Overview of Procure to Pay Cycle
Procure to Pay cycle in Oracle is the cycle which is concerned with the cycle of procurement of raw materials, parts and products which the the business needs to manufacture its end products. Procure to Pay cycle is concerned with the procurement of the raw materials from suppliers to prepare the finished goods to the step of payment to the supplier for the goods purchased. The procure to Pay cycle like the Order to Cash one has certain steps involved.
Create Purchase Requisition
Create Purchase Order
Receive the PO
Enter Invoice
Pay
1. Purchase Requisition
The first step in initiating the purchase of goods is the creation of a purchase requisition. A purchase requisition is a formal requisition to buy something. Purchase requisition represents a demand for a good in the business
Purchase Requisition represents demand for materials either through Work in Progress,Inventory , Materials requirement planning or Order Management.
A requisition might be internal or external
Internal Requisition : An internal requisition is generally prepared in case of inter organization transfer
Purchase Requisition: A purchase requisition is generally created when the business needs to procure materials from external sources ie its suppliers to fulfill the requirements raised by Inventory,Work in Progress, Materials Requirement Planning or Order Management
In simple terms we can say that a requisition refers to a purchase request initiated by the various department people when the business has certain material requirements
2. Purchase Order
After the purchase requisition has been created and approved , the next step is the creation of purchase order.
The purchase order is the document having details of the materials which need to be procured, supplier details, this document is shared with the supplier in order to procure the required materials.
When a PO is created in the system the status of the PO is generally incomplete, before we can progress with the PO the PO needs to be approved by the approvers setup in the system so that it can be sent across to the suppliers and then received.
Depending on the business Requirements, a purchase order can be of different types:
1] Standard: Create standard purchase orders for one-time purchases of various items. You create standard purchase orders when you know the details of the goods or services you require, estimated costs, quantities, delivery schedules, and accounting distributions.
2] Blanket: Create blanket purchase agreements when you know the detail of the goods or services you plan to buy from a specific supplier in a period, but you do not yet know the detail of your delivery schedules.
3] Contract: Create contract purchase agreements with your suppliers to agree on specific terms and conditions without indicating the goods and services that you will be purchasing.
4] Planned: A planned purchase order is a long-term agreement committing to buy items or services from a single source. You must specify tentative delivery schedules and all details for goods or services that you want to buy, including charge account, quantities, and estimated cost.
3. Receiving
After the Purchase Order has been sent across to the supplier the supplier will deliver the goods to the specified warehouse where the task of receiving has to be performed.
When the shipping details of the goods are received by the supplier receipts are created in the system.
The receipt creation and the receiving mechanism can differ based on the Routing mechanism set up in the system. We will discuss the Routing mechanism in the upcoming post.
After the receiving is performed , the onhand for the items are increased in the system and the goods are available to fulfill the business demands.
4. Invoice
Once the goods have been received the business needs to pay for the procured goods. Payables invoices are created in the system for the Purchase orders to pay off the outstanding amount.
Invoices can be created either individually or through invoice batches
System can setup a recurring invoice creation faciltiy to create invoices at periodic intervals
Invoices can be created electronically via EDI
After the Invoices are created the invoices need to be validated with the purchase order or the the Purchase Receipt to match for the quantity and pricing. Invoices need to be validated before they can be paid off.
5. Payment
Once the invoices have been validated they are eligible for payment. Payments for the invoices can be done individually or payment batch can be created which pay off groups of Invoices.
Invoices can be paid off by a variety of mechanisms including checks, manual payments, wire transfers, EDI payments, bank drafts, and electronic funds transfer.
This is how a Procure to Pay ( P2P) cycle works in Oracle.
Procure to Pay cycle in Oracle is the cycle which is concerned with the cycle of procurement of raw materials, parts and products which the the business needs to manufacture its end products. Procure to Pay cycle is concerned with the procurement of the raw materials from suppliers to prepare the finished goods to the step of payment to the supplier for the goods purchased. The procure to Pay cycle like the Order to Cash one has certain steps involved.
Create Purchase Requisition
Create Purchase Order
Receive the PO
Enter Invoice
Pay
1. Purchase Requisition
The first step in initiating the purchase of goods is the creation of a purchase requisition. A purchase requisition is a formal requisition to buy something. Purchase requisition represents a demand for a good in the business
Purchase Requisition represents demand for materials either through Work in Progress,Inventory , Materials requirement planning or Order Management.
A requisition might be internal or external
Internal Requisition : An internal requisition is generally prepared in case of inter organization transfer
Purchase Requisition: A purchase requisition is generally created when the business needs to procure materials from external sources ie its suppliers to fulfill the requirements raised by Inventory,Work in Progress, Materials Requirement Planning or Order Management
In simple terms we can say that a requisition refers to a purchase request initiated by the various department people when the business has certain material requirements
Impact
on tables and important columns:
PO_REQUISITION_HEADERS_ALL
Important
Columns: -
REQUISITION_HEADER_ID à Primary Key
SEGMENT1 à Requisition Number
AUTHORIZATION_STATUS à Requisition Status ( After
Approval the status
Will be ‘APPROVED’. )
PO_REQUISITION_LINES_ALL
Important Columns: -
REQUISITION_LINE_ID à Primary Key
ITEM_ID
UNIT_PRICE à Unit Price of the Item
QUANTITY à Required Quantity
PO_REQ_DISTRIBUTIONS_ALL
Important Columns: -
DISTRIBUTION_ID à Primary Key
CODE_COMBINATION_ID à Unique identifier for the
General Ledger charge account
After the purchase requisition has been created and approved , the next step is the creation of purchase order.
The purchase order is the document having details of the materials which need to be procured, supplier details, this document is shared with the supplier in order to procure the required materials.
