1. Oracle R12 A/P Accruals OAUG Cost Mgmt SIG Meeting March 15, 2011
Douglas Volz
Douglas Volz Consulting

2. Introduction
Learn about the Oracle inventory and expense accrual processes for Release 12
Find out about the available improvements
Discuss the underlying business processes
Discuss current problems you may have
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3. Agenda Welcome to Our Session! Cost Management SIG Business
Release 12 A/P Accruals
Why are these accrual processes so important?
Periodic vs. perpetual accruals
Basic accounting entries for the A/P accruals
Setup steps for the accrual processes
Using the Accrual Reconciliation Reports
Using the expense accrual processes
Summary of Release 12 Enhancements
Conclusions
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4. OAUG Cost Management SIG Business
Collaborate11 – April 10th to 14th
OAUG Cost Mgmt SIG Meeting April 11, 2011, 9:15am to 10:15am Room W311H
Oracle OpenWorld Call for Papers – March 9th to March 27th
OpenWorld 2011 October 2-6, 2011
Call for papers url:
Open vacancy for OAUG Cost SIG Membership Chairperson
Questions, concerns, ideas for the OAUG Cost Mgmt SIG:
Doug Volz
Jerry Devore
Sharon Widmer
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5. Release 12 A/P Accruals
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6. Why Are These Accrual Processes so Important?
Valuable integration control
Monitors accuracy of receiving and payables processes
Provides a vital barometer over these activities
Helps to ensure accurate inventory counts
Ultimately affects your profits
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7. What Are These Accrual Accounts?
Principle of accrual accounting
Timing difference between receiving and invoicing
Represents the accrued liability from your vendors or suppliers
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8. Periodic Versus Perpetual Accruals
Periodic accruals occurs at month-end
With computers came perpetual accruals
Perpetual accruals ensure that valued quantities equals accounting entries
Don’t accrue expenses upon receipt (unless you are a governmental agency or heavily into Project Control)
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9. Why Not Use Perpetual Accruals for Expenses?
Receiving inspection then includes both assets and expenses
Have to reclass balances
Doubles the accrual entries that you need to reconcile
Significantly more entries to review, research, and correct
Increased processing for the Accrual Reconciliation programs
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10. Background Information for A/P Accruals
PO HEADERS
(PO_HEADERS_ALL)
May have multiple lines per PO
May have multiple scheduled receipts and PO releases per line
May have multiple PO distributions per line or scheduled receipt
Four stored accounts per PO distribution
PO LINES (PO_LINES_ALL)
PO SHIPMENTS (PO_LINE_LOCATIONS_ALL)
PO RELEASES (PO_RELEASES_ALL)
PO DISTRIBUTIONS
(PO_DISTRIBUTIONS_ALL)
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11. More Background Information
Expense Destination
Inventory / WIP Destination
Cost Center or Expense Account
Default Subinv. or Org Mat’l Acct
Expense A/P Accrual Account
Inventory A/P Accrual Account
Inventory IPV Account
Expense Budget Account
Default Subinv/Org Encumbrance Account
Type of Account
Charge Account
Accrual Account
Variance (IPV) Account
Budget Account
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12. Accrual Accounting Entries – Perpetual Accruals
Releases 10 to
Purchase order receipt
A/P Invoice match
PO Return to vendor
A/P Invoice correction
PO Receipt delivery
Expense A/P accrual
Release
Transfer to Regular (consignment)
Internal Orders / Logical Transactions
Retroactive Price Adjustments
Release 12
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13. Accounting Entries for a PO Receipt
Receive one $100 PO unit price
Account Debit Credit
Receiving Account
A/P Accrual Account 100
Receiving Value Account Inventory A/P Accrual Account
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14. Accounting Entries for an A/P Invoice Match
Same item, $80 invoice unit price, $100 PO unit price
Account Debit Credit
A/P Accrual Account 100
A/P Trade Payables 80
Invoice Price Variance 20
A/P Accrual Account A/P Trade Payables
Invoice Price Variance 20
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15. Accounting Entries for a PO Return to Vendor
Same item, $100 PO unit price
Account Debit Credit
A/P Accrual Account 100
Receiving Account 100
A/P Accrual Account Receiving Account
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16. Accounting Entries for an A/P Invoice Correction
Same item, $80 invoice unit price
Account Debit Credit
New Charge Account 80
Old Charge Account 80
New Charge Account Old Charge Account
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17. Accounting Entries for PO Receipt Deliveries
