How to Defer Invoicing-Revenue Recognition Based on Customer Acceptance

7/31/2019 How to Defer Invoicing-Revenue Recognition Based on Customer Acceptance

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Copyright DARC Corporation, 2010

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How to Defer Invoicing / RevenueRecognition Based on CustomerAcceptance (OM & AR)


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Michelle Taylor

DARC Corporation


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DARC Lines of Business

Consulting Services Program Management, Functional, Technical,

Architecture

Production Support 24x7 Functional & Database


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Organizational Change Management Communications, Documentation, Training

Accelerators for Interfaces and Conversions

Mergers & Acquisitions

Global Consolidation


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Speakers Qualifications

Implementing Oracle Applications for over 14 years

Certified Expert Consultant, Oracle E-Business Suite R12 Supply Chain:

Order Management Certified Implementation Specialist, Oracle E-Business Suite R12 Supply

Chain: Order Management

Certified Implementation Specialist, Oracle E-Business Suite R12 Supply


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Chain: Inventory Oracle Supply Chain Management R12.1 PreSales Specialist

Oracle Supply Chain Management R12.1 Sales Specialist

Oracle Financial Management R12.1 Sales Specialist

Certified Professional Consultant, Oracle E-Business Suite R11i SupplyChain: Order Management


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Agenda

Introduction

Description, Benefits & Definitions

Setup Steps

Process Flow & Processes Review

Acceptance Helpful Hints


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Revenue Recognition Overview Considerations

Summary


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Description & Benefits - Customer Acceptance Based

Deferrals for Invoicing & Revenue Recognition

Businesses have the requirement to DEFER RevenueRecognition until receipt of a sales order shipment has been

formally acknowledged / accepted by a customer

Benefits

Reduce


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Administrative Costs Revenue Accounting Maintenance / Mgt Revenue Recognition inconsistencies (audit)

Improve

Compliance to corporate governance regulations /

requirements


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Description & Benefits - Customer Acceptance Based


Customers have the requirement to DEFER Invoicing until they haveformally acknowledged / accepted the receipt of goods and / or

services from a sales order shipmentEliminates the need to manage / monitor the time lags between ship

date, transit time values & invoice date


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Reduce

Administrative Costs AP Maintenance / Mgt (customer side)

Administrative Costs AR Maintenance / Mgt (vendor side)

Improve Overall customer service


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Definition - Acceptance Types

Explicit Acceptance Can be record Manually or Programmatically

Using the Order Information Portal (OIP) the sales order lines can bemarked as Accepted by an External or Internal (CSR) Customer(separate setups required) to record acceptance explicitly

Order Import / Process Orders API


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o ca on ccep ance one n evenue g > evenueAccounting form

Implicit Acceptance

Can ONLY be recorded Programmatically

Revenue Contingency / Deferral Reason has to be defined with an Event

Attribute Date that has a value for Expire Days Implicit Acceptance Request Set concurrent programs used to record

implicit acceptance


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Definition - Acceptance Deferral Types

Pre-billing Acceptance

Always tied to Invoicing Removal Event Defers Invoicing AND Revenue Recognition

Can be Implicit or Explicit

Sales Order Line Workflow rocess is held at Invoice Interface


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Eligible Pending Customer Acceptance Sales order line workflow status is reflected as Pending pre-

billing acceptance post ship confirm


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Definition - Acceptance Deferral Types

Post-billing Acceptance

Always tied to Customer Acceptance Removal Event Defers ONLY Revenue Recognition

Can be Implicit or Explicit

Sales Order Line Workflow process is held at Close Line Eligible


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Sales order line workflow status is reflected as Pending post-billing acceptance post ship confirm

Invoice generated but Revenue Deferred and held in theUnearned Revenue Account until Acceptance is completed


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R12 Setup Steps


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R12 Setup Steps Order Management

Enable Customer Acceptance

Customer acceptance can be enabled at OU level through OMsystem parameter: Enable Fulfillment Acceptance Y / N

Once enabled the AR API is called to invoke the rules engine tovalidate customer acceptance on every sales order line


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na e unc on secur y w n respons es menus

Sales Orders: Fulfillment Acceptance

Sales Orders: Update Acceptance Attributes

Enable Folder Fields for Customer Acceptance SO / QSO

Order Organizers SOL Results tabSales Order Forms Lines Regions - Others tab


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R12 Setup Steps Order Management

User Access to Order Information Portal (required to performManual Explicit Acceptance)

External User Actual Customer UserInternal User CSR

Otherwise Insufficient Privileges Error Message will bedisplayed after clicking the Fulfillment Acceptance (B)


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R12 Setup Steps Order Management Customer

Acceptance Data Fields via Folder Tools


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R12 Setup Steps Order Management Customer

Acceptance Data Fields via Folder Tools


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R12 Setup Steps Accounts Receivable /

Revenue Mgt Create Revenue Contingencies

Define Revenue Contingency / Deferral Reason

Create Revenue Contingency / Deferral Reason (AcceptanceName) via Receivables Revenue Management set ups

