ACE Blueprint – ERP Enterprise Structures

Order to Cash

ERP Advanced Cloud Experts (ACE)

Oracle Development
July 1, 2020
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Program agenda

1 Integration Overview
2 Business Units and Business Functions
3 Legal Entities
4 Data Security
5 Summary

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Program agenda

1 Integration Overview
2 Business Units and Business Functions
3 Legal Entities
4 Data Security
5 Summary

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 Integration Overview: Focus on Order to Cash (ERP)
Supply Credit Management Data
Customer credit check
Credit Management (ERP) Advanced Collections (ERP)
Credit checks Sales order data for invoicing Collection strategies

Data for analysis

CPQ (CX) Order Management (SCM) Sales order and Bill Management (ERP)
Customer Quotes Sales orders & fulfilment fulfilment data
credit
check Billing
Subscription Management
basis Receivables (ERP)
Sales order data (CX) Credit memo
Invoices and credit memos
Start Subscription contracts requests &
customer payments
Subscription
Sales order and data Receipts
fulfilment data Billing
data Receivables (ERP)
Enterprise Contracts (CX) Revenue Management (ERP)
Customer Payments
Project contracts Project contract data Revenue contracts

Journals for Project contract revenue data

revenue,
Native integration contract assets,
and PPM Cloud (ERP)
Integration planned - performance Project billing PPM invoice data
on future roadmap obligation
liabilities Receivable
journals
General Ledger (ERP)
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Program agenda

1 Integration Overview
2 Business Units and Business Functions
3 Legal Entities
4 Data Security
5 Summary

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Key Considerations: Business Units and Business Functions (1 of 5)

• A business unit is an Oracle Cloud enterprise structure that administers and secures subledger
transactions such as customer invoices and payments.
• Subledger transactions (sales orders, customer invoices, and payments) are owned and partitioned
by business unit. For example, customer invoices are assigned to a single Receivables Invoicing
business unit.
• Business units may be responsible for performing one or more business functions such as invoicing,
payments, and collections.
• Setups that control the behavior of subledger transactions are often defined at the business unit
level.
• A business unit need not be assigned all business functions. For example, a business function may
be performed by another business unit or externally to Oracle Cloud Applications.

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Key Considerations: Business Units and Business Functions (2 of 5)

• Relationships between business units control the flow of subledger transactions between them.
• The Service Provider Relationship configuration can be used for centralization of customer
payments.
• With the exception of Human Capital Management (HCM) and Revenue Management, Order to
Cash subledger transactions are secured by business unit.
• Revenue Contracts in Revenue Management are partitioned and secured by Ledger, not by business
unit.
• Business units determine which primary ledger is used for accounting for the business unit’s
transactions
• Not all business functions can be implemented in independent business units as shown in the table
on the next slide.

Future Corp Business Functions

China (Primary Future Corp Project Billing and Revenue Collections
China BU Customer Payments
Ledger) Accounting Management Management

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 Key Considerations: Business Units and Business Functions (3 of 5)

PRODUCT BUSINESS
FUNCTIONAL AREA DEPENDENCIES
FAMILY ONLY FUNCTION

If Order Management is implemented, the Order Fulfillment and Billing & Revenue Management business
Order Fulfillment
SCM Manages processing of sales orders. units must be the same.
Orchestration

Data from multiple business units in AR can feed into Revenue Contracts in Revenue Management (RM), as
Billing and Revenue Manages processing of customer invoices and data in RM is accessed and secured by Ledger. Sales Order-, Project Billing-, Subscription data, and AR Invoice
Financials
Management credit memos in Receivables. data when processed in upstream BUs belonging to same Ledger data can be included in the same revenue
contract in a Ledger in RM.
• Localizations that report on both customer and supplier invoices are likely to assume that these business
Customer Manages receipts of payment for customer invoices functions reside in the same business unit.
Financials
Payments and customer refunds. • Refunds (payment of customer credit memos in Payables) generates the payment request in the same
business unit as the credit memo.

Collections Manages advanced collections, including strategies The Collections Management business function must be assigned to the same business unit as Billing &
Financials
Management to collect balances owed by customers. Revenue Management.

