Freight Settlement & Financials High Level

Overview

(Manish Kumar)
Before reading this document, please walk through following document, just to
get a basic understanding of the basic terms involved in OTM Financials.

OTM_financial_overv
iew.doc

Now, let us move into some more details of OTM Financials and Freight Settlement. First
of all let us discuss this term Freight Settlement.

Freight: - This term is used in many contexts, but in our scenario, where we are
talking about OTM, Freight is a transportation term meaning goods being
transported.

Settlement: - in the financial domain, this term is frequently used; which may be
defined as the process in which a buyer makes payment and receives the
agreed-upon good or service, which often occurs several days after a trade is
made. More precisely, Settlement (Financials) may be defined as the process of
the transfer of the security (for the seller) or cash (for the buyer) in order to
complete a security transaction.

So if these definitions are put together we may technically define the term Freight
Settlement as reconciliation of invoices for payments, billing and allocation

It is important to mention here that OTM Financials is the final stage of shipment
execution in OTM (refer to below screenshot)
Further, it is very important to note that OTM is not a master data application, its a
downstream application. An Order is the fundamental element in OTM or in any
TMS, which are sent to OTM ,usually from external ERP systems (SAP,APROMS
etc) Let us review life cycle of an Order in OTM and move further:-
We will go into the detail of everything involved in OTM Financials but overview of above
three circled block is already given in the document embedded in very starting.

Now, lets navigate to OTM Financials Screen and just take an overview, what all are the
options available in OTM for financials and then will get back to theory again:-

As, we can see from below screen shot, the main options available in OTM Financials
are:-
Payment invoice management.
Payment rule management.
Billing management.
Allocation rule management.
Exchange rates management.
General ledger codes.
Taxes etc.
Will discuss each option later on; now let us get back to theory again. Now, let us review
the following screenshot:-
 Freight Settlement Options: - As shown in the above screenshot, there are two
lines black and red, which are representing the two options for freight
settlement:-

Scenerio-1-when carrier sends invoice to OTM: - Match and Pay option

(manual option) represented by Red lines.

Scenerio-2-when OTM generates invoice based on shipment- Auto pay

option (auto option as its name suggests) represented by black lines. Lets
discuss these one by one.

Scenerio-1-Match and pay option :- Review red lines in previous screenshot,

Before discussing this option, lets review following diagram:-

As, we can see that, this manual option of freight settlement is composed of four steps:-

After the shipment is completed, 3PL or SP or carrier sends invoice to account

payable system in the form of EDI 210 transactions.(Please get the basic
understanding of terms like invoice, EDI,EDI 210 from the document which is
embedded at the beginning).
Accounts payable System transmits that invoice to OTM.
Matching takes place means OTM matches the invoice rates with its own master
data entered and check for any mismatch and if carrier charges and Invoice
charges are matching or if unmatching is there but in tolerance limits, then OTM
goes ahead and generates and transmits vouchers for these charges to account
payable systems.
Account payable system pays to carrier against the invoice.
If we summarize this whole scenario ,refer to below diagram:-
 Scenerio-2-Auto pay Option: - Please review black lines in the screenshot on
previous page.

In this option, OTM generates invoice based on shipment.

THERE IS NO NEED OF MATCHING AND APPROVAL IN THIS OPTION

OTM generates voucher based on invoice.

We only need to decide, which carrier would be allowed for auto pay in service
provider manager.
Let us see how to enable a carrier for auto pay option:-

Navigate to Contract and Rate Management > Service Provider Manager and
hit search, all the SP would be displayed, click on any Service provider ID,
Following screen would appear.
 As, we can see in circled area, there is an Auto pay checkbox, check this box if
you want to enable this SP for auto pay option.
If we summarize this scenario, please review following screenshot :-

Now, let us navigate to OTM screen again and study various modules and sub modules
in OTM Financials. As defined earlier, following are the sub modules in OTM Financials

Payment invoice management.

Payment rule management.
Billing management.
Allocation rule management.
Exchange rates management.
General ledger codes.
Taxes etc.

