INTERNAL ORDERS

WITH INTERCOMPANY INVOICING

A White Paper prepared by IT Convergence




Author
Hernan Hamburg


Copyright
IT Convergence 2012





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TABLE OF CONTENTS

Introduction ............................................................................................................................................................................... 3
Why Should I use Internal Orders with Intercompany Invoicing?.............................................................................................. 3
Internal Orders with Intercompany Invoice Flow....................................................................................................................... 4
Internal Orders with Intercompany Invoice Key Setups ....................................................................................................... 12
Internal Orders with Intercompany Invoice Identifying Prices and Costs.............................................................................. 13
Intercompany Function............................................................................................................................................................ 14






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Introduction
Internal Orders with Intercompany Invoicing is not a new function, in fact, its been around for quite some time in different
Oracle versions. However Oracle has made major improvements to Intercompany functionality in Release 12, and this
new globalized scenario will help companies lower costs and improve operating efficiencies.
This paper discusses the fundamentals behind Oracle R12 Intercompany Invoicing and highlights this transaction flow.
Why Should I use Internal Orders with Intercompany Invoicing?
Intercompany Invoicing is a necessary evil that companies must manage when they reach a certain size. On the one
hand it is a fundamental process that insures that internal resources get allocated properly and transparently. However,
properly documenting Intercompany transactions can seem like added unnecessary bureaucracy and red tape to what
is, after all, and internal process. Fortunately, Oracle R12s enhancements help you keep this process manageable.

Internal Orders with Intercompany Invoicing provides an option to companies with multiple operating units that transfers
material from one Inventory organization that belong to one operating unit to another Inventory organization that belong
to another operating unit. Here is a quick look at some of the specific features of Oracle R12 Intercompany Invoicing:
Automatization Internal Orders with Intercompany Invoicing reduce manual operations involved in a typical
transfer. This flow automatically creates Sales Orders and generates the Intercompany Invoices in Account
Receivables and Account Payables. In addition, if you use Advanced Supply Chain Planning you can even
create the Internal Requisition automatically. This means that the only human interaction points are actual
picking and shipping of the goods and the receiving them inside the Inventory organization.
Accuracy Fewer mistakes will be made since Oracle handles most of the flows operations.
Flexibility You can add / disable different Operating units to use this flow at any given time. You can also run
this flow in parallel with other options, like creating a Purchase orders in the requesting operating unit and
manual Sales order within the sourcing Operating unit.
Oracle has recently added functionality in R12 such as shipping documents that further enhance the Intercompany
Invoicing flow. R For example this enhancement in Oracle Shipping that allows you to easily modify documents in XML
gives you the flexibility to gather all the information you need. In addition the performance for the concurrent Create
Intercompany AR invoices and Create Intercompany AP Invoices has been improved.





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Internal Orders with Intercompany Invoice Flow


Flow Steps:
1) Internal Requisition
Navigation: (PO) Requisitions Requisitions






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Type: Internal Requisition
Destination Type: Inventory
Organization and Location: This is the inventory org requesting the goods
Source and Organization: This is the inventory org providing the goods.
This is done on the requesting Operating Unit.

2) Create Internal Orders
Navigation: (PO) Reports -> Run



This is done in the requesting Operating Unit.





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3) Order Import
Navigation: (OM) Orders, Returns Import Orders Order Import Request



Order Source: Internal
Operating Unit: Optionally enter the Operating Unit. This is normally done if you have global operations and
want to create internal orders in specific time zones.











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4) Pick Release
Navigation: (OM) Shipping Release Sales Orders Release Sales Order



This form allows many combinations to execute the pick release. For this case specific the picking rule has an automatic
shipment rule. As a result both Pick and Ship confirm happens in one step.






