Intermediate OU of goodsPurchasing OU Receiving OU Logical Issue of Logical Issue of goods goods Supplier ships PO is raised The Goods On the Supplier Supplier .

Inter Company Procurement Flow Financial Flow with 3 OUs • Financial Flow with 3 OUs IC AP in HK OU IC AP in China OU on US OU @PO/Tr Price on HK OU @ PO/Tr Price US Hongkong China Intermediate OU Purchasing OU Receiving OU AP Invoice In US OU On Supplier IC AR in US OU IC AR in HK OU on HK OU @ PO/Tr Price on China OU @ PO/Tr Price Supplier ships PO is raised The Goods On the Supplier 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.

or to OU or can be of currency of PO . you can define the AR invoice details and AP invoice details  The Currency code can be of from OU.Inter Company Procurement Flow Setups  You can define Multiple nodes  For each OU pair in a node.

Questions and answers Questions and Answers .

com sagaram@hotmail.sagaram@utstar.Contact Information Ravi Sagaram ravi.com 630-849-9888 mobile .