Create Assignment Rule(s) to link the Revenue Contingency /Deferral Reason (Acceptance Name) to based on customer, site,


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item, etc


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R12 Setup Steps Accounts Receivable /

Revenue Mgt Create Revenue Contingencies



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R12 Setup Steps Accounts Receivable / Revenue

Mgt Revenue Contingency Assignment Rules



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R12 Setup Steps Accounts Receivable / Revenue

Mgt Revenue Contingency Assignment Rules


Revenue Contingency / Deferral Reason (Acceptance Name) and their relatedEvent Attributes can be defaulted during order creation when the AR API thatis called from OM (NOT Traditional Order Management Defaulting Rules) If Enable Fulfillment has not been activated the AR API will NOT be

called to invoke the related AR Revenue Contingency defaults EVEN IF

Assignment Rules (can be assigned to customer, site, item, etc) have beensetup


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Process Flow & Processes



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Customer Acceptance Process Flow

Enable FulfillmentAcceptance in OM

Set deferral reason(s)in AR Revenue Mgt

SETUP

AcceptanceRequired?

Pick Release & ShipConfirm Material

PROCESS

Enter & BookSales Order

Pre or PostBilling?

Pre-billing

Acceptance attributescan be defaulted or bespecified for SO line

Process Acceptance

Type ofAcceptance

Explicit

Implicit Record Acceptance(OIP/ Order Import)

Yes

No


Auto-Invoicecreatesinvoice

Post-billing

xp rat on

Period past?

ProcessAcceptance

(Conc Progs)

No

Revenue Recognition

Automated process

Pre-billing Flow

Post-billing Flow

Legend

Normal Flow(without Acceptance)

Yes


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R12 Process - Order to Cash

w/ Customer Acceptance

Enter & Book orders that are subject to Customer Acceptance -viewing / updating (if appl.) order line Acceptance Attributes

Pick Release and Ship Confirm goods view workflow line statustransition

Pending pre-billing acceptance

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Perform Acceptance / RejectionImplicit (Programmatic only) or Explicit (Manual via OIP or Order

Import / Process Order API)

View Acceptance Details in SO line and / or in OIP> Order Status (T)

View Invoice and Revenue Recognition acceptance related detailsfrom AR / Revenue Mgt


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Pre-Billing Acceptancewith Explicit Process Description

Pre-Billing Acceptance (Invoicing Removal Event)

Sales Order Line in Pending pre-billing acceptance workflow statuspost ship confirm

Invoicing AND Revenue Recognition deferred

Record Acceptance via Order Information Portal (OIP)> Order


Status (T) or Order Import/ Process Orders API[EXPLICIT]

Line status transitions to Closed and line gets interfaced to AR

The Acceptance Date is the Invoice Date in AR

Could have different values for Ship Date and Invoice Date as

a resultInvoice generation and Revenue Recognition happen consecutively


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Pre-Billing Acceptance

with Implicit Process Description

Pre-Billing Acceptance (Invoicing Removal Event)

Sales Order Line in Pending pre-billing acceptance workflow statuspost ship confirm

Invoicing AND Revenue Recognition deferred

Record Acceptance via Implicit Acceptance Request Set - Based


on ven r u e xp re ays a a

Line status transitions to Closed and line gets interfaced to AR

The Acceptance Date is the Invoice Date in AR

Could have different values for Ship Date and Invoice Date asa result

Invoice generation and Revenue Recognition happen consecutively


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Sales Order Line BEFORE Ship Confirm

and Pre-billing Implicit Acceptance



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Sales Order Line AFTER Ship Confirm

but BEFORE Pre-billing Implicit Acceptance



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Sales Order Line AFTER Ship Confirm

but BEFORE Pre-billing Implicit Acceptance



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Pre-Billing Acceptance Sales Order Line

Workflow Status Diagram



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Post-Billing Acceptance

with Implicit Process Description

Post-Billing Accept. (Customer Acceptance Removal Event)

Sales Order Line in Pending post-billing acceptance workflow status post

ship confirm

Invoice is generated in AR Revenue is held in Unearned Revenueaccount ONLY Revenue Recognition deferred

Record Acce tance via Im licit Acce tance Re uest Set - Based on


Event Attribute Expire Days data[IMPLICIT] Line status transitions to Closed

Upon Acceptance completion the Revenue Recognition reverses theoriginally Unearned Revenue account assignment and debits the appropriateRevenue account

The Acceptance Date is the GL Date used for when the Revenue isRecognized


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Post-Billing Acceptance

with Explicit Process Description

Post-Billing Accept. (Customer Acceptance Removal Event)

Sales Order Line in Pending post-billing acceptance workflow status post ship

confirm

Invoice is generated in AR and Revenue is held in Unearned Revenueaccount ONLY Revenue Recognition deferred

Record Acce tance via Order Information Portal OIP > Order Status T


or Order Import/ Process Orders API[EXPLICIT] Line status transitions to Closed

Upon Acceptance completion the Revenue Recognition reverses the originallyUnearned Revenue account assignment and debits the appropriate Revenueaccount

