Setting Up Purchasing

 
The following setup steps are basic setups. One person or a large team of people working concurrently may perform setups. In an implementation, common application setups are generally performed first, followed by shared setups for each product family (procure to pay, order to cash) and finally application specific setups. To implement Purchasing module below are the required setups to follow. 
Define Financial Options:

Financial Options are user to determine controls and accounts to process the invoices, associate inventory organizations and hierarchies for approval for each operating unit.

Also use to define the options and defaults that you use for your Oracle Financial Application(s). Values you enter in this window are shared by Oracle Payables, Oracle Purchasing, and Oracle Assets. You can define defaults this window to simplify supplier entry, requisition entry, purchase order entry, invoice entry, and automatic payments.

Navigation: MCR PO > SetUp > Organizations > Financial Options > New

Accounting Tab:All the below given accounts will assign to supplier, but we can change these accounts at supplier site.

Future Periods: Payables displays the number of future periods you use in your set of books. Payables uses this value to limit the number of future periods you can maintain in the Control Payables Periods window. You can enter invoices in future periods.

GL Accounts

Liability: Payables assigns this account as the default Liability Account for all new suppliers you enter. You can override this value during supplier entry. If you use Accrual Basis accounting, then the Liability Account for an invoice determines the liability account(s) charged when you create accounting entries for invoices.

Prepayment: The Prepayment account and description for a supplier site's invoices. The Financials option value defaults to new suppliers, and the supplier value defaults to new supplier sites.

Future Dated Payment: If you use future dated payments, then enter a value for Future Dated Payment account. This value defaults to all new suppliers and new bank accounts. The supplier value defaults to all new supplier sites. The bank account value defaults to new payment documents.
When Payables accounts for future dated payments, it uses the Future Dated Payment Account from either the supplier site or the payment document, depending on the option you select in the Payment Accounting region of the Payables Options window.

If you relieve liability payment time, this should be an asset account. If you relieve liability at future dated payment maturity, then this should be a liability account.

Discount Taken: If you choose to distribute your discounts to the system Discount Taken Account, Payables uses this account to record the discounts you take on payments. Use the Payables Options window to select your method for distributing discounts for your invoices.

PO Rate Variance Gain/Loss: Payables uses these accounts to record the exchange rate variance gains/losses for your inventory items. The variance is calculated between the invoice and either the purchase order or the receipt, depending on how you matched the invoice. These accounts are not used to record variances for your expense items. Any exchange rate variance for your expense items is recorded to the charge account of the purchase order. Payables calculates these amounts during Payables Invoice Validation.

Expenses Clearing: This account is required when you use the Company Pay payment option of Oracle Internet Expenses. Payables uses this as a temporary account to record credit card transaction activity. Payables debits this account when you create an invoice to pay a credit card issuer for credit card transactions. Payables credits this account with offsets to the original debit entries when you submit Expense Report Import for an employee expense report entered in Internet Expenses that has credit card transactions on it.

Miscellaneous: Used only when importing invoices submitted via iSupplier Portal or XML Gateway.

If you enter a value here then the system uses this account for all Miscellaneous charges on invoices your suppliers enter in iSupplier Portal. If you do not enter a value here then the system prorates Miscellaneous charges across Item lines on iSupplier Portal invoices.

The system also uses this value for any miscellaneous charges your suppliers send in XML invoices. If you do not enter a value here then import prorates miscellaneous charges across Item lines for XML invoices.

Supplier-Purchasing Tab:

 
The options you define in this region, except for Inventory Organization, are used as default values for the Purchasing region of the Suppliers window. The supplier values default to new supplier sites for the supplier, which default to new purchasing documents for the supplier site.

Note: If you use the Multiple Organizations Support feature, values you enter in this window will default to both the Supplier and Supplier Site.

You can override defaulted values during entry of the supplier, supplier site, and purchasing documents.

Ship-To /Bill-To Location: The name of the ship-to/bill-to location for the system default value. If the name you want does not appear in the list of values, use the Location window to enter a new location.

Inventory Organization: You need to choose an inventory organization if you use Purchasing. You can associate each of your Purchasing operating units with one inventory item master organization. When you associate your Purchasing operating unit with an inventory organization, items you define in this organization become available in Purchasing. You can only choose an inventory organization that uses the same set of books as your Purchasing operating unit. Do not change the Inventory Organization after you have already assigned one to Purchasing.

