Difference between Inter-Project Billing and Intercompany Billing

Enterprises face complex accounting and operational project issues that result from both: Centralized project management through sharing resources across organizations

Decentralized project management through subdividing a project into related

Oracle projects, provides the Inter company and inter-project billing features to address these issues.

Project Example Company ABC is a construction company with a multiple organization structure, as illustrated below:
Business Group

BGI Japan Japan

Set of Books

US US

Legal Entity

OU

Los Angeles SanFrancisco

New York

Tokyo

The Los Angeles operating unit, ABCs headquarters, received a contract from a UK local resources. In order to expand its business the UK customer wants ABC to construct buildings in San Francisco, New York, and Tokyo to establish the business. ABC calls this project Project X and wants to track it using Oracle Projects. ABC will plan and construct the buildings using resources from the Los Angeles operating unit. Employee EMPJP from its Japan subsidiary will act as an internal consultant to add special features to suit the Japanese climate. The San Francisco, New York and Tokyo operating units are each responsible for the successful completion of these buildings with their local resources.

Company ABC can choose to implement either Intercompany Billing or Inter Project Billing features of Oracle Projects. Structure will be as below if Company ABC chooses to implement Inter Project Billing feature:

Inter-Project Billing:

Primary Project with Subcontracted Projects

UK Customer
Customer Invoice

Project X
Inter project Invoices

Provider Organizations Bill Project Owner via Inter project Billing

Project Customer Receiver Project Provider Project Expenditures Receiver Organization

Los Angeles

Los Angeles

X-San Francisco

X-New York

X-Tokyo

ABC divides Project X into several related contract projects. The LA operating unit owns the primary customer project, or receiver project, and bills the external customer. The related projects, or provider projects, are subcontracted to their respective internal organizations and internally bill the LA org. to recoup their costs.

San Francisco

New York

Tokyo

Structure will be as below if Company ABC chooses to implement Inter Company Billing feature:

Inter Company Billing:

Global Project (charged-to from anywhere)

UK Customer
Customer Invoice

Centralized Project Ownership Centralized Customer Billing

Project Customer Cross-charged Project Expenditures

Project X
Costs Costs Costs Costs

Los angeles San Francisco

New York

Tokyo

LA operating unit (project owner or receiver organization) centrally manages Project X All four ous (the provider organizations) incur project costs and charge them directly to Project X.

Difference, Advantages and Disadvantages between Inter-Project Billing and Inter Company Billing Process flow:
S. No 1 Inter-Project Billing Definition Interproject billing generates invoices for work performed between two projects. Inter company Billing Definition Inter company billing, a processing option within the cross charge feature, generates invoices for work performed

During Project Setup a subcontracting relationship must be defined between the provider project and the receiver project (also referred as Subcontracting). Once the work has been performed, the provider project generates a Receivables invoice for work/expense incurred to the receiver project. The receiver project automatically receives this internal invoice as a payables invoice during the AR invoice tieback process. The invoice is then treated as any other supplier invoice and is interfaced to projects as costs on the receiver 2

between two organizations. The provider operating unit generates a Receivables invoice, which is then interfaced to the receiver operating units Payables system as a Payables invoice. When a company cross charges transactions across a legal entity boundary, inter company billing documents are usually required by law. Companies that cross charge within a legal entity can also use inter company billing to formalize their cross charge process.

Create the following documents, Same as in Inter Project Billing which offset each other for a net profit and loss effect of zero: The provider operating unit generates AR invoices, which record internal revenue and accounts receivable balances against the receiver operating unit. The receiver operating unit accepts the corresponding Payables invoices, which record internal costs and accounts payable balances against the provider operating unit. Setup Steps Each Provider OU must set the flag Provider for Internal Billing and specify the internal supplier in Internal Billing of implementation options. Receiver OU must set the flag Receiver for Internal Billing and specify the internal customer in Internal Billing of implementation Setup Steps Each Provider OU must set the flag Provider for Internal Billing and specify the internal supplier in Internal Billing of implementation options. Receiver OU must set the flag Receiver for Internal Billing and specify the internal customer in Internal Billing of implementation options.

options. Each provider OU must create a provider project and own it completely. Each provider project must have an Agreement and baselined Funding to generate interproject billing invoice. Customer of this project should be same as the customer specified in Internal Billing of implementation options in the Receiver operating unit. The Provider Project can have internal and external customers and can be used to bill the external customer.

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Funding Limit is checked for Inter Project Billing Provider Project can be MultiCurrency Billing enabled

Receiver OU must create a Receiver project and use this to bill the customer directly.