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5) Create Intercompany AR Invoices
Navigation: (INV) Reports Intercompany Invoicing



Concurrent Name: Create Intercompany AR Invoices
Parameters:
Shipping/Procuring Operating Unit: Select the Operating unit that has shipped the goods






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6) Autoinvoice
Navigation: (AR) Interfaces Autoinvoice


Program Name: Autoinvoice Master Program
Parameters:
Invoice Source: Intercompany
Default Date: System Date





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7) Create Intercompany AP Invoices
Navigation: (INV) Reports Intercompany Invoicing


Concurrent Name: Create Intercompany AR Invoices
Parameters:
Shipping/Procuring Operating Unit: Select the Operating unit that has received the goods





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8) AP Invoice
Navigation: (AP) Other Requests Run



Concurrent Name: Payables Open Interface Import
Parameters:
Source: Intercompany





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Internal Orders with Intercompany Invoice Key Setups
Pre-Requisites:
Operating Units
Inventory Organizations
Account Payables
Account Receivables
Purchasing
Inventory
Order Management
Advanced Pricing
Shipping
SLA
Locations
Profile Options:
INV: Intercompany Invoices for Internal Orders. Set value to Yes
QP: Multi Currency Installed
CST: Transfer Pricing Option
INV: Advanced Pricing for Intercompany Invoicing
INV: Intercompany Currency Conversion
Define AR Transaction type (or use an existing one)
Define OM Order Type (it is recommend to use the Line Flow Generic, Ship only workflow
Assign OM Order Type a sequence
Add the OM Order Type on the Purchasing Options
Select Source Internal On the Purchasing Options





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Verify the Purchasing document Type Requisition Internal is fully setup
Setup Shipping Networks
Verify Items are assign to the Inventory Organization involved in this process. Make sure these organizations
share the same Inventory Master Organization.
Setup Price List if need it
Define an Internal Customer on both Operating units involved on this process
Define Supplier on the requesting Operating Unit
Setup Intercompany Relationships
Internal Orders with Intercompany Invoice Identifying Prices and Costs
Every organization needs to understand where its prices and cost are coming from. Oracle R12 Internal Orders with
Intercompany Invoicing provides four elements that help and organization define its prices and identify its costs:
Internal Requisition
Internal Sales Order
Shipping
Intercompany Invoice
Internal Requisition
Oracle populates the Internal Requisition Price field based on the Item cost as determined by the sourcing
Organization. If the Currency in the source organization is different than the currency of the Requesting operating unit,
an exchange rate will be applied based on the setup of the profile options.
Internal Sales Order
The Price flag for Internal Sales Order is No. In other words, you will see the field called Calculate Price Flag as Freeze
Price.
The Selling price for the internal sales order lines will be coming from the internal requisition. In other words, it will be the
item cost of the source organization.
Shipping
The Shipping part of the flow will create an internal Inter Org Transfer (based on the Shipping networks setup).





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The cost used here will depend on the profile option CST: Transfer Pricing
If the value selected is No, Oracle will use the item cost
If the value selected is other option, Oracle will use a price list using the Transfer pricing functionality.
Intercompany Invoice
The AR Invoice will get the Price from a Price List. This can be either defaulted from the Internal Customer Bill to Site or
based on the use of Qualifiers depending on the setup of the profile option INV: Advanced Pricing for Intercompany
Invoicing
Intercompany Function
Implementing Internal Orders with Intercompany Invoicing comes with its unique set of challenges, just as any Oracle
workflow does. Hopefully this paper has given you some guidelines which will help you get started on the right foot. In
the event that you should need further assistance, please feel free to contact us at 1-800-675-0032 and we will be happy
to assist you.





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Bibliography
Oracle Inventory User Guide, Release 12.1, Part No. E13450-04, August 2010
Oracle Order Management Implementation Manual, Release 12.1, Part No. E13406-04, August 2010
Oracle Order Management Users Guide, Release 12.1, Part No. E13408-04
Oracle Shipping Execution Users Guide, Release 12.1, Part No. E13431-04
Oracle Purchasing User Guide, Release 12.1, Part No. E13410-05









ABOUT THE AUTHOR:
Hernan Hamburg has been an Oracle Functional Consultant since 1998 and has implemented and supported Oracle Applications worldwide. He is
presently Senior Principal Consultant at IT Convergence.

LEGAL DISCLAIMER:
The information contained herein should be deemed reliable but not guaranteed. The author has made every attempt to provide current and
accurate information. If you have any comments or suggestions, please contact us: info@itconvergence.com.


Worldwide Inquiries: IT Convergence: IT Convergence White Paper:
Internal Orders with Intercompany
Invoicing
April, 2012
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IT Convergence.
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