Procure to Pay process Flow (High Level)

When I started working on the Oracle Applications I always had a desire if I could get a Process Flow of the Business process that I am working on, That could help me Understand how the data and transactions Flow. and I can also get a Good understanding of the Big Picture of what is it that we are trying to achieve.

So as part  of this Blog here is a Process Flow for all new explorers. Below mentioned is a Summary Process flow of Procure to Pay Process and How are Purchasing, Payables and General Ledger Modules are Used in this Business Process.

My next post will have a Detailed process Flow Procure to Pay Model

Multi Organization Architecture in R12

Chart of Account

Chart of Accounts is actually an Accounting Key Flexfield within General Ledger Application. As chart of accounts Structure is the most important part of accounting setups it is very important to finalize the correct accounting structure (Chart of accounts) before we start accounting setups. It is important to note that once the chart of accounts structure is defined it is not recommended to change it.

Defining of Chart of accounts consists of following main steps.

• Finalize the chart of account Structure
• Creating value sets which can be assigned to various segments of Chart of accounts Structure.
• Defining Accounting Key Flexfield and its Segments.
• Specifying appropriate qualifiers.
• Compiling the Key flex field Definition.
• Defining Values for the value sets.

Finalize the chart of account Structure

it is very important to finalize the correct accounting structure (Chart of accounts) before we start accounting setups. Because once the chart of accounts structure is defined it is not recommended to change it. Analyze the organizational structure and the dimensions of the business before designing the Chart of accounts by carefully evaluating the business needs, design the chart of accounts to take advantage of General Ledger’s flexible tools for recording and reporting the accounting information in the best possible way.

Sample Structure for a three segment Chart of Accounts.

1. Balancing segment
2. Natural Account
3. Cost center

Defining Value sets

Define the value sets for different Segments of the chart of account structure. Value sets determine the attributes of your account segments such as the segment length, value alignment, and value security. Do note that same value sets can be used for multiple segments of COA Structure.

Define the Value sets for the Accounting Flexfield as independent, table, or dependent-type value sets. Refrain from using value sets with a validation type of None, Pair, or Special for the Accounting Flexfield.

Navigation: 

Defining Accounting Key Flexfield and its Segments.

Define the chart of Accounts structure in oracle applications by defining Accounting Flex fields. There can be up to 30 segments for an Accounting Flex Field Structure. We should assign one of the Chart of account segments as Balancing Segment and one of the segment as Natural Account segment as these two are required Segments.

Application: General Ledger

Flexfield Title: Accounting Flexfield.

Navigation:

• Check the Allow Dynamic Insert check Box if it is desired to create the accounting ode combinations dynamically.
• Check the Cross Validate segments checkbox if it is desired to use Cross Validation rules to prevent/ allow creation of some account code combinations.

Define Chart of Account Segments:

Define the chart of account segments as per the structure decided and attaché the corresponding value sets to the segments. It is very important to decide and setup the column as it specifies which Segment it will correspond to in the accounting code combinations. It Determine the appearance of your key Flexfield window, the number and order of the segments, and the segment descriptions.

Specify Accounting Flexfield qualifiers:

Accounting Flex Filed qualifiers specify how different accounting flex filed segments will be used.  By default there are three accounting Flexfield qualifiers.

• Balancing Segment
• Natural Account

A natural account segment contains values representing account types, such as expense, liability, Revenue Etc. This Account type finally specifies the type of the account code Combination.

• Cost Center
• Intercompany
• Management
• Secondary Tracking

We should designate one of the Chart of account segments as Balancing Segment and Natural Account segment each. We can optionally designate other segment as Cost Center, intercompany, management, Secondary tracking. It is mandatory to define a Cost center segment if Oracle Assets or Oracle Projects is supposed to be installed and used.

Compiling the Key flex field Definition.

       Once the Chart of Accounts Structure is defined and the respective qualifiers and Value sets are attached to the segments appropriately. Freeze the Flexfield definition by checking the “Freeze Flexfield Definition” check box. Once the Accounting Flexfield account structure is Freezed in the Key Flexfield Segments window and we start using account numbers in data entry, we should not modify the Flexfield definition. Changing the existing Flexfield structure after Flexfield data has been created can cause serious data inconsistencies.

• Check the Allow Dynamic Insert check Box if it is desired to create the accounting ode combinations dynamically.

Defining Values for the value sets.

Define the Values in the value sets attached to different segments of Chart of accounts Structure so that the corresponding values can be used for the creation of the accounting Code Combination.

Navigation.

Select Allow Budgeting and Allow Posting as per business requirement.

Allow Posting flag confirms that the segment value can be used by the Posting program.

Oracle Receivables does not use the Allow Budgeting option

Natural account segment contains values representing account types, such as expense, liability, Revenue Etc. This Account type finally specifies the type of the account code Combination.

