Customer Acceptance in R12 Order Management
Customer Acceptance in R12 Order Management
In different countries a number of companies prefer to accept
goods formally before being invoiced by the supplier. To record and
view customer acceptance, Oracle Order Management integrates with
Accounts Receivables and Costing. The customer can accept the goods
in any or in combination of the following ways:
Pre-Billing Acceptance (goods are accepted before Invoicing)
Implicit or ExplicitPost-Billing Acceptance (goods are accepted
after Invoicing) Implicit or Explicit
What is Customer Acceptance?
Customer Acceptance is new functionality with R12 that gives a
seller control over the timing of customer invoicingor revenue
recognition and provides the ability to link either of these events
with customer satisfaction of a productor service delivery. Where
invoicing used to be automatic based on the standard fulfillment
criteria of shipping aproduct or service, it can now be delayed
until explicit or implicit customer acceptance criteria are
received andlogged against a given shipment (sales order line).
There are some initial concepts that must be understood before
configuring and using Customer Acceptance, andthey will be reviewed
here.First, there are 2 fundamentally different flows for handling
acceptance:Pre-Billing Acceptance and Post-BillingAcceptance. Lets
look at each separately and how they fit into the fulfillment
flow.
ForPre-Billing Acceptance, as the name implies, acceptance must
be recorded before AR invoicing can beprocessed. This is
accomplished by preventing the Sales Order Line from interfacing to
AR until the acceptance isrecorded. Think of it as the Customer
saying Do not bill me until I approve the shipment! and having
Oraclecomply with that demand.
Post-Billing Acceptance, also as the name implies, affects what
occurs after AR invoicing has already beenprocessed. Revenue
recognition will not occur for a given line/AR invoice until an
acceptance is recorded. Fromthe Customers perspective, there is no
change with this type of acceptance. They still receive their
invoice with thenormal timing relative to a shipment being
confirmed. So in that respect, this acceptance type is less
customer focusedand more of an internal (sellers) process.
We reviewed the 2 acceptance flows, but within each one there
are 2 types or acceptance Explicit and Implicit.Explicit
acceptanceis one that requires an actual acceptance to be recorded,
so the sales order line workflow willNOT progress until this is
recorded. It requires action either on the part of the customer or
customer servicerepresentative in order to open the gate for
customer billing (AR invoicing) or revenue recognition.
Implicit acceptance,on the other hand, is one that will
automatically be generated when a certain interval of time
haslapsed beyond a specific event for the order line. This interval
and the event it applies to are both configurable inAR and will be
explained in more detail later.
Note: Even if implicit acceptance is engaged, you have the
option to enter explicit acceptance prior to thenumber of expire
days elapsing.
So based on the above terms,, there are 4 kinds of Customer
Acceptance as listed below:1. Pre-Billing Explicit2. Pre-Billing
Implicit3. Post-Billing Explicit4. Post-Billing ImplicitThe seller
does not have to rely on any one of the above types, but rather has
the ability to use any or all of them inthe course of their
fulfillment cycle.
Customer Acceptance Setups:
Order Management:
1) System parameter in OM "Enable fulfillment acceptance" to
"Yes"
First, and foremost, you must enable the System Parameter in OM.
Without it, Customer Acceptance simplywill not work. The reason it
is setup as a parameter, with a default of No, is that when enabled
there is an AR APIthat is engaged for every sales order line. This
requires system resources and can result in a performance penalty
forthe application, so you dont want to enable this functionality
unless you intend to use it.
2)Show fieldusing theFolder options to show the fields related
to customer acceptance.
Use Folder Show Field to add the required mix of acceptance
fields, then save as a named folder, and makeit your default with
the option of making it public. If Customer Service intends to use
this functionality, I wouldsuggest you setup a public folder so
that every CSR sees the same data when responding to customer
inquiries.Sales order lines- Otherstab
3)Enable function security within the Menu
Below are 2 OM functions which must be enabled on the menu
structure in order to use Customer Acceptance. Bydefault, they
should be enabled on the ONT_SALES_ORDERS menu, but you might need
to verify these inSystem Administrator if you run into any
difficulties. By enabling or disabling these functions within a
givenresponsibility, you can enforce functional security for who
can and cannot perform Customer Acceptance.