Enables external customers to view own bills, create The Bill Management business function must be assigned to the same business unit as Billing & Revenue
Financials Bill Management*
and manage disputes, and pay bills. Management.

Financials Credit
Establish customer credit score and credit limit Enable customer credit checks during quoting, ordering and collections to determine credit limit.
Management*

If both Project Accounting and Project Billing are implemented, the Project Accounting and Customer Contract
Projects Manages project contracts (Enterprise contracts)
Project Accounting Management business functions must be assigned to a business unit with both Payables Invoicing and Billing
and billing.
& Revenue Management business functions.

* These are not business functions that are assigned as part of the business unit setup but are included for completeness .

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Key Considerations: Business Units and Business Functions (4 of 5)

Receivable Invoicing
• Responsible for processing customer invoices. Billing & Revenue Management business units cannot span multiple
ledgers.
Receivable Payments
• Responsible for processing customer receipts. Customer Payment business units cannot span multiple ledgers.

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Key Considerations: Business Units and Business Functions (5 of 5)

Cross Business Unit Processing of Cash Receipts in Receivables

• Cross business unit cash receipt applications can arise in two ways:
- 1) The customer inadvertently transfers funds into a bank account used by a different business unit from the one that issued the
invoice. This is not a shared service center scenario. A user who has been assigned the appropriate function and data privileges
can apply a cash receipt registered in one business unit to a customer invoice that resides in another.
- 2) The deploying enterprise establishes a shared service center to process customer cash receipts (and often, supplier
payments) and requests that customers transfer funds into its bank account. Shared service center users who have been
assigned the appropriate function and data privileges can apply a cash receipt registered in the shared service center business
unit to customer invoices that reside in other business units. This is the example reflected in picture below.

Future Corp Inc Future Corp SA Sales Order Customer

Spain BU AR Invoicing
Future (Legal Entity) Orchestration Payment
Corp
Spain
(primary
ledger) Future Corp Retail Next Gen Retail SA Sales Order
AR Invoicing
Spain BU (Legal Entity) Orchestration

Service Provider Relationship

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Best Practices: Business Units and Business Functions (1 of 3)

To ensure centralized and seamless management of cash resources

• There would normally be a 1 : 1 or M : 1 relationship between the bank account and the Customer Payments business
unit
• In companies that centralize management of the cash resource, the Customer Payments business unit and Payable
Payments business unit would normally be the same
• There would normally be a 1 : 1 relationship between a legal entity and Customer Payments business unit (but that
doesn't mean that the Billing & Revenue Management business unit and Customer Payments business units are the
same business unit!).
• In a US regulatory environment, the above considerations are not important, so the above best practice can be
disregarded.

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Best Practices: Business Units and Business Functions (2 of 3)

To ensure centralized and seamless management of cash resources

• There would normally be a single Customer Payment business unit per country if:
- There is a centralized cash receipt processing department.
- There is a single bank account into which all customers are directed to pay.
• The Customer Payment business unit would normally be the same as the Billing & Revenue Management business
unit if:
- There are strong requirements to secure payments at the Billing & Revenue Management business unit level.
- Each Billing & Revenue Management business unit administers and processes the payments for its invoices.
- Each Billing & Revenue Management business unit have separate bank accounts.
- Cross business unit cash receipt applications that arise from customer errors (for example, paying into the wrong bank account)
can be made irrespective of whether Customer Payment business units are centralized or not.

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Best Practices: Business Units and Business Functions (3 of 3)

• Contrast requirements to segregate transactions with those for simplicity; minimal setup and
maintenance; and usability.
• Unnecessary duplication of business units increases complexity; setup and maintenance; and the
risk of discrepancies.
• Business units should reflect stable real-world lines of business and not short lived entities such as
projects.
• Valid reasons for creating separate business units include:
- Strong business requirements to segregate and secure subledger transactions or their setups by lines of
business.
- Significant differences between lines of business in business processes that result in conflicts between their
business unit level configurations.