Defining Organization Structure

Defining Organization Structure:

It is Very important to define the Multi Organization Structure in most effective and Optimum manner. The Success of the Multi Organization Support in Oracle applications depends on how different Business Entities in an enterprise are modeled in a Multi Organization hierarchy in Oracle Applications.
The Organization Structure should not only be compliant from legal perspective but should also be effective from operational management and accounting perspective.
Below Mentioned are some points which can be used while planning the Organization Structure.

• Business group is the highest level in the Organization Structure and is used for managing human resource information and does not have an accounting impact. It determines the availability of the employees to the ledger, Operating Units Attached to it.
• Ledger is the highest level which impacts and controls accounting, Multiple Ledgers can be associated with a single Business group but a Ledger can be associated to only One Business group.
• A legal Entity can be associated to Single Ledger, Multiple Legal Entities can be Associated to a Ledger.
• Multiple Operating units can be associated with a Single Legal Entity, but One Operating Unit can be Associated to only one Legal Entity.
• An inventory Organization points to only one Operating Unit but can be referenced by any Operating unit within the same Ledger.

Multi Organization Architecture in R12 (WHAT is WHAT)

What Is Multi organization Architecture:

       Multi Organization is a feature of oracle applications which Provides Implementation, Maintenance and operations of Multiple Business Units in an Enterprise within a single installation of Oracle Applications, taking Appropriate care of Data security and data separation. Below mentioned are certain salient features of Multi Organization functionality.

• Any number of Business Units in an Enterprise can be supported within a single installation of Oracle Application even if they have different Ledger, Legal Entity, HR data.
• User can access the data corresponding to and limited to the operating unit of the user.
• Transactions like Procurement, Receiving, Selling, Shipping Etc. with the same Party Can be Performed through Different Organization and can be managed internally through intercompany postings.
• Reporting can be managed at different organization levels like, Business Group, Ledger, Operating unit etc.

The Multi Organization structure should not only be compliant from legal perspective but should also be effective from operational management and accounting perspective. Multi organization Architecture provides support for multiple organizations in a single Installation of Oracle E-Business Suite on the basis of the relationships defined between multiple organizations entities in an Enterprise. It provides a hierarchy that specifies how different organization entities interact, and how transactions flow between them. Various types of organizations supported in the Multi organization Architecture are mentioned below.

Business Group:

Business group is the highest level in the Organization Structure and is used for managing human resource information. It can be setup to represent a consolidated Enterprise, A major Division or an Operating Company. There is no impact of Business group on Accounting. It is required to have At least one business group defined for an oracle applications Installation. Multiple Legal Entities, Ledger, operating Units Can relate to a Single Business group.

Ledger:

Ledger is a financial reporting entity, which represents an accounting representation for an organization that is accountable in a self contained way. Ledger is the highest level which impacts accounting. Ledger uses below mentioned components to secure and Manage the transaction information such as Journal entries and Balances) by ledger

• Chart of accounts
• Functional currency
• Accounting calendar
• Subledger accounting method.

Ledger represents the core of a Company’s financial records where every transaction flows through.  It provides balanced ledger accounting for the accounting entity and serves as a repository of financial information. Multiple Legal entities can be assigned to a Ledger. A Ledger can be associated with multiple Legal Entities and operating Units.

Legal Entity:

Legal Entity represents a legal company for which Fiscal and Tax reports are prepared. A Legal Entity can Model to an Enterprise, a Designated Legal unit which is recognized by legal authorities in a country. Legal entity is a business entity that is known to exist to the outside world. Internal organizations or divisions are not legal entities themselves, but are just part of it. In the Multi Organization structure various legal entities could share the same ledger. Both legal entities and operating units are associated with the ledger and the relationship between the legal entity and operating unit is derived based on the ledger.

Operating Unit:

An operating Unit represents a business unit in an Enterprise which has a business need to secure transaction data, Setups and Seed data. It can be a major division, sales office, a department, or a separate company within an enterprise. Since the transaction Information is secured at operating unit level for the various modules within Oracle applications, A single application responsibility can access, process, and report on data for one or more operating units that is assigned to its Security profile. An Operating unit can be associated to a Single Legal Entity and Ledger. But multiple operating units can be Associated to a Single Legal entity and Ledger.

Balancing Entity:

Balancing Entity is a business entity in a operating unit for which the Balance sheets are prepared. There can be Multiple Balancing entities within an Operating unit and each of them must balance within themselves. It could be a company or a division in an Enterprise. A Balancing entity is represented by Balancing Segment value in the Accounting Flexfield Structure (Chart of Accounts Structure). If there is intercompany transaction within an operating unit, appropriate intercompany entries will be automatically created in the Ledger so that the balancing Entities are in Balance.

Inventory Organization:

An Inventory organization represents a business entity of an enterprise for which the inventory transactions and inventory balances are tracked. It could be modeled to a Manufacturing plant, warehouse, Distribution center, Sales Office Etc. All the Oracle Application Products which include inventory transactions and inventory balances secure information at Inventory Organization Level. An inventory Organization points to only one Operating Unit but can be referenced by any Operating unit within the same Ledger.