Ship Via: Freight carrier you use with suppliers. If the type of freight carrier you want does not appear in the list of values, use the Freight Carriers window to define a new shipping method. The value you enter here is the value in the Description field of the Freight Carriers window in Purchasing.

FOB: If the type of FOB you want is not in the list of values, use the Oracle Purchasing Lookups window to define a new FOB.

Freight Terms: The freight terms for a supplier identify whether you or your supplier pays for freight charges on goods you receive. You can define new freight terms in the Oracle Purchasing Lookups window.

Encumbrance Tab:

 
To use encumbrance accounting or budgetary control, you must install Payables, Purchasing, and General Ledger. Use this region to enable encumbrance accounting and to specify the default encumbrance types Payables assigns to your invoices, and Purchasing assigns to your requisitions and purchase orders.

If you enable encumbrance accounting or budgetary control, Purchasing creates encumbrances when you reserve funds for a requisition or purchase order. If you use the perpetual accrual method in Purchasing, Purchasing reverses purchase order encumbrances when you inspect, accept, and deliver the units. If you are using the periodic accrual method in Purchasing, Payables reverses the purchase order encumbrances when you create accounting entries for invoices.

Payables creates encumbrances when there is a variance between a matched invoice and the purchase order to which it is matched, and when the invoice encumbrance type is different from the Purchasing encumbrance type.

Oracle Financials provides two predefined encumbrance types that you can use to identify requisition, purchase order, and invoice encumbrances: Commitment and Obligation. You can define additional encumbrance types in Oracle General Ledger in the Encumbrance Types window. 
Use Requisition Encumbrance: Enable this option to encumber funds for requisitions. If you enable this option, Purchasing creates journal entries and transfers them to General Ledger to encumber funds for purchase requisitions.

Encumbrance Type: If you enable Use Requisition Encumbrance, you must select an encumbrance type by which you can identify your requisition encumbrance journal entries. Purchasing assigns this encumbrance type to the encumbrance journal entries it creates for purchase requisitions.

Reserve at Completion: If you enable Use Requisition Encumbrance, indicate whether you want requisition preparers to have the option to reserve funds. If you do not enable this option, only requisition approvers will have the option to reserve funds.

Use PO Encumbrance: Enable this option to encumber funds for purchase orders, purchase order and receipt matched invoices, and basic invoices (not matched). If you enable this option, Purchasing encumbers funds for purchase orders and Payables encumbers funds for variances during Payables Invoice Validation for purchase order and receipt matched invoices. If you enable this option and enter a non-purchase order matched invoice, Payables will encumber funds for it during Payables Invoice Validation. All Payables encumbrances are reversed when you create accounting entries. If you enable Use Requisition Encumbrance, you must also enable this option.

PO Encumbrance Type: If you enable Use Purchase Order Encumbrance, select a purchase order encumbrance type by which you can identify your purchase order encumbrance journal entries. Purchasing assigns this encumbrance type to the encumbrance journal entries it creates for purchase requisitions and purchase orders.

Invoice Encumbrance Type: If you use purchase order encumbrance, select an invoice encumbrance type by which you can identify your invoice encumbrance journal entries. Payables assign this encumbrance type to the encumbrance journal entries that it creates. We recommend that you use an encumbrance type different from the Purchasing encumbrance type so you can identify invoice encumbrances.

Tax Tab

 
Member State: The location of your company or organization. Payables use this country name to determine if your company or organization is located in a member state of the European Union (EU).

VAT Registration Number: The Value-Added Tax (VAT) registration number for your organization. Your organization is assigned a VAT Registration Number if you register to pay VAT. The first two characters of a VAT registration number are the country code for the country or state where the registered company or organization is located. Payables print this number on the header of the Intra-EU VAT Audit Trail Report.

Human Resource Tab:

 
Use this region to enter the options and defaults for entering employee information in the Enter Person window. 
Business Group: Enter the name of the business group that you want to associate with Purchasing. If you use Purchasing jointly with Oracle Human Resources, you must reference the business group that you define in Oracle Human Resources. If you use Purchasing without Human Resources, you can use the default value. The default for this field is the Human Resources default of Setup Business Group.

The business group determines which employees you can use in Purchasing. In Purchasing, you can see only the employees in this business group.

Expense Reimbursement Address: Select the default address you want to use on payments for employee expense reports: Home or Office. The system uses this default for each new employee you enter. You can override this default during employee entry or expense report entry.

Use Approval Hierarchies: Enable this option to use positions and position hierarchies to determine approval paths for your documents within Purchasing. Disable this option of you want approval paths based on the supervisor structure.