Account Debit Credit
Delivery to stock inventory (PO Receipt)
Material (Subinv/Org) Account XXX
Receiving Account XXX
Delivery to WIP inventory (Outside Processing Receipt)
Job OSP Account XXX
Receiving Account XXX
If using standard costing you may have PPV entries as well
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18. Purchase Order Accounting Accrual Summary by T Account
Transaction
Receipt
Delivery to Stock
Invoice Match
Receiving Value Inventory A/P Accrual
100
Material Value Invoice Price Variance 20
Trade Payables 80
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19. Accounting Entries for Inventory Consignment
Account Debit Credit
Delivery to stock inventory (PO Receipt for ”Transfer to Regular”)
Material (Subinv/Org) Account XXX
AP Accrual Account XXX
Transfer to WIP inventory (Backflush from Subinventory above)
WIP Material Account XXX
Material (Subinv/Org) Account XXX
Available feature since Release
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20. Accounting Entries for Internal Orders
Receipt into Inventory (Internal Order Intransit Ship)
Account Debit Credit
Subinv. or Org Accounts XXX
AP Accrual Account XXX
Intercompany Invoice Match (Payables)
I/C A/P Accrual Account XXX
Trade Payables Account XXX
Reported on Miscellaneous Accrual Report
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21. Month-End Period Accruals
For expenses only
Account Debit Credit
Charge Account XXX
Expense A/P Accrual Account XXX
Release 11i, run the Receipt Accruals Period End program
Creates entries directly into the G/L Interface lines
Then run Journal Import
Release 12, run the Receipt Accruals Period End program
Creates Receiving Accounting Distributions
Then run Create Accounting Program to create SLA entries and
Run Transfer Journal Entries to G/L program, or (optionally) transfer to G/L at same time as Create Accounting is run
Next accounting Period, reverse the Accrual:
R11i: In the G/L find the G/L Batch Header and click on Reverse Batch
R12: The reversal entry is automatically done for you
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22. Where You Setup the Accrual Processes
Setup in Oracle Purchasing
Setup in Oracle Inventory
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23. Setup in Oracle Purchasing
Use the Define Purchasing Options Form
Set the Expense Accrual Account
Set the Accrual Options for Expenses
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24. Setup in Oracle Purchasing
Use the Define Receiving Options for each Org:
Receiving Account
Retroactive Price Adjustment
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25. When Defining Purchase Orders
Much safer, harder to find the Accrue on Receipt Flag
You have to set up the Accrue on Receipt field on your folder form before you can see the Accrue on Receipt settings
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26. Setup in Oracle Inventory
Organization Parameters ─ Inventory AP Accrual Account
Set your PPV and IPV Accounts
Set your Inventory A/P Accrual Account
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27. Setup in Oracle Inventory (cont’d)
Intercompany Accrual Accounts
Separate inventory and expense accrual accounts for intercompany A/P accruals
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28. New R12 Setup For A/P Accruals
List of A/P Accrual Accounts to Reconcile
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29. Caution Use separate accounts for each type of system account:
Expense A/P Accrual Account
Inventory A/P Accrual Account
Receiving Account
Expense Purchase Order Charge Accounts
Other inventory, WIP and price variance accounts
Teach Payables staff to not use the A/P Accrual Account
This account should be always assigned automatically
Or set up G/L security rules to prevent use
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30. R12 Accrual Reconciliation and Write-Off Major Enhancement
11i issues
Poor Performance
Full data load causing years of accrual distributions being loaded and reloaded again
Inflexibility and Confusion
Forms and Reports are data dumps. Difficult to identify the transaction to write off
Data can not be exported in excel format.
Possibility for Errors
Manual write-off to GL can lead to errors and mistakes
No Summary Reporting
R12 Enhancements
Enhanced Performance
Incremental data load using from and to date to load data with outstanding accrual balances only
Support writing off balances
Increased Usability
Headers and lines separation
Summarization display
AP PO data only
Miscellaneous data only
Data exportable to excel
Will help user for investigation
Mass write-off
Automatic Accounting Creation
No more manual adjustment to GL
Write-off will post to SLA as any other distributions
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Slides courtesy of Oracle Cost Development