Sales Orders: Fulfillment AcceptanceSales Orders: Update
Acceptance Attributes
4)User Access toOrder Information Portal(required to
performManual Explicit Acceptance)
Receivables (Revenue Management):
1) Revenue contingency
A revenue contingency is an AR setup that affects revenue
recognition, and ties in with the workflow associatedwith Customer
Acceptance. Some seeded revenue contingencies are provided in AR,
but you can add new ones as need be
Contingency removal eventis one of the required fields in
setting up revenue contingency
The removal event determines which Customer Acceptance flow will
be engaged in the workflow.ForPre-Billing Acceptance,setRemoval
EventtoInvoicingForPost-Billing Acceptance,setRemoval
EventtoCustomer Acceptance
4A revenue contingency is an AR setup that affects revenue
recognition, and ties in with the workflow associatedwith Customer
Acceptance. Some seeded revenue contingencies are provided in AR,
but you can add new ones asoutlined below. You can define new
contingencies using the Revenue Management Super User
responsibility.The example below is a revenue contingency for
Pre-Billing Implicit Acceptance, automatically recorded 3 daysafter
Ship Confirm.Fig. 4 Revenue Contingency Example (implicit
pre-billing acceptance)The removal event determines which Customer
Acceptance flow will be engaged in the workflow.For Pre-Billing
Acceptance, set Removal Event to InvoicingFor Post-Billing
Acceptance, set Removal Event to Customer Acceptance
The choices for Removal Event are: Contingency Expiration,
Customer Acceptance, Invoicing, Payment, Proof ofDelivery.
If you wantExplicit Acceptance, leave Optional Time Attributes
blank. You will record the actual acceptance dataat the appropriate
time in the Order Information Portal (OIP).
If you wantImplicit Acceptance, select anAttribute EventandDays
Added to Event Attribute. The acceptance will be automatically
generated by a request set that can be scheduled to run daily in
theapplication.
Choices for Event Attribute are: Fulfillment Date, Proof of
Delivery Date, Ship Confirm Date, or Transaction Date.Assignment
Rules can be configured to automatically assign the desired revenue
contingency to a sales order line.
Choices can be as general as the Operating Unit, or as specific
as a single Item when shipped to a specific Customer.You define the
business scenarios that require Customer Acceptance with these
rules, or you can optionally assignthe acceptance manually in Order
Management before booking the sales order.
--------------------------------------------Under Generally
Accepted Accounting Principles (GAAP), deferred revenue, sometimes
called unearned revenue.Deferred revenue is aliabilitythat is
created whenmonies are receivedby a company for goods and services
not yet provided.What is the deferred revenue?Deferred revenue is a
liability that is created when monies are received by a company for
goods and services not yet provided.Revenue will be recognized, and
the deferred revenue liability eliminated, when the services are
performed.Deferred revenue stems from the accounting concept of
revenue recognition, under which revenues are recognized only when
the earnings process is complete. If funds are received and no
goods or services have yet been provided, the process is not
complete; thus revenue cannot be recognized, and a deferred revenue
liability is recorded.Specifically, the deferred revenue account is
credited, and cash (or otherassets) are debited. Please take a note
deferred revenue is recorded in specific industries under
particular circumstances.Deferred Revenue ExampleLike many
subscription businesses, A internet Hosting company offers a plan
to pay upfront for whole year.Since deferred revenue represents the
value of the services that are left to be delivered at a point in
time, if you purchased the annual plan, $2400 would be added to
both the cash account of the balance sheet and the deferred revenue
line. Every month $200.00 would be moved out of deferred revenue
and reported as revenue on the income statement.Understand why you
need to defer revenue.Why can't you just record the revenue when
you actually receive the cash payment? By doing so , this would
violate the principles of accrual-based accounting.There are 2
principles which provide the foundation for accrual accounting.The
first is the matching principle. Under the matching principle,
revenues and expenses that correspond to each other must be
recorded in the same accounting period. Using the insurance example
above, you cannot recognize all the revenue inJanuary, because
there will be expenses associated with that insurance coverage
incurred throughout the year. These expenses must be matched with
their corresponding revenues.The second is the revenue recognition
principle. This principle dictates that revenues should only be
recorded when they are both realized (or realizable) and earned.
