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Inter-company Setups checklist (Notes on logic of Intercompany Invoicing and Pricing)

Setups Check list for the Inter Company transactions



1. Make Sure there are no security rules defined when shipping the item from other Operating unit and Auto Accounting rules are defined(for Selling OU) to default the balancing segment values with Table Name as Standard Lines(Which will get the values from Standard line item or Inventory Item used)
Path for Security Rules:
Responsibility: General Ledger Responsibility
Navigation: Setup → Financials → Flexfields → Validation → Security → Define
Path for Auto Accounting:
Responsibility: Receivables Responsibility
Navigation:  Setup → Transactions → Auto Accounting

2. Make Sure Shipping parameters are defined for both Shipping and Selling operating units.
  
Responsibility: Order Management Responsibility
Navigation: Shipping → Setup → Shipping Parameters

3. Make Sure that the COGS account is assigned to the Transaction Type used for SO in Selling Organization.
Note : you also give COGS account on the Intercompany transaction flows
Responsibility: Order Management Responsibility
Navigation: Setup-> Transaction Type 

4. Make sure that a value is assigned for System parameter 'Inventory Item For Freight' 
Create an Expense item of freight and assign to shipping org and then assign the item to the system parameter.

Responsibility: Order Management Responsibility
Navigation: Setup → System Parameters → Values

5.  Define Intercompany Transaction flow and Intercompany Relations

Responsibility: Inventory Manager

Navigation: Setup → Organizations → Intercompany Transaction Flows

Note:
“Advanced Accounting’ option is not available for internal requisitions – internal sales order business flow. Though you can set the ‘Advanced Accounting’ flag at Intercompany Transaction Flow header to ‘Yes’, system ignores the flag and does not generate any logical transactions. This means you cannot have an intermediate financial node in the intercompany transaction flow. Also,you cannot have intercompany invoicing for internal sales order with direct transfer (in shipping network between the inventory organizations) as an option. You have an flexibility to switch off intercompany invoicing for internal sales orders by setting the profile ‘INV: Intercompany Invoice for Internal Orders’ to No.

Note that in Intercompany Transaction Flow, physical goods never flow through intermediate operating unit. Oracl e creates ‘Logical Material Transactions’ between the operating units, based on which intercompany invoices between multiple operating units are raised.
No logical transactions will be created when you do not choose ‘Advanced Accounting’




6.Make sure Destination organisations is set as customer in the Sourcing Organisation.
Enter the inventory org name of the destination org in the ship-to (internal location field).

Responsibility : Order Management 
Navigation : Customer-> Site-->Details-->Business purpose-->Ship-to--->Details--> Internal location and internal organisations


If the Profile option use"INV: Use Advance pricing for Inter company" is set to No, Enter the pricelist that would be used for transfer price.

Navigation : Customer--> Site--> Details--Business Purpose-->Bill to--Details-->Pricelist.

Note: Advanced Pricing Profile ‘INV: Advanced Pricing for Inter company Invoice’ decides the usage of advanced pricing , Set the profile to ‘Yes’ in the  Sourcing 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.


7.Shipping networks is defined between inventory orgs of Sourcing and destination organisations.

Responsibility: Inventory Manager
Navigation: Setup → Organizations → Shipping Network

Note:

Intercompany invoicing is possible for inter-org transfers of type ‘In-transit’ only through ‘Internal sales Orders’. No intercompany invoicing is possible if you perform org transfers between two inventory orgs belonging two different operating units without ‘internal sales Orders’. Also note that intercompany invoice cannot be raised for inter-org transfers of type ‘Direct Transfer’ through Internal sales Orders.

Also check if the Price list is entered in the transfer price section.


8) Make sure if  "internal order type" and "Internal requistion order source" is entered in the purchasing option of the the sourcing org.

Responsibility : Purchasing super user 
Navigation : Setup:-> Organizations->Purchasing option-->"Internal requisition" and "Internal Order type"

Inter company invoicing and pricing logic.