When a PO is created in the system the status of the PO is generally incomplete, before we can progress with the PO the PO needs to be approved by the approvers setup in the system so that it can be sent across to the suppliers and then received.
Depending on the business Requirements, a purchase order can be of different types:
1] Standard: Create standard purchase orders for one-time purchases of various items. You create standard purchase orders when you know the details of the goods or services you require, estimated costs, quantities, delivery schedules, and accounting distributions.
2] Blanket: Create blanket purchase agreements when you know the detail of the goods or services you plan to buy from a specific supplier in a period, but you do not yet know the detail of your delivery schedules.
3] Contract: Create contract purchase agreements with your suppliers to agree on specific terms and conditions without indicating the goods and services that you will be purchasing.
4] Planned: A planned purchase order is a long-term agreement committing to buy items or services from a single source. You must specify tentative delivery schedules and all details for goods or services that you want to buy, including charge account, quantities, and estimated cost.
Impact
on tables and important columns:
1.
PO_HEADERS_ALL
Important
Columns: -
PO_HEADER_ID à Primary Key.
SEGMENT1 à Purchase Order Number.
AUTHORIZATION_STATUS
à PO Status (After Approval
the status
will be ‘APPROVED’. )
2. PO_LINES_ALL
Important
Columns: -
PO_LINE_ID à Primary Key.
ITEM_ID à Inventory Item ID.
QUANTITY à Quantity Ordered on the line.
UNIT_PRICE à Item Unit Price.
3. PO_LINE_LOCATIONS_ALL
Important
Columns: -
LINE_LOCATION_ID à Primary Key.
QUANTITY à Inventory Item ID.
SHIP_TO_LOCATION_ID à Quantity Ordered on the line.
4. PO_DISTRIBUTIONS_ALL
Important
Columns: -
PO_DISTRIBUTION_ID à Primary Key.
CODE_COMBINATION_ID à Unique identifier for the General Ledger charge
account
3. Receiving
After the Purchase Order has been sent across to the supplier the supplier will deliver the goods to the specified warehouse where the task of receiving has to be performed.
When the shipping details of the goods are received by the supplier receipts are created in the system.
The receipt creation and the receiving mechanism can differ based on the Routing mechanism set up in the system. We will discuss the Routing mechanism in the upcoming post.
After the receiving is performed , the onhand for the items are increased in the system and the goods are available to fulfill the business demands.
Impact
on tables :
1. RCV_SHIPMENT_HEADERS
2.
RCV_SHIPMENT_LINES
3. RCV_TRANSACTIONS
Once the goods have been received the business needs to pay for the procured goods. Payables invoices are created in the system for the Purchase orders to pay off the outstanding amount.
Invoices can be created either individually or through invoice batches
System can setup a recurring invoice creation faciltiy to create invoices at periodic intervals
Invoices can be created electronically via EDI
After the Invoices are created the invoices need to be validated with the purchase order or the the Purchase Receipt to match for the quantity and pricing. Invoices need to be validated before they can be paid off.
Impact on tables and important columns:
AP_INVOICES_ALL
Important Columns: -
INVOICE_ID à Primary Key.
INVOICE_NUM à Invoice number
INVOICE_AMOUNT à Invoice amount
VENDOR_ID àSupplier identifier
2. AP_INVOICE_LINES_ALL
Important
Columns: -
INVOICE_ID à Primary Key.
LINE_NUMBER à Inventory Item ID.
LINE_TYPE_LOOKUP_CODE à Quantity Ordered on the line.
UNIT_PRICE à Item Unit Price.
3. AP_INVOICE_DISTRIBUTIONS_ALL
Important
Columns: -
INVOICE_ID à Invoice identifier
DISTRIBUTION_LINE_NUMBER à Distribution number
ACCOUNTING_DATE à Accounting date.
JE_CATEGORY_NAME à Inventory Item ID.
DIST_CODE_CMBINATION_ID à Quantity Ordered on the line.
4. XLA_AE_HEADERS
Important
Columns: -
AE_HEADER_ID à Invoice identifier
GL_TRANSFER_STATUS_CODE à Distribution number
ACCOUNTING_DATE à Accounting date.
5. XLA_AE_LINES
Important Columns: -
AE_HEADER_ID à Accounting entry header ID
AE_LINE_NUM à Accounting entry Line Number
CODE_COMBINATION_ID à Code Combination ID
GL_SL_LINK_ID à GL subledger Link ID – Used
to establish link with Journal
Lines (GL_JE_HEADER and GL_JE_LINES)
ENTERED_DR à Entered Dr. Amount
ENTERED_CR à Entered Cr. Amount5. Payment
Once the invoices have been validated they are eligible for payment. Payments for the invoices can be done individually or payment batch can be created which pay off groups of Invoices.
Invoices can be paid off by a variety of mechanisms including checks, manual payments, wire transfers, EDI payments, bank drafts, and electronic funds transfer.
Impact
on tables:
New IBY tables
in R12:
IBY_PAY_SERVICE_REQUESTS - Payment Process Request information (11i Terminology is Payment Batch)
IBY_PAY_INSTRUCTIONS_ALL
- Payment Instruction information
IBY_DOC_PAYABLES_ALL
- Invoice information stored by IBY for generating payment
IBY_PAYMENTS_ALL
- Payment Information
The
following tables are used in PPR in R12 . These were used in 11i for payment
batches also.
AP_INV_SELECTION_CRITERIA_ALL
AP_SELECTED_INVOICES_ALL
The
following AP tables are still in use in R12 to store payment related
information.
AP_INVOICE_PAYMENTS_ALL
AP_CHECKS_ALL
AP_PAYMENT_HISTORY_ALL