Employee Numbering Method: You can enter your employee numbers manually or let the system generate sequential employee numbers. The system prevents you from entering a value in this field if you install Oracle Human Resources or Oracle Payroll. You can change the numbering method at any time.

·         Automatic: The system automatically assigns a unique sequential number to each employee when you enter a new employee.

·         Manual: You enter the employee number when you enter an employee.

·         Use National Identifier Number: The system automatically enters the employee's National Identifier Number as the employee number. For example, a Social Security number for a United States employee.

Attention: Be careful if you switch from manual to automatic entry. The employee number must be unique. When you use manual entry, you can assign any number and in any order. If you switch to automatic after having entered employee numbers manually, the system may try to assign a number that you already assigned. If you switch from manual to automatic entry, make sure the next available number for automatic entry is larger than the largest number you have already recorded.

Next Automatic Number: If you select the Automatic Employee Numbering method, enter the starting value you want the system to use for generating unique sequential employee numbers. After you enter a number and save your changes, the system displays the number that it will assign to the next new employee you enter. 
Define Purchase Options:

Purchase options are used to determine the document numbering, controls and accounts to process different types purchase documents. You can often override purchasing options when you are creating documents.
Navigation: MCR PO > SetUp > Organizations > Purchase Options 
Defining Document Control Options:

1. Navigate to the Control tabbed region in the Purchasing Options window.

2. Enter the Price Tolerance Percentage. This is the percentage by which the auto created purchase order line price cannot exceed the requisition line price. If you select Enforce Price Tolerance Percentage, you can create, but not approve, purchase orders for which this tolerance is exceeded. There is no restriction on how much a price can decrease, but changes to the line (quantity or unit of measure for example) may cause the price tolerances to be exceeded.

Note: If the price on a requisition line is zero, then price tolerance checks do not apply.

3. Select Enforce Price Tolerance Percentage if you want Purchasing to enforce the price tolerance percentage.

4. Enter the Price Tolerance Amount. This is the dollar amount by which the auto created purchase order line price cannot exceed the requisition line price.

Note: If you set both price tolerance percentage and amount values, the system will apply the more restrictive of the two.

5. Select Enforce Price Tolerance Amount if you want Purchasing to enforce the price tolerance amount.

6. Enforce Full Lot Quantity: Select one of the following values for the Enforce Full Lot Quantity option:

None: The requisition quantity is not rounded to the lot quantity.

Automatic/Mandatory: The requisition quantity is forced to the rounded quantity.

Advisory: An advisory message suggesting rounding and a suggested rounding quantity are displayed, but you can override.

Enforce Full Lot Quantity is used for rounding quantities on Internal Requisitions, for example:

System Options Enforce Full Lot Quantities = Yes Items Rounding Factor = 75% Items Unit of Issue = DZ Unit of Measure on Internal Requisition = Each

If the user enters 6 each on the Internal Requisition, the quantity will be rounding to 0. If the user enters 11 each on the Internal Requisition, the quantity will be rounded to 12 each.

7. Select Display Disposition Messages if you want to see any disposition messages defined against inventory items when they are placed on requisitions.

8. Select the Receipt Close Point, which is when the shipment is closed for receiving: Accepted (passed inspection), Delivered, or Received. Note that you need to set the receipt close tolerance percentage in the Default Options window.

9. Select Notify If Blanket PO Exists if you want to be notified of existing blanket purchase agreements when you create a requisition, purchase order, or blanket purchase agreement line for the item. If you sourced the item, you see the following message: Blanket purchase order [number] already exists for this item. Your requester can directly create a release for the blanket purchase agreements instead of creating a requisition or purchase order if you allow your requester to enter releases.

10. The Cancel Requisitions options apply only to requisitions from which purchase orders were Auto Create. Select one of the following:

Always: When canceling the purchase order, Purchasing also cancels the requisition.

Never: When canceling the purchase order, Purchasing does not cancel the requisition, so it is again available for inclusion on a purchase order.

Optional: When canceling the purchase order, you are given the option to cancel the requisition.

11. You can define for each item whether you allow updating of the item description during the creation of requisition, RFQ, quotation, or purchase order lines. This update affects only the line you are creating. Select Allow Item Description Update if you want Yes to be the initial default of the Allow Description Update attribute when you are defining a new item.

12. Select a Security Hierarchy, which is a position hierarchy from the Position Hierarchy window. When the Security Level is set to Hierarchy for a document in the Document Controls window, this position hierarchy governs access security for the document.