What is Multi Organization Architecture in R12

What Is Multi organization Architecture:

       Multi Organization is a feature of oracle applications which Provides Implementation, Maintenance and operations of Multiple Business Units in an Enterprise within a single installation of Oracle Applications, taking Appropriate care of Data security and data separation. Below mentioned are certain salient features of Multi Organization functionality.

• Any number of Business Units in an Enterprise can be supported within a single installation of Oracle Application even if they have different Ledger, Legal Entity, HR data.
• User can access the data corresponding to and limited to the operating unit of the user.
• Transactions like Procurement, Receiving, Selling, Shipping Etc. with the same Party Can be Performed through Different Organization and can be managed internally through intercompany postings.
• Reporting can be managed at different organization levels like, Business Group, Ledger, Operating unit etc.

The Multi Organization structure should not only be compliant from legal perspective but should also be effective from operational management and accounting perspective. Multi organization Architecture provides support for multiple organizations in a single Installation of Oracle E-Business Suite on the basis of the relationships defined between multiple organizations entities in an Enterprise. It provides a hierarchy that specifies how different organization entities interact, and how transactions flow between them. Various types of organizations supported in the Multi organization Architecture are mentioned below.

Calendar Setup in Oracle R12

Calendar

Define your calendar to fit your business. You can define a calendar for any fiscal year, The periods can be of different lengths, but they all must be of the same period type for one Ledger so that Oracle General Ledger can use them appropriately.

Calendar Setup in oracle application involves below Steps

• Defining the Period Type
• Define the Calendar Periods
• Validate the Calendar

Defining the Period Type

Before defining a calendar it is required to define Period types. Use the Period Types form to define your accounting period types. Oracle General Ledger provides you with standard period types Month, Quarter and Year. Period types are used to define organization’s calendar which can be used for Defining GL, Payables, Purchasing, Inventory ect. Application related calendars.

There are two options for Year type.

Fiscal: To specify how Oracle General Ledger determines the system name for your accounting periods

Calendar: Oracle General Ledger uses the year in which an accounting period begins to determine its system name

Navigation: Setup à Financials à Calendars à Types

Defining the Calendar Periods

Accounting Calendar form can be used to define your calendar. Oracle General Ledger lets you add periods to your calendar at any time. When a New accounting periods is defined it is required to use the same period type that you originally assigned to the Ledger.  The Calendar structure defined is used for Defining GL, Payables, Purchasing, Inventory etc. Module related calendars where in Periods can be Opened or closed at individual application Level. While Defining the Calendar makes Sure all periods in the Fiscal year have same value for year.

Adjusting Period:

Check the Adjusting Period box to indicate you want your accounting period to be an adjusting period. An Adjusting accounting period can overlap with other accounting periods. Journals cannot be imported in an adjusting accounting period.

Navigation: Setup à Financials à Calendars à Accounting

Validate the Calendar

Validating the calendar is the most important step in setting up Calendar. Once the calendar set up is complete, review it to make sure it is correct before assigning it to a Ledger. Calendar periods cannot be changed once they have been used. The Period cannnot be modified once the Period status is open or closed. The first Encumbrance Year is opened automatically when the first period is opened Even if encumbrance is used or not.

The Calendar Validation Report is used for validating the calendar. This will be run automatically when the changes are made to existing calendar or a new calendar is created. This Program can also be submitted at will from Standard Report Submission window. However, please note that this report does not fix anything. It just produces a report that shows the problems with calendar definition. The Problems if any must be corrected from Accounting Calendar form.

About ERP

ERP, which is an abbreviation for Enterprise Resource Planning, is principally an integration of various business management functions and practices with modern information technology. In an ERP System Technology integrates with the Operational/Management functions and processes of a Business to streamline and accomplish specific business objectives.

Basically ERP is a software architecture that supports the management of information scattered over various functional and geographically units of an Enterprise and provides the business management executives with a comprehensive overview of the complete business execution details, which in turn influences their decisions in a productive way. The Business processes May differ for different organizations but the ultimate Business Concepts remain the same which is the base of all the ERP technologies.

My Emphasis here is on sharing the knowledge that I have gained during my journey with the ERP Systems, Primarily Oracle Applications E Business Suite.  This blog is my own repository of Notes that I have prepared as part of my ongoing research and Experience with Oracle Applications E Business Suite.

Contact Me:

I would appreciate your valuable comments and Suggestions. Your feedback is very important for my personal improvement and quality of content on this blog.

You may anytime contact me at Kinjal.saxena@gmail.com

DISCLAIMER:

The opinions expressed on this blog/Site are solely my own personal views based upon my Research, experience and observations and do not reflect the position of Oracle, My Current or Previous employers or Their Clients or any other Corporation