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Program agenda

1 Integration Overview
2 Business Units and Business Functions
3 Legal Entities
4 Data Security
5 Summary

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Key Considerations: Sales Order Impact on Legal Entity (1 of 2)

• Order management does not pass the Profit Center legal entity to Receivables via AutoInvoice hence,
downstream invoices' legal entities are derived from the Billing & Revenue Management business
unit's default legal entity.
• More than one Billing & Revenue Management business unit per legal entity may be necessary if
there are strong requirements to secure invoices at a line of business level.
• More than one legal entity per Billing & Revenue Management business unit may be necessary if
many legal entities are managed as a single homogeneous management entity (usually occurs when
legal entities have been created or retained after an acquisition for non-operational reasons such as
risk limitation).

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Key Considerations: Sales Order Impact on Legal Entity (2 of 2)

This diagram illustrates an enterprise structure configuration where

• the legal entity is derived from each Billing and Revenue Management business unit
• Revenue Management Cloud receives and processes sales order and billing data from multiple legal entities and
business units when linked to the same ledger
Spain

Future Corp Invoice 1876 Line 1 - Machine Future Corp Spain Primary
Sales Order198876 Future Corp SA
Customer: ABC Ledger
BU Customer: ABC
Bill to: ABC HQ VAT @ 21%
(Legal Entity)
• Corp COA
• Corp Calendar
• EUR Accounting Currency

Receivable
Vending Sales Order 298877
Invoice 2877
Customer: ABC
Line 1 - Maintenance Vending
Journals
Iberica SRL
Iberica BU Customer: ABC Bill to: ABC HQ VAT @ 21% (Legal Entity) from AR

Next Gen Sales Order: 33878

Invoice 3878 Line 1 - Warranty Next Gen
Customer: ABC Retail SA
Retail BU Customer: ABC
Bill to: ABC HQ VAT @ 21% (Legal Entity)

Sales Order Data Billing Data Journals for

Revenue, Contract
Revenue Management Assets, and
Revenue Contracts (by Ledger) Performance
Obligation
Liabilities

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Key Considerations: Customer Invoice Legal Entities (1 of 2)

• A legal entity is a real-world enterprise structure that has property rights and obligations that can be
enforced through courts of law.
• Customer invoices (credit memos, etc.) are issued to the customer by a single first party legal entity
which ”owns” the customer receivable.
• In most of Europe, Latin America, and some Asian countries, customer invoices and their transaction
taxes (VAT or GST depending on the country) must be partitioned (i.e. sequenced and reported
separately) by first party legal entity. Invoice lines can impact only one legal entity.
• Many customers that do not have statutory document sequencing requirements still want their
transaction numbers to be gapless. You must configure gapless document sequencing to achieve
this.
• In the United States and Canada, regulation is directed at a group of companies under common
ownership or control. Within the group of companies, customer invoices may contain lines whose
accounting impacts different balancing segment values across multiple legal entities.
• In effect, intercompany accounting is performed within the accounting for a single customer invoice and transaction tax
reporting for United States sales and use taxes or Canada GST/HST/PST/QST can be based on different balancing segment
values which may not coincide with first party legal entity that was invoiced to the customer.

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Key Considerations: Customer Invoice Legal Entities (2 of 2)

This diagram illustrates two example enterprise structure configurations where

• the Spanish enterprise’s customer invoices and their transaction taxes (VAT) must be partitioned (i.e. sequenced
and reported separately) by first party legal entity.
• the American enterprise has a group of companies under common ownership or control. Within the group of
companies, customer invoices may contain lines whose accounting impacts different balancing segment values
(multiple legal entities) resulting in intercompany accounting entries being generated.
Spain United States
Invoice 1876
Line 1 - Machine Future Corp Future Corp Line 1 – Machine Future Corp US
Customer: ABC Future Corp Inc
Issued by: Future SA Spain Primary (Legal Entity) Primary Ledger
Corp SA VAT @ 21% (Legal Entity)
Ledger Sales Tax @ 9%
• Corp COA
• Corp Calendar
• Corp COA • USD Accounting
• Corp Calendar Currency
• EUR Accounting
Currency
Invoice 2877
Line 1 – Maintenance Vending Invoice 549
Line 2 – Maintenance Future Corp
Customer: ABC Customer: DEF
Issued by : Vending Iberica SRL Issued by : Future Digital Inc
Iberica SRL VAT @ 21% (Legal Entity) Corp Inc Sales Tax @ 9% (Legal Entity)