Attention: This field is enter-able only when the form is accessed from the Purchasing menu.

13. Select Enforce Buyer Name to enforce entry of only your name as the buyer on purchase orders. Otherwise, you can enter the name of any active buyer.

14. The PO Output Format selection defines the output format for purchase orders sent to the supplier using print, e-mail, or fax. It also enables functionality related to that output format.

PDF: Purchase orders are output in the Adobe Portable Document Format (PDF). You can view the purchase order fully formatted from the Enter Purchase Order window, Purchase Order Summary window, Change History page, Oracle iProcurement, and Oracle iSupplier Portal. You can also communicate the purchase order to the supplier from the Purchase Order Summary window.

Text: Purchase orders are output in text.

Note: Your ability to communicate the purchase order to the supplier from the Approval window remains the same with either setting. Only the formatting of the output changes.

15. Select Enforce Supplier Hold if you do not want to be able to approve purchase orders created with suppliers that are on hold. Use the Suppliers window to place suppliers on hold.

Note: Even if you put a supplier on hold in the Suppliers window, you can still approve a purchase order to that supplier if Enforce Supplier Hold is not checked here.

16. If you have selected Gapless Invoice Numbering for the entire business unit or for a specific supplier site, enter the SBI Buying Company Identifier, which is an identifier included in the invoice number created by the Pay on Receipt process. This portion of the invoice number identifies the buying business unit and for invoices is combined with the prefix defined by the PO: ERS Invoice Number Prefix profile.

17. Select Gapless Invoice Numbering to enable gapless (no breaks in numbering) invoice number generation for your buying organization during Pay on Receipt processing.

18. Select RFQ Required to require an RFQ for an item before you can auto create the corresponding requisition line onto a purchase order. You can override this value for each item or requisition line.

Defining Document Default Options:

1. Navigate to the Default tabbed region in the Purchasing Options window.

2. Select one of the following Requisition Import Group By options for requisitions imported through the requisition open interface: All (not grouped), Buyer, Category, Item, Location, or Supplier.

3. Select the default Order Type for internal requisitions.

Important: The Order Type field is visible only if the application Oracle Order Management is installed.Order types are defined in Order Management. The order type you choose here is the type that Purchasing uses to create sales orders from internal requisitions.

4. Select the default Order Source for internal requisitions. Purchasing defaults and only uses Internal. This is the source OrderImport uses to transfer internal requisitions from Purchasing to Order Management. Attention: This field is enterable only when the form is accessed from the Purchasing menu.

5. Enter the Receipt Close tolerance percentage for your shipments. Purchasing automatically closes a shipment for receiving if it is within the receiving close tolerance at the receiving close point. Set the receiving close point in the Control Options window. You can override this option for specific items and orders.

6. Enter the Invoice Close tolerance percentage for shipments. Purchasing automatically closes a shipment for invoicing if it is within the invoicing close tolerance at billing, when Payables matches invoices to purchase orders or receipts. You can override this option for specific items and orders. 

7. Enter the Quote Warning Delay. This is the number of days before a quotation expires that you want to receive an expiration warning. When a quotation is due to expire within the number of days you provide here, you receive the following message in the Notifications Summary window: Quotations active or approaching expiration: [number].

8. Select a default Line Type for requisition, RFQ, quotation, and purchase order lines. When you create any of these documents, the line type is part of your item information. You can override the line type for each document line.

9. Select the currency Rate Type that defaults on requisitions, purchase orders, RFQs, and quotations. If the Rate Type is User, you can override this default for each document line. If either your functional currency (defined in your set of books) or your transaction currency (the currency you enter in a purchasing document window) is Euro (the European Monetary Unit currency), and the other is another European currency, Purchasing defaults in the appropriate conversion Rate Type, Rate, and Rate Date.

10. Select one of the following options for Match Approval Level:

Two-Way: Purchase order and invoice quantities must match within tolerance before the corresponding invoice can be paid.

Three-Way: Purchase order, receipt, and invoice quantities must match within tolerance before the corresponding invoice can be paid.

Four-Way: Purchase order, receipt, inspection, and invoice quantities must match within tolerance before the corresponding invoice can be paid.

Note: The Invoice Match Option in the purchase order Shipments window and the Match Approval Level here are independent options. The Invoice Match Option determines whether Payables performs invoice matching to the purchase order or the receipt. You can perform whichever Invoice Match Option you want on a shipment regardless of the Match Approval Level you choose here.