31. R12 Accrual Reconciliation and Write-Off Major Enhancement Recap
Performance enhancement:
Incremental load
Accrual data only with outstanding balance
Usability enhancement:
Information categorized using specific windows and reports
AP and PO Accrual data
Miscellaneous AP and Inventory
Writing off accrual balance at PO distribution
Ability to export Accrual data reported in excel format
Mass write-off
Remove possible financial mistakes:
Automatic accrual write-offs posting to the GL
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Slides courtesy of Oracle Cost Development

32. New R12 Table Structure Permanent table structures
CST_ACCRUAL_ACCOUNTS (holds valid accrual accounts)
CST_AP_PO_RECONCILIATION (matched AP/PO entries w/outstanding balances)
CST_MISC_RECONCILIATION (unmatched AP and INV entries)
CST_RECONCILIATION_BUILD (accrual load submissions)
CST_RECONCILIATION_SUMMARY (summary of CST_AP_PO_RECONCILIATION)
CST_WRITE_OFFS (write-off transaction header table)
CST_WRITE_OFF_DETAILS (write-off transaction details table)
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33. R12 Accrual Reconciliation and Write-Off Functional Flow
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Slides courtesy of Oracle Cost Development

34. Slides courtesy of Oracle Cost Development
R12 Accrual Reconciliation and Write-Off Functional Flow: Define your Accrual Account
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Slides courtesy of Oracle Cost Development

35. Slides courtesy of Oracle Cost Development
R12 Accrual Reconciliation and Write-Off Functional Flow: Run Accrual Load Program
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Slides courtesy of Oracle Cost Development

36. Slides courtesy of Oracle Cost Development
R12 Accrual Reconciliation and Write-Off Functional Flow: Accrual Load Program
Accrual data load run as a standalone concurrent program
Incremental load: Load is run for a specific date range. Transactional data picked up only from the data range specified
Accrual data is summarized and accrual balances are calculated at the PO distribution level
PO, A/P and Write Off balances as well as last activity date
Zero balance accrual data are deleted from the table, this should eliminate 80%+ of the data
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Slides courtesy of Oracle Cost Development

37. Slides courtesy of Oracle Cost Development
R12 Accrual Reconciliation and Write-Off Functional Flow: Run Summary Accrual Reconciliation Report
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Slides courtesy of Oracle Cost Development

38. Slides courtesy of Oracle Cost Development
R12 Accrual Reconciliation and Write-Off Functional Flow: Summary Accrual Reconciliation
Step3 Report: Summary Accrual Reconciliation
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Slides courtesy of Oracle Cost Development

39. Slides courtesy of Oracle Cost Development
R12 Accrual Reconciliation and Write-Off Functional Flow: Run AP and PO Accrual Reconciliation Report
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Slides courtesy of Oracle Cost Development

40. R12 Accrual Reconciliation and Write-Off Functional Flow: AP and PO Accrual Example - Reconciliation Report…
We decide to write this balance off for these un-billed receipts
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Slides courtesy of Oracle Cost Development

41. Slides courtesy of Oracle Cost Development
R12 Accrual Reconciliation and Write-Off Functional Flow: AP and PO Accrual Example - Write-Off Window…
We begin by looking for the PO balance we want to write off…
Submit the Write Off and the balance disappears online
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Slides courtesy of Oracle Cost Development