Invoice 3878
Line 1 – Warranty Next Gen Line 3 – Warranty Next Gen
Customer: ABC
Issued by : Next Gen Retail SA Retail Inc
Retail SA VAT @ 21% (Legal Entity) Sales Tax @ 9% (Legal Entity)

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Key Considerations: Customer Payment Legal Entities (1 of 2)

• A bank account’s funds are “owned” by a single first party legal entity. All deposits into a bank
account inherit its legal entity.
• In most countries including those which require strong partitioning of customer invoices, a payment
can relieve the customer receivable in many first party legal entities. Depositing customer payments
into a bank account that is owned by a different legal entity from the legal entity that issued the
customer invoice represents, in effect, intercompany transactions.
• In countries with strong requirements to partition journal entries by legal entity, Subledger
Accounting ensures that separate journals are generated for each legal entity involved in a cross
legal entity customer deposits.

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Key Considerations: Customer Payment Legal Entities (2 of 2)

This diagram illustrates an example enterprise structure configuration where

• the legal entity Future Corp SA receives customer payments for invoices on behalf of two other legal entities
Vending Iberica SRL and Next Gen Retail SA as well as it’s own legal entity.
• intercompany transactions are generated when customer receipt amounts for invoices issued by a different legal
entity are paid into that of the Legal Entity, which the bank account represents.

Spain
Future Corp Spain Primary Ledger
Invoice 1876 Payment 6543
Journal
Future Corp SA Customer: ABC
BSV 04 - Receivable
Customer: ABC
Future Corp SA
BSV 04 - InterCo AP - 05
(Legal Entity) Issued by: Future (into Future Corp’s BSV 04 - InterCo AP - 06
Seq. 549
Corp SA bank account) BSV 04 – Cash Clearing

Invoice 2877
Vending Journal BSV 05 - Receivable
Customer: ABC
Iberica SRL Issued by: Vending BSV 05 - Receivable Vending Iberica SRL
(Legal Entity) Seq. 887 BSV 05 - InterCo AR - 04
Iberica SRL

Invoice 3878
Next Gen Journal BSV 06 - Receivable
Customer:ABC
Retail SA Issued by : Next Gen BSV 06 - Receivable Next Gen Retail SA
(Legal Entity) Seq. 19177 BSV 06 - InterCo AR - 04
Retail SA

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Key Considerations: Business Units and Legal Entities (1 of 2)

ERP Cloud offers considerable flexibility regarding the relationship between business units and legal
entities.
This diagram illustrates an example enterprise structure configuration where
• Future Corp Inc has several legal entities within a single country (could be due to historic M&As, risk limitation, tax
optimization etc.) but it wouldn’t make sense to have a business unit for every single legal entity.
• In the case where one business unit and multiple legal entities (BSVs) are linked to a single primary ledger
- You can select the relevant Legal Entity upon invoice entry through the UI or you can control this via AR invoice import.
- Defining one Billing BU that spans several legal entities is not always supported by localizations in some countries.
• Future Corp Mfg has its own Business Unit and Legal Entity to support separate setup and transaction processing .

Future Corp Inc Future Corp Inc Future Corp Digital Inc Next Gen Retail Inc
Future Receivables BU Legal Entity Legal Entity Legal Entity
Corp
US
(primary Future Corp
ledger) Future Corp Mfg
Manufacturing
Receivables BU
Legal Entity
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Key Considerations: Business Units and Legal Entities (2 of 2)

This diagram illustrates an example enterprise structure configuration where

• Future Corp UK Ltd legal entity has a diverse business portfolio where operational transactions are better processed
separately.

Future
Corp Future
Future Corp Future Corp Inc
UK Corp UK Ltd
Manufacturing BU Receivables BU
(primary Legal Entity
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ledger)

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Key Considerations: Legal Entity Defaulting in Receivables

Receivable Invoices
• You can set up transaction types by Legal Entity.
• The Legal Entity will then default on the transaction when you use the transaction type to create a transaction.
• To set up a transaction type Navigate to Tools > Setup and Maintenance > Query the task Manage Transaction
Types.