11. Select the Price Break Type that defaults on blanket purchase orders:

Cumulative: Price breaks apply to the cumulative quantity on all release shipments for the item.

Non-cumulative: Price breaks apply to quantities on individual release shipments for the item.

12. Select the Price Type that defaults on purchase orders. Use the Lookup Codes window to define price types.

13. Enter the Minimum Release Amount that defaults on blanket, contract, and planned purchase orders. This amount is in your functional currency.

Defining Receipt Accounting Options:

1. Navigate to the Receipt Accounting tabbed region in the Purchasing Options window.

2. Choose one of the following Accrue Expense Items options:

At Receipt: Accrue expense items upon receipt. You can override this flag in the Shipment Details window when you are entering purchase orders and releases.

Period End: Accrue expense items at period end.

Attention: When using Cash Basis Accounting, you should set this option to Period End, but you will not normally run the Receipt Accrual - Period End process.

3. For Accrue Inventory Items, you currently have only one choice: On Receipt.

4. Enter the default Expense AP Accrual Account.

5. An offset is an accounting entry that is created to offset, or balance, another accounting entry. Automatic Offset Method is the method used to automatically create the account for the offsetting transaction. Here the offsetting account is the Receiving Inspection Account, which offsets the Accrual Account transaction at the time of receipt and the Charge Account at the time of delivery. The Automatic Offset Method controls which of the two accounts are used as the base account and which as the overlay account, as well as which segment is used to overlay the base account segment.

Choose one of the following Automatic Offset Method options:

None: No substitutions are made and the Receiving Inspection account for the destination organization is used.

Balancing: The base account is the Receiving Inspection Account for the destination organization and the balancing segment is overlaid with the balancing segment of the Charge Account.

Account: The base account is the Charge Account and the account segment is overlaid with the account segment of the Receiving Inspection Account. 
Defining Numbering Options:

Purchasing numbers requisitions, purchase orders, quotations, and RFQs within operating units in a Multi-Org setup. So, for example, Purchasing allows the same requisition number to be used by different operating units.

Purchasing also numbers receipts within inventory organizations rather than across inventory organizations. So, for example, the same receipt number could be used by different inventory organizations.

1. Navigate to the Numbering tabbed region in the Purchasing Options window.

2. Select the [Document] Number Entry method for RFQ, quotation, purchase order, and requisition numbers:

·         Automatic: Purchasing automatically assigns a unique sequential number to each document when you create the document.

·         Manual: You provide a document number manually when you enter the document.

Attention: You can change the method of entering document numbers at any time. If you originally allow manual entry and switch to automatic entry, make sure to enter a Next Number that is higher than the highest number you assigned manually.

3. Select the [Document] Number Type you want Purchasing to use for RFQ, quotation, purchase order, and requisition numbers: Numeric or Alphanumeric.

Attention: If you choose Automatic document number entry, you can generate only numeric document numbers, but you can still import either numeric or alphanumeric values from another purchasing system.

Attention: If you import purchasing documents from a foreign system that references alphanumeric numbers, you must choose Alphanumeric as your number type, regardless of your numbering method.

If you choose Manual document number entry, you can choose numeric or alphanumeric numbers. You can change the document number type from Numeric to Alphanumeric whenever you want. You can change the document number type from Alphanumeric to Numeric only if all your current document numbers are numeric.

Attention: The ordering of numeric values in lists of values can appear random when you use the Alphanumeric number type. If you are using Alphanumeric numbering, consider entering all numeric values with the same number of digits. For example, if you can assume all numeric values contain six digits, you should enter the first value as 000001.

Attention: You should setup the numbering type to be the same in all operating units in which you are planning to create and enable global agreements.

4. Enter the Next Number. This is the starting value you want Purchasing to use for generating unique sequential document numbers if you choose Automatic document number entry. Purchasing displays the next document number that will be used for a new document when you create the new document. You cannot enter this field if you choose Manual document number entry.

If you use Master Scheduling/MRP, Inventory, Work in Process, or any non-Oracle system to create requisitions automatically, you must also let Purchasing number the corresponding requisitions automatically.
 
Here we do not have option to enter the document numbering.

Note: To enter the document numbering we need to run a Replicate Seed Data Program from System Administrator for every operating unit, which will generate document categories for most of the documents created at Operating Unit. In R12 we need to run only once but in 11i whenever we added new responsibility we need to run this program.

Setting Up Purchasing Continuation...