"Realized" revenues are those for which a claim to cash has been
received, and "earned" revenues are those for which a good or
service has been rendered.
The implication, then, is that you cannot simply record a
revenue whenever cash is paid to your company. If, for example, a
client is prepaying for a continuing service, then you cannot
recognize that payment as revenue until you actually render the
service. Until then, the payment represents a liability, or an
obligation to the client. This makes sense to you.Governing RuleFor
revenue to be recognized (earned), SEC have SAB 101/104 sets four
key conditions that must be met:Persuasive evidence of an
arrangement exists,Delivery has occurred or services have been
rendered,The seller's price to the buyer is fixed or determinable,
andCollectability is reasonably assured
Understanding the Deferred Revenue Accounting ProcessYou can
create and send invoices for products or services that you will
deliver in the future or over a range of time.Invoice details:Bill
line amount: 6000.00 USD.Invoicing Rule = Bill in AdvanceInvoice
Date 2-DEC-12GL Date 2-DEC-12Accounting Rule:Type: Accounting,
Fixed DurationPeriod : MonthlyNumber of Periods : 6
Here is accounting Posting
FinallyKeep in mind that deferred revenue generally means that
cash has been received by the seller, so the remaining concern is
determining when the cash is recognized as earned revenue. Within
GAAP, there are multiple methods that can be used to recognize
revenue. Depending upon which method is chosen, the financial
statements may look drastically different even though economic
reality remains the same.Posted inOracle Receivable|No Comments
Revenue Recognition: Does Your Company still Have missing link
within ERP?Posted onApril 25th, 2013bySanjit Anand|Print This
Post|Email This PostAre you aware about the top three concerns for
finance teams asFinancial closing and reporting processExcessive
use of spreadsheetsand revenue recognition.
In key finding of survey conducted bywww.RevenueRecognition, it
was observed92% of public companies rely on manual processes to
perform key revenue recognition and reporting functionality (nearly
the same percentage is true for private companies).68% of all
companies stated their Financials/ERP systems DO NOT automate all
their revenue recognition and reporting activities.84% of companies
that initially stated Financials/ERP systems DO automate revenue
accounting are actually using spreadsheets for these activities.The
finance processes that are most difficult to establish internal
controls for are contract management and revenue
recognition.Companies want to spend less time on data aggregation,
manipulation, and validation and more time on business performance
analysis.
Issue with EXCELUsing Excel as the "system of record" for
managing revenueThe problems were...Excessive time and effort
to:analyze and arrange an enormous amount of dataclose the
bookscreate journal entriesensure accuracyIncreased time and effort
to manage accounting controlsInflexible reporting and analysis and
the volume of data was growing
Missing Link92% of companies said above, they are using
spreadsheets for one or more of the following key revenue
recognition and reporting tasks:Applying revenue allocation
rulesRedistributing revenue (e.g. based on SOP 97-2, EITF
00-21)Creating revenue recognition schedules for future
periodsReviewing sales orders to identify deferred itemsPerforming
revenue contribution analysisReporting on future revenue
streamsCreating accounting entries
Regardless of whether your company is private or public, does
your organization recognize the importance of consistent and
reliable revenue recognition ?Revenue RecognitionRevenue
Recognition is Principle of accrual accounting that determines the
period in which revenue is recognizedRevenue recognition is an
earning processThere are rules and regulations on how and when you
can recognize revenueUnder GAAP, there are four basic
criteria:Evidence of an arrangement exists (governing contract
& PO)Delivery has occurred (transfer title and risk of loss)Fee
is fixed or determinable (normal payment terms)Collection is
probable (customer has ability to pay)
Accounting terminology you may hear FASB and IFRS guidelines,
evidence of an arrangement, delivery, fixed fees, collection,
software and non-software rules, multiple element arrangements,
fair value (VSOE, BESP, TPE), relative selling price, revenue
allocation, linked arrangements, acceptance, release events,
contingencies, future upgrades, significant discounts, extended
terms, software is essential to functionality, deferred revenue