42. Slides courtesy of Oracle Cost Development
R12 Accrual Reconciliation and Write-Off Functional Flow: AP and PO Accrual Example - AP PO Write Off…
If you resubmit the AP PO Accrual Reconciliation report…
….The PO#5418 disappeared
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Slides courtesy of Oracle Cost Development

43. Slides courtesy of Oracle Cost Development
R12 Accrual Reconciliation and Write-Off Functional Flow: AP and PO Accrual Example - View Write Off for AP PO…
If you query the write off View Window, you will find your write off transactions…
All Write off transactions for the PO Distribution balance will be displayed
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Slides courtesy of Oracle Cost Development

44. Slides courtesy of Oracle Cost Development
R12 Accrual Reconciliation and Write-Off Functional Flow: AP and PO Accrual Example - Write Off Reversal …
You can reverse the write off transaction if you think error has been made…
A write-off reversal transaction has been created to offset the previous write off
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Slides courtesy of Oracle Cost Development

45. Slides courtesy of Oracle Cost Development
R12 Accrual Reconciliation and Write-Off Functional Flow: AP and PO Accrual Example - Write Off Reversal…
From AP PO Write Off Window, the PO balance re-appears…
The PO balance is again available for write off
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Slides courtesy of Oracle Cost Development

46. Slides courtesy of Oracle Cost Development
R12 Accrual Reconciliation and Write-Off Functional Flow: AP and PO Accrual Example - Write Off Reversal…
AP PO Accrual Reconciliation Report shows the PO balance again…
The PO balance shows up again
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Slides courtesy of Oracle Cost Development

47. Slides courtesy of Oracle Cost Development
R12 Accrual Reconciliation and Write-Off Accrual Reconciliation Process: Accrual Data life Cycle
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Slides courtesy of Oracle Cost Development

48. Slides courtesy of Oracle Cost Development
R12 Accrual Reconciliation and Write-Off Accrual Reconciliation: Major Benefits
Write Off Activity is tracked by a Write Off transaction
Enhance the control of the write off activity
Enhance audit ability
Only accrual data with outstanding balance will be kept in the accrual reconciliation tables
Decrease the volume of data
Enhance the performance
Enhance the usability
Slide 48
Slides courtesy of Oracle Cost Development

49. Slides courtesy of Oracle Cost Development
R12 Accrual Reconciliation and Write-Off Functional Flow: Run Miscellaneous Accrual Reconciliation Report
Slide 49
Slides courtesy of Oracle Cost Development

50. Slides courtesy of Oracle Cost Development
R12 Accrual Reconciliation and Write-Off Miscellaneous Accrual Reconciliation Report
Slide 50
Slides courtesy of Oracle Cost Development

51. Slides courtesy of Oracle Cost Development
R12 Accrual Reconciliation and Write-Off Miscellaneous Accrual Reconciliation: Miscellaneous Write-Off Window
Slide 51
Slides courtesy of Oracle Cost Development

52. Slides courtesy of Oracle Cost Development
R12 Accrual Reconciliation and Write-Off Miscellaneous Accrual Reconciliation: Miscellaneous Write-Off Window
Slide 52
Slides courtesy of Oracle Cost Development

53. Slides courtesy of Oracle Cost Development
R12 Accrual Reconciliation and Write-Off Write Off transaction Accounting: Leverage Sub Ledger Accounting
To post the accounting to the GL, we can execute the “Create Accounting – Cost Management” process with the process category “Receiving”…
Upon completion of the process the accounting report will show the status of the accounting
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Slides courtesy of Oracle Cost Development

54. Slides courtesy of Oracle Cost Development
R12 Accrual Reconciliation and Write-Off Write Off transaction Accounting: Leverage Sub Ledger Accounting – Continue…
Once posted the SLA accounting entries are viewable online in the view write off Window…
Slide 54
Slides courtesy of Oracle Cost Development