The Acceptance Date is the GL Date used for when the Revenue isRecognized


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Sales Order Line

Before Post-billing Explicit Acceptance



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Sales Order Line

Before Post-billing Explicit Acceptance



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Post-Billing Acceptance Sales Order Line

Workflow Status Diagram



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How to Manually Complete



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Actions (B) LOV (Header / Lines)


Actions LOV> FulfillmentAcceptance (Select for ManualExplicit Acceptance)


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OR Fulfillment Acceptance (B)



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Manual Explicit Acceptance via Order

Information Portal (OIP)> Order Status (T)



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OIP> Order Status (T)> Process

Manual Explicit Acceptance



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Confirmation of Manual Explicit

Acceptance in OIP > Order Status (T)



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OIP> Order Status (T) Reflecting Manual

Explicit Acceptance Detail Updates


S l O d Li O h (T) Af C l i


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Sales Order Line Others (T) After Completing

OIP Post-Billing Manual Explicit Acceptance



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How to Complete Implicit


Implicit Acceptance Request Set /


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Implicit Acceptance Request Set /Concurrent Programs


S l O d Li I li it A t


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Sales Order Line Implicit Acceptance

Completed Indicator



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Request Set contains two concurrent programs

Generate Pre-billing Acceptance Program for Pre-billing, Implicit

AcceptanceRevenue Contingency Analyzer for Post-billing, Implicit

Acceptance

Helpful Hints - Implicit Acceptance


Stamp value for the related Event AttributeEvent Attribute is Ship Confirm Date and Expire Day is 1

Ship Confirm Date value is 17-FEB-2010 16:00:00

The Implicit Acceptance Request Set will NOT process the

related sales order line record(s) for Acceptance until 18-FEB-2010 16:00:00 or later

Helpful Hints Acceptance Management


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Customer Acceptance Report



H l f l Hi A M


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Customer Acceptance Report Sample Output




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Revenue Recognition


Post-Billing Revenue Recognition BEFORE


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Acceptance AR Revenue Accounting




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Post-Billing Revenue Recognition BEFOREAcceptance AR Revenue Accounting


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Explicit Acceptance Completed via


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e e o a o o a

Post-Billing Revenue Recognition


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Post Billing Revenue RecognitionAFTER Acceptance AR Revenue Accounting


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Post Billing Revenue RecognitionAFTER Acceptance AR Revenue Accounting


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Post Billing Revenue RecognitionAFTER Acceptance AR Invoice Distributions


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Pre-Billing AFTER


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gAcceptance AR BPA Invoice View


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Considerations


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Considerations - Customer Acceptance Based


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pDeferrals for Invoicing & Revenue Recognition

Requirement to complete Invoicing and / or Revenue RecognitionAFTER the sales order shipment is physically received/ formally

acknowledged / accepted

Receivables / Revenue Management


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evenue on ngenc es e erra easons ccep ance ames canno

be assigned to transaction lines that have deferred account rules Revenue Contingencies / Deferral Reasons (Acceptance Names) and their

related Event Attributes are setup in AR Revenue Mgt but enforced inOrder Management

Continued on next slide



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pDeferrals for Invoicing & Revenue Recognition

Continued

Revenue Contingency / Deferral Reason (Acceptance Name) and

their related Event Attributes can be defaulted during order creationwhen the AR API that is called from OM (NOT Traditional OrderManagement Defaulting Rules)


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Parameter: Enable Fulfillment Y / N and the setup of RevenueContingency Assignment Rules

If Enable Fulfillment has not been activated the AR API will NOTbe called to invoke the related AR Revenue Contingency defaults

EVEN IF Assignment Rules (can be assigned to customer, site,

item, etc) have been setup



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p


Order Management Once the system applies the Revenue Contingency, it will remain applied to the

Order Line till the user manually removes it from the Sales Order form Support for multiple Inventory item types Standard, Service, ATO / PTO Model and

PTO Kits

For Service, ATO / PTO Model and PTO Kits Acceptance contingency is


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,parent

Fulfillment Acceptance functions need to be added to menus

Only supports Full Acceptance / Rejection for outbound order lines

Ship Confirm Date is the only event attribute supported for the current release

Fields of Earliest and Latest Acceptable dates are still only applicable to sales order

line scheduling calculations Does not apply to returns, internal orders or retro bill orders


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Summary


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Customer Acceptance Based Deferrals for


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Contingency Definition / Deferral Reason (Acceptance Name) andtheir related Event Attributes are setup in AR / Revenue Mgt and can

be defaulted during order creation as a result of the AR API that iscalled from OM (dependent on additional setups)

Folder functionality enables user access to Acceptance data details

Invoicing & Revenue Recognition - Summary


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Pre-billing deferral is tied to Invoicing and defers BOTH Invoicing andRevenue Recognition

Post-billing deferral is tied to Customer Acceptance and defers ONLYRevenue Recognition

Explicit and Implicit Acceptances are supported with standardfunctionality (additional setups required)


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Questions?


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Documents

How to Defer Invoicing-Revenue Recognition Based on Customer Acceptance