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
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.

In the procurement 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
Inter Company Shipping Flow

INTERCOMPANY SHIPPING FLOW

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 shipping OU ships goods to the

customers directly.

The Shipping OU records an Intercompany AR Invoice against the

Selling OU at the transfer price.

The Selling OU records Intercompany AP invoice for the payment.

These two invoices are recorded by the system using the intercompany
transaction flow
Inter Company Shipping Flow

Sample Org Structure used in the examples

Set of Books

Legal Entity

Operating Unit

Inventory Org 1.2.3….

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
Inter Company Shipping Flow
Transfer Price
External API

API
MTL_INTERCOMPANY_INVOI
CES.GET_TRANSFER_PRICE

If the external API returns value
greater > 0 for the transfer
Price, then the value returned
by the API is used for the
transfer price

If the return value is 0 or null,
then the system will ignore this
value and look for other
conditions to get the transfer
price

You can use this API to easily
plug in variable transfer price
like cost + x% or based on
customer selling price etc. This
is a very powerful API and can
be used easily without much
customization.
CREATE OR REPLACE package body MTL_INTERCOMPANY_INVOICES as
/* $Header: INVICIVB.pls 120.2 2006/03/29 05:41:10 sbitra noship $ */
function get_transfer_price (I_transaction_id in number,
I_price_list_id in number,
I_sell_ou_id in number,
I_ship_ou_id in number,
O_currency_code out NOCOPY varchar2,
x_return_status OUT NOCOPY VARCHAR2,
x_msg_count OUT NOCOPY NUMBER,
x_msg_data OUT NOCOPY VARCHAR2,
I_order_line_id IN NUMBER default null) return number is
l_transfer_price number := 0;
begin
O_currency_code := null;
x_return_status := FND_API.G_RET_STS_SUCCESS;
x_msg_count := 0;
x_msg_data := null;
if (I_ship_ou_id = 81 and I_sell_ou_id = 147) then
begin
select nvl(unit_selling_price,0) * 4
into l_transfer_price
from oe_order_lines_all
where line_id = I_order_line_id;
exception
when others then
null;
end;
end if;
if l_transfer_price <> 0 then
O_currency_code := 'USD';
return(l_transfer_price);
else
return (NULL);
end if;
exception
when others then raise;
end get_transfer_price;
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, 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
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.

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, we can create
IC flow only between 2 OUs.

An inventory Organization should
be defined and associated with all
the OUs in the nodes even if there
is no physical flow of inventory. This
is to create logical inventory
transactions
Inter Company Transaction Flow -- Setup

In the Intercompany relations,

specify the IC AR invoice customer,
invoice type, IC COGS A/C and
Currency Code. Similarly specify
the IC AP supplier, supplier site,
Inventory Accrual AC and Expense
Accrual Account

The currency for the IC invoices

can be of the

To operating unit,

or from OU

or order currency
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
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, run the program ‘Create

Intercompany AR Invoices’. This will create records in the
auto invoice interface tables
5 On successful completion of the above program, run the
‘Auto Invoice Master Program’ from the receivables
responsibility. This will create IC AR Invoice
6 From Payables responsibility of the Selling OU,
run the ‘Create Intercompany AP Invoices’

7 Then run the program ‘Payables Open Interface

Import’ from Payables responsibility. This will
create IC AP Invoices in the selling OU.
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, run the program ‘Create

Intercompany AR Invoices’. This will create records in the auto
invoice interface tables

5 On successful completion of the above program, run the ‘Auto

Invoice Master Program’ from the receivables responsibility.
This will create IC AR Invoice

6 From Payables responsibility of the intermediate OU,

run the ‘Create Intercompany AP Invoices’.

7 Then run the program ‘Payables Open Interface Import’

from Payables responsibility. This will create IC AP
Invoices in the intermediate OU.

8 From the receivables responsibility, run the program

‘Create Intercompany AR Invoices’. This will create
records in the auto invoice interface tables

9 On successful completion of the above program, run

the ‘Auto Invoice Master Program’ from the receivables
responsibility. This will create IC AR Invoice

10 From Payables responsibility of the Selling

OU, run the ‘Create Intercompany AP
Invoices’.

11 Then run the program ‘Payables Open

Interface Import’ from Payables responsibility.
This will create IC AP Invoices in the
selling OU.
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

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.

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
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.
Inter Company Procurement Flow Setups

You can define

Multiple nodes

For each OU pair in a

node, you can define
the AR invoice details
and AP invoice details

The Currency code

can be of from OU, or
to OU or can be of
currency of PO
Questions and answers

Questions and Answers

Contact Information

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