Let us take an overview of these sub modules:-

Payment invoice management: - The invoice manager enables us to manage

the buy-side financials process, from entering and editing payment invoices to
matching invoices to buy shipments, approving invoices for payment, and
allocating and issuing vouchers.

This page is accessed via Financials > Payment Invoice Management > Payment
Invoice. Navigate to this page and hit search button, so many pre created invoice will be
displayed, just open any one and play around:-
Following is the OTM screen for payment invoice manager, as we can see there are
various tabs in this sub module which are Header, Reference Numbers, Involved parties,
contacts, matched shipments etc.

It is important to note that BM reference Qualifier should be there on all invoices and it
should be matched with the service provider alias (defined in Header tab)-refer to below
screenshot:-

Because when matching takes place Service Provider alias is checked against BM
qualifier by OTM. This is just a high level overview, we will go in details of all these
modules in later sessions.
 Payment rule management: -Match rule The Payment rule management
includes the following sets of rules and rule profiles that help us automate the
buy-side financials process. Rules are parameters for performing an action. Rule
profiles are ordered sets of rules.

Match Rules and Match Rule Profiles specify the service provider and reference
number qualifiers to be used when automatically matching invoices to shipments.

Auto Approve Rules and Auto Approve Rule Profiles specify the allowable ranges
(of amounts due and weights) between invoices and their matched shipments
when automatically approving invoices for payment.

Allocation Rules and Allocation Rule Profiles specify the metrics (for example,
weight, volume, piece count, etc.) used to allocate both the planned and
vouchered transportation costs of invoices and bills.

Match Validation Rules and Match Validation Rule Profiles are used after a
shipment is matched to an invoice. The match is then validated by comparing
reference numbers on the orders and shipments to reference numbers on the
invoice.

Line Approval Tolerance Rules and Line Approval Tolerance Rule Profiles
establishes tolerance thresholds for individual shipment cost/invoice lines.

Note: Invoices created via integration cannot be deleted if the invoice's voucher
has already been issued.

This page is accessed via Financials > Payment Rule Management > Match Rule.
Referring to above screenshot, Few points to remember:-

Refer to above screenshot, Match rule type is always Invoice

Match rule outcome means invoice is to be matched against what? Obviously
shipments. So in this field it is either always shipment or a ship unit, or a ship unit
line.

In Match rule criteria, there are two fields, source location rule and destination
location rule. This is for matching purpose means whether or not the system
should check the source location and/or the destination information when looking
for a match. For example, if Source Location is selected, the first stop on the buy
shipment must match the first stop on the invoice. We just took an overview of
this screen; we will go in depth in upcoming sessions.

Invoice Approve Rule: - Invoice approves rules specify the limits, ranges, and
other criteria used to automatically approve invoices for payment. For both cost
and weight approval, invoice approve rules compare payment invoices to their
matched buy shipments.

This page is accessed via Financials > Payment Rule Management > Invoice
Approve Rule.

Following is the OTM screen for invoice approval rule:-

Now, focus on circled area, in this section we define the default approval rules.
When the approval process runs, Oracle Transportation Management compares
the parent/standard invoice charge with the sum of the matched shipments costs.
The Cost and/or Weight Approval Rules are validated in this step.
Once the Invoice Approval Tolerance Rule has passed, the auto approval
process then validates each invoice line approval tolerance rule by comparing
child invoice line item charges with the matched shipment cost line at the cost
 type level. Out-of-Tolerance details of each failed invoice line items are captured
during this process/step.
If any line items fail at that point, the process validates the Overall Cost Deviation
Rule by adding all the individual line item deviation amounts.

Few points to remember about approval rule:-

At least one default invoice approve rule should be created to govern all non-
detailed approvals. If a default invoice approve rule is not created, automatic
invoice approval may not operate correctly.
In order for a user to be able to issue approvals, the user must have an invoice
approve rule profile defined.

These above circled fields, specify the default amount above and below the total
actual cost of a shipment that the amount due of an invoice can be. A blank field
indicates 0 percent (an exact match)

If both percentages and amounts are specified, the more restrictive tolerance will
be used

In later sessions, we will go in depth of OTM Financials modules.