55. Summary Comparison for R11i and R12
R11i: Inventory A/P Accruals
Accrual Reconciliation Report – detail report
Write-Off Accrual Screen/Form
Accrual Write-Off Reports
R12: Inventory A/P Accruals
Accrual Reconciliation Detail and Summary Reports
Separate write-off forms for AP/PO vs. Inventory transactions
When you write off entries you create Write-Off journal entries
New Reports
AP and PO Accrual Reconciliation Report
Summary Accrual Reconciliation Report
Miscellaneous Accrual Reconciliation Report
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56. How to Balance the Accrual Reconciliation Report
Only picks up transactions available to the general ledger
Create Accounting – Final mode has been run
Use Subledger Accounting or G/L reports to reconcile
Subledger Accounting – Journal Entries Report
Account Analysis Reports
General Ledger summary and journal line reports
Or use original accounting distribution reports
Receiving Account Distribution Report
Payables Account Analysis Report
Material Distribution Summary Report
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57. What to Check If the Perpetual Accruals do Not Balance
Check for any conversion issues
Check for manual G/L journal entries
Make sure create accounting has been run
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58. Process Problems for Receiving
Why receipts do not equal invoices
Wrong receipt quantities (quantity and/or UOM is incorrect)
Receiving goods to the wrong PO line or PO
Trying to receive or return goods using miscellaneous inventory transactions
Routine over receipts with correct invoice quantities
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59. Process Problems for Payables
Why invoices do not equal receipts
Incorrect invoice quantities (UOM is wrong, etc.)
Payables not processing debit memos correctly
Expenses, invoice price or exchange rate variances miscoded
Payables matching the invoice to the wrong PO, PO line or PO Release
Not matching invoices to POs at all
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60. Process Problems for Purchasing
Why invoices may not be processed correctly
Purchase orders prematurely closed or “final closed”
Purged purchase orders
Incorrect purchase order unit prices
Late or no purchase orders created for the receipt
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61. Expense A/P Accruals Expense A/P Accruals – for both R11i and R12
Uninvoiced Receipts Report
Supporting backup for your month-end expense accruals
Run this report BEFORE running the Receipts Accrual – Period End program
Receipts Accrual – Period End program
This program creates your month-end expense accruals
Payables has to be closed BEFORE you run this month-end Purchasing program
R11i only creates entries into the G/L Interface
R12 creates Receiving accounting distributions
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62. How to Run the Expense Accrual Programs and Reports
Run the Uninvoiced Receipts Report by specifying
Accrued Receipts:
No (before running the month-end process),
Yes (after running the month-end process),
Include On-line accruals: No
The desired Period Name
And the desired sort selection (purchasing Category or Vendor)
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63. How to Run the Expense Accrual Programs and Reports
Run the Receipt Accruals – Period-End program after A/P is closed
Enter the Minimum Accrual Amount
Leave Supplier and Item Category information blank
Select the accounting period
Purchasing Period must be OPEN, G/L Period must be OPEN and A/P Period must be CLOSED.
When Purchasing is closed the expense receipts are un-marked
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64. How to Balance the Receipt Accrual - Period End Process
Use careful cut-off controls for receipt and invoice transactions
Close purchase orders and lines after you have reconciled the Expense A/P Accrual Account
Uninvoiced Receipts Report should agree to your Receipt Accruals - Period-End journals
R11i: Goes directly into your General Ledger Interface table
R12: Goes directly into your Receiving Accounting Distributions
Make sure you match your expense A/P invoices to your expense PO receipts
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65. How to Balance the Receipt Accrual - Period End Process
Caution, for earlier R12.0x and 12.1 Releases:
For both online and period-end accruals, both accounting entries use the journal category of Receiving
See Metalink Note:
How To Change The Seeded Default Journal Category from "Receiving" to Accrual"? [ID ]
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66. Implementation Issues (Mistakes You Don’t Want to Make)
Sharing system accounts
Badly defined receiving and payables processes
Little or no system testing for your accrual processes
After “go live”, late review for the first Accrual Reconciliation Report
If your company has badly defined and/or badly executed PO Receipt and A/P Invoice Match processes you will have a mess!
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67. Release 12 A/P Accrual Issues
XML or BI Publisher Reports can become quite huge (especially if your Procurement and Payment processes are broken)
Inventory A/P accrual entries are reported on the Miscellaneous Accrual Reconciliation Report, even for Inter-Company Internal Orders or Logical Shipments/Logical Receipts (depending on FOB)
Accrual Reconciliation Load Run will fail if run more than one Accrual Reconciliation Load at a time
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68. Release 12 Summary - Major Rewrite for A/P Accruals
Each month’s accrual entries are loaded incrementally
No more cumulative loading each month for the Accrual Temp table (no longer temporary)
PO and A/P entries which balance to zero are matched and removed
Much better performance and less tablespace too
Separately define what are valid A/P Accrual Accounts
Easier to exclude invalid PO and A/P entries
Matching is done at the PO distribution level (effectively at the PO Release level when using PO Releases)
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69. Release 12 Summary - Major Rewrite for A/P Accruals
Summary and Detail Accrual Reconciliation Reports
Summary reporting by account
Detail reporting with separate headings from report detail
Uses XML/BI Publisher – download reports into Excel
Separate reports for matching vs. non-matching miscellaneous entries (A/P, Inventory entries)
Ability to do mass A/P Accrual Write-Offs
Write-offs use SLA (sub-ledger architecture) and now create journal entries
Can do write-offs at the PO distribution level
With better write-off reporting
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70. Conclusions
These accrual processes are very important in ensuring your margins are accurate
Proper implementation and data conversion is essential
Requires accurate receiving and A/P matching processes
Release 12 has major enhancements to consider
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71. Where to get more information
Douglas Volz Consulting
Collaborate08: How to Setup and Use Your A/P Accruals (R11i)
Oracle Corporation
Metalink:
FAQ For On Line Accruals & Accrual Reconciliation Reports [ID: ]
Impact of R12 Design in PO Accounting, [ID: ]
R12 How To Diagnose And Reconcile Inventory AP Accrual Transactions Using Reconciliation Reports [ID ]
Master Note For Oracle EBS Procurement Suite - Encumbrance And Accrual Accounting [ID ]
Oracle Purchasing User Guide
Oracle Cost EBS Public Forum:
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72. Acknowledgements
You, the OAUG Cost Mgmt SIG, thanks for attending this session
Oracle Cost Development
Partners in crime at my clients over the years