Now users can set up a profile to create inter company invoices for Internal Orders of type In-transit Shipments. The profile is called –
1. INV: Inter-company Invoice for Internal Orders. This profile can be set at site level and assumes a default value of No.
The form to define the inter-company relations is common for both trade ordersand internal orders and remains unchanged. It is this set up between the selling and shipping operating units that decides if an internal order or a trade order qualifies for creating inter-company invoices (Both AR and AP).
In the existing functionality, the invoice price for creating inter-company AR and AP invoices for Trade Orders is picked from the price list specified for the customer in the customer setup. So every time an item in a trade order isinvoiced for a given customer, same price and the price list is used. In other words, the price of an item is static. If user wants to use a different price, user would have to either change the price in the price list for that item or change the price list code in the customer set up. Item price could also come from an external API, if the external API was programmed to return a value for that item.This external API is a hook provided which users can program to use their own criteria to return an invoice price.
With this enhancement, Inter-company invoicing program would be able to use Advanced Pricing Engine to derive invoice price for an item. Advanced pricingsetup would allow users to define different rules based on which a price list should be used to get invoice price for an item. Users can use this feature by setting a profile otherwise the system would use the static price as explained in the previous paragraph. The new profile is called-
2. INV: Advanced Pricing for Inter-company Invoice. This can be set atsite level. When this profile is set to “Yes”, user can use Advance
Pricing (QP) engine for Inter-company Invoicing.
Note: User is expected to purchase a separate license for Advance Pricing.Setting this profile without a license will not provide the functionality.
New Request Type, Global Structure, Context and new set of Qualifier and Pricing Attributes have been seeded to define advanced pricing rules for intercompany invoicing process.

INTEGRATION OF ADVANCE PRICING & INTERCOMPANY INVOICING

If profiles 1 and 2 are set to “Yes” and QP is installed then user will be able to use QP for Intercompany invoicing of Internal Orders. Flow chart given below gives in details the logic that is used to get item price
during the process of intercompany invoicing. Intercompany invoicing for Sales Order and Internal Order will look for an external API (customer / user programmable hook) to return a price for the items that have been included in the Sales Order or Internal Order. If the API doesn’t return a value and if both the profiles that are mentioned above are set to “Yes”, then the pricing logic will try to get the price from the price list using the QP
engine. If QP finds the price for that Item in one of the price lists then
intercompany invoicing will process that record and move to the next record. If
QP is unable to find a correct price for that item then intercompany invoicing
will log an error message for that record and move to the next record.
Intercompany invoicing for Sales Order & Internal Order will look for an
external API (customer / user programmable hook) to return a price for the items
that have been included in the Sales Order or Internal Order. If the API doesn’t
return a value and If QP profile (profile # 2) is set to “No” and profile # 1 is set
to “Yes”, then the pricing logic will try to get the price from the price list then
that has been specified for that customer (in the customer setup). If there is no

price defined then an error message will be logged and pricing logic will go to
the next record and start processing it.



If users want to use Advanced Pricing feature for Intercompany Pricing, then
before defining pricelists, user has to set the following 2 profiles at the user level
with the following values:
QP: Pricing Transaction Entity – Intercompany Transaction
QP: Source System Code - IC
This will allow the user to see and use the Intercompany context, in addition to
the Order Fulfillment context to define attribute-mapping rules.
Two new mappings/relationships between request type and source system codes
have been seeded. One is between request type IC and source system INV, and
the second is between request type IC and source system QP. The request type
IC and Source system INV are new set of seed data. The above two mappings
allow the users to have price lists that are common to both inter-company
invoicing and sales order invoicing. For trade orders, price lists are created with
source system code of ‘QP’, and the mapping between OM (Oracle order
management system) and QP (Advanced pricing) is used to pick pricelists for
trade order invoices. Similarly, inter-company users may decide to create
separate price lists for intercompany invoicing, that is with source system code
of INV. This can be achieved by setting the profile ‘QP: Source system code’ to
INV. In order to use only these prices lists for inter-company invoicing, the
mapping between IC and QP should be disabled, otherwise if pricing engine
finds a better fit for the price list defined under QP, it will return use that
pricelist.
A new global structure has been defined that can be used to define mapping
rules for qualifier attributes and pricing attributes for price lists. This global
structure is based on all the information that is captured and available in a sales
order or an internal sales order record. All seeded defaulting rules are defined by
using this global structure. Users can use the data in this global structure to
define more mapping rules.

For More details get the metalink white paper named"Intercompany Invoicing and
Advance Pricing Integration"







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