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Key Considerations: Multiple Legal Entities and one Business Unit

Further impact considerations if the Billing and Revenue Management business unit spans multiple
legal entities:
• Refunds
- Configure Subledger Accounting rules to override the default primary balancing segment of the clearing account (legal
entity is available as a Subledger Accounting source).
• Dunning
- Legal entity is available in the dunning letter BI Publisher data model. Modify dunning letter templates to group or segregate
the dunned transactions as required.
• Late Charges and Statements
- A separate bill-to customer site should be defined for each legal entity.

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Program agenda

1 Integration Overview
2 Business Units and Business Functions
3 Legal Entities
4 Data Security
5 Summary

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Key Considerations: Data Security in Order to Cash (1 of 2)

Sales Orders (SCM)

• Sales Orders are secured by Business Unit. Sales Order staff may be granted access to one or more sales order
business units to perform a wide range of actions on sales orders.
Revenue Management (ERP)
• Revenue Contracts in Revenue Management are secured by ledger.
• Sales order data, project billing data, subscription data, and AR invoice data when processed in upstream BUs
belonging to same Ledger data can be included in the same revenue contract in a Ledger in Revenue Management.
Project Portfolio Management (ERP)
• Project transactions are secured by business unit. If both Project Accounting and Project Billing are implemented, the
Project Accounting and Customer Contract Management business functions must be assigned to a business unit
with both Payables Invoicing and Billing & Revenue Management business functions.

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Key Considerations: Data Security in Order to Cash (2 of 2)

Customer Invoices and Customer Payments (ERP)

• Invoices and payments are secured by business unit. Users are explicitly assigned access to one or more business
units using the Manage Data Access for Users page. If the Billing and Revenue Management business functions are
assigned to different business units, a user that processes payments for customer invoices must have Access to both
business units.
Bank Accounts for Customer Payments (ERP)
• Bank accounts are assigned to business units and hence, subject to business unit security. It is also possible to
further limit access to bank accounts to specific users and roles.
Aggregation across Roles
• Business unit access privileges are aggregated across roles. If a user has been granted access to a business unit by
virtue of one role, they will have access to it across all applications and features.
• Example: if a user is assigned the Accounts Receivable Specialist role for business unit Future Corp Spain and the Accounts
Receivable Invoice Supervisor role for business unit Next Gen Retail Spain, they will have the same feature access (pages, reports,
etc.) for both business units.

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Program agenda

1 Quote to Cash Integration Overview

2 Business Units and Business Functions
3 Legal Entities
4 Data Security
5 Summary

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Summary

• Contrast requirements to segregate transactions with those for simplicity; minimal setup and maintenance; and
usability.
• Unnecessary duplication of business units increases complexity; setup and maintenance; and the risk of
discrepancies.
• Receipt amounts for Invoices:
• In most countries including those which require strong partitioning of customer invoices, an amount received
from a customer can relieve the accounts receivable in many first party legal entities. Receipt amounts for
invoices issued by a different legal entity into that of the Legal Entity the bank account represents, in effect,
are intercompany transactions.
• In the United States and Canada, regulation is directed at a group of companies under common ownership or
control. Within the group of companies, customer invoices may contain lines whose accounting impacts
different balancing segment values across multiple legal entities.

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Additional Resources

• Cloud ERP Enterprise Structures White Paper (Doc ID 2415848.1)

• Securing Oracle ERP Cloud
• ERP Cloud – Order to Cash Enterprise Structures Best Implementation Practices Blueprint (MOS Doc
ID 2685402.1)
• ERP Cloud - Record to Report Enterprise Structures Best Implementation Practices Blueprint (MOS
Doc ID 2660940.1)
• Customer Connect session: ERP – Record to Report Enterprise Structures Best Implementation
Practices (https://cloudcustomerconnect.oracle.com/posts/3ad0d689c1 ) - delivered and recorded
on May 7, 2020
• ERP Cloud – Procure to Pay Enterprise Structures Best Implementation Practices Blueprint (MOS Doc
ID 2677696.1)
• Customer Connect session: ERP – Procure to Pay Enterprise Structures Best Implementation
Practices (https://cloudcustomerconnect.oracle.com/posts/1586918bf2) - delivered and recorded on
June 10, 2020
• Oracle Financials Cloud: Global Catalog
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Thank you

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