Nothing needs to be specifed in the Provider OU under Provider Controls

Each Receiver OU must specify the Provider OUs under Receiver Controls of the Provider/Receiver Controls In Customers and Contacts form link This step is not required in this case the Receiver Project to each Provider Project created in the Provider OUs. One Receiver Project can be linked to several Provider Projects of different OUs vice versa is not

Each provider OU must create an Intercompany Billing project with project type having Intercompany flag = yes. Each Intercompany Billing project must have an Agreement and baselined Funding (please note Funding of Intercompany Billing project will be automatically baselined because the Intercompany flag = yes for the project type) to generate intercompany billing invoice. Customer of this project should be same as the customer specified in Internal Billing of implementation options in the Receiver operating unit. IC Billing Project is a dummy project and can be used to bill the internal customers only. There is no Funding Limit for the Inter company Billing Project Inter company Billing Project cannot be Multi-currency enabled but Inter company Invoices can be generated in currency different form functional currency Receiver OU must create a Receiver project and use this to bill the customer directly. Intercompany Tax Receiving task must be specified for this project in the Cross Charge Setup. Each Provider OU must specify the Receiver OU, Legal Entity, Allow Cross Charge, Processing Method, Intercompany Billing Project and Invoicing group under Provider Controls Each Receiver OU must specify the Provider OUs under Receiver Controls of the Provider/Receiver Controls

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possible. This step is not required in this case

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Provider OUs incur costs and charge to the respective provider project. Events can be entered as cross charge transactions on provider project Distribute costs in Provider OU Receiver Project is still not ready to bill the external customer Run the Streamline Interface Process to Interface Costs to AP for Expense Reports and to GL for other expenditure transactions from Provider OU Run Generate Draft Invoice to generate the inter-project invoice for the provider project in provider OU. Bill Amount is calculated as per the Billing setup of the project/task based on the actual cost incurred. Approve and release the inter-project invoice. Run the Streamline Interface process with streamline option as XI: Interface Draft Invoice to AR to interface the inter-project invoice to Receivables of Provider OU. Tieback process of the above streamline process creates IP Payables invoice in Receiver OU for the Receiver Project Import the Payables invoice from open invoice interface to create the supplier invoice and transfer to GL Interface this payables invoice to Oracle projects of Receiver OU as a normal supplier invoice charged to the Receiver Project. This steps gets the actual costs to the Receiver OU Now the Receiver Project is ready

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Set Allow cross charges from other OUs to yes and specify the Labor and Non labor Transfer Price schedule at the project and task level for the Receiver Project in Receiver OU. Provider OUs incur costs and charge to the Receiver project directly that is created in the Receiver OU through which the customer is billed Events cannot be entered for Receiver Project (Cross Charged Project) as cross charged transactions in the Provider OU Distribute costs in Provider OU Receiver Project is ready to bill the external customer Run the Streamline Process to Interface Costs to AP for Expense Reports and to GL for other expenditure transactions from Provider OU Run Generate Intercompany Invoice for the Intercompany Billing Project in Provider OU. Bill Amount is calculated as per the Transfer Price Schedule of the Cross Charged Project at the project/task level based on the actual cost incurred. Approve and release the intercompany billing invoice. Run the Streamline Interface process with streamline option as XIC: Interface Intercompany Invoice to AR to interface the intercompany invoice to Receivables of Provider OU. Tieback process of the above streamline process creates Payables invoice in Receiver OU for the Cross Charged Projects Import the Payables invoice from open invoice interface to create the supplier invoice and transfer to GL This step is required to take the internal costs to Oracle projects of the Receiver OU In this case Cross Charged project is

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for billing the external customer in Receiver OU and can generate Draft Invoice for Receiver Project and interface it to AR of Receiver OU. Unless step 17 is performed it is not possible to bill the customer because the expenditure is still not charged to the receiver project. Run update project summary amounts for the receiver project in Receiver OU Costs are owned by the Provider OU Decentralized Project Ownership and Centralized Customer Billing Advantages Flexibility in managing the provider project Each provider is treated and processed the same way as any other external customer contract project

ready to bill the external customer as soon as the costs incurred on cross charged project are distributed.

Run update project summary amounts for the receiver project in Receiver OU Costs are owned by the Provider OU Centralized Project Ownership and Centralized Customer Billing Advantages Simple project creating and maintainence All the expenditures against the receiver project whether cross charged or not are available for external customer billing and project tracking via PSI The customer receives timely consolidated invoices from Receiver OU which owns the project for all the work performed regardless of which OU provides the resources. Disadvantages Requires additional initial overhead for implementing the cross charge feature and creating intercompany billing projects to collect cross charge transactions within each provider organization.

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Disadvantages With distinct project structure this requires additional overhead in creating and managing additional provider projects The receiver projects status and external customer invoicing depend upon timely completion of the internal billing from all provider projects