73. Douglas Volz (doug@volzconsulting.com)
Professional Background
Doug Volz is a Senior Architect and Advisor for Oracle Application projects, with a particular interest in Cost and Project Management. He has 30 years accumulated experience, including 5 years in Oracle Development (co-designing Oracle Cost Management) and 12 years in industry in Cost and Accounting Management positions. His Manufacturing and Cost systems experience covers project management, software design/development, delivery and consulting services, for both Oracle Corporation, and multiple international consulting firms. Prior to his systems career, Mr. Volz also held numerous management accounting positions for telecommunications, defense, and electronics companies.
In his consulting roles Doug has served over 100 clients. Many of these were multi-org, multi-currency with global footprints. Countries include US, Mexico, UK, Netherlands, Belgium, Taiwan, P.R.O.C., Norway, Japan, Italy, Switzerland and Germany.
Doug leads the OAUG Cost Management Special Interest Group. He also advises and participates on the Oracle Customer Advisory Board for Fusion Costing.
Core Expertise
Experience
Multi-organization, Multi-currency ERP Implementations
Project Management and Senior Project Advisor
Core manufacturing processes
Cost Management
Inventory
Bills of Material
WIP
Systems Integration and Data Conversions
Sample of clients served:
Beckman Coulter (US)
Matsushita (UK, Mexico)
Logitech (US, Taiwan, P.R.C.)
Celgene Corporation (US, Switzerland)
NTL (UK, now Virgin Media)
TCI International (US)
Onninen AS (Norway)
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74. Thank You for Your Attendance and Participation74