release, and so on.In other words its HIGHLYUnder Generally
Accepted Accounting Principles (GAAP), deferred revenue, sometimes
called unearned revenue.Deferred revenue is aliabilitythat is
created whenmonies are receivedby a company for goods and services
not yet provided.What is the deferred revenue?Deferred revenue is a
liability that is created when monies are received by a company for
goods and services not yet provided.Revenue will be recognized, and
the deferred revenue liability eliminated, when the services are
performed.Deferred revenue stems from the accounting concept of
revenue recognition, under which revenues are recognized only when
the earnings process is complete. If funds are received and no
goods or services have yet been provided, the process is not
complete; thus revenue cannot be recognized, and a deferred revenue
liability is recorded.Specifically, the deferred revenue account is
credited, and cash (or otherassets) are debited. Please take a note
deferred revenue is recorded in specific industries under
particular circumstances.Deferred Revenue ExampleLike many
subscription businesses, A internet Hosting company offers a plan
to pay upfront for whole year.Since deferred revenue represents the
value of the services that are left to be delivered at a point in
time, if you purchased the annual plan, $2400 would be added to
both the cash account of the balance sheet and the deferred revenue
line. Every month $200.00 would be moved out of deferred revenue
and reported as revenue on the income statement.Understand why you
need to defer revenue.Why can't you just record the revenue when
you actually receive the cash payment? By doing so , this would
violate the principles of accrual-based accounting.There are 2
principles which provide the foundation for accrual accounting.The
first is the matching principle. Under the matching principle,
revenues and expenses that correspond to each other must be
recorded in the same accounting period. Using the insurance example
above, you cannot recognize all the revenue inJanuary, because
there will be expenses associated with that insurance coverage
incurred throughout the year. These expenses must be matched with
their corresponding revenues.The second is the revenue recognition
principle. This principle dictates that revenues should only be
recorded when they are both realized (or realizable) and earned.
"Realized" revenues are those for which a claim to cash has been
received, and "earned" revenues are those for which a good or
service has been rendered.
The implication, then, is that you cannot simply record a
revenue whenever cash is paid to your company. If, for example, a
client is prepaying for a continuing service, then you cannot
recognize that payment as revenue until you actually render the
service. Until then, the payment represents a liability, or an
obligation to the client. This makes sense to you.Governing RuleFor
revenue to be recognized (earned), SEC have SAB 101/104 sets four
key conditions that must be met:Persuasive evidence of an
arrangement exists,Delivery has occurred or services have been
rendered,The seller's price to the buyer is fixed or determinable,
andCollectability is reasonably assured
Understanding the Deferred Revenue Accounting ProcessYou can
create and send invoices for products or services that you will
deliver in the future or over a range of time.Invoice details:Bill
line amount: 6000.00 USD.Invoicing Rule = Bill in AdvanceInvoice
Date 2-DEC-12GL Date 2-DEC-12Accounting Rule:Type: Accounting,
Fixed DurationPeriod : MonthlyNumber of Periods : 6
Here is accounting Posting
FinallyKeep in mind that deferred revenue generally means that
cash has been received by the seller, so the remaining concern is
determining when the cash is recognized as earned revenue. Within
GAAP, there are multiple methods that can be used to recognize
revenue. Depending upon which method is chosen, the financial
statements may look drastically different even though economic
reality remains the same.Posted inOracle Receivable|No Comments
Revenue Recognition: Does Your Company still Have missing link
within ERP?Posted onApril 25th, 2013bySanjit Anand|Print This
Post|Email This PostAre you aware about the top three concerns for
finance teams asFinancial closing and reporting processExcessive
use of spreadsheetsand revenue recognition.
In key finding of survey conducted bywww.RevenueRecognition, it
was observed92% of public companies rely on manual processes to
perform key revenue recognition and reporting functionality (nearly
the same percentage is true for private companies).68% of all
companies stated their Financials/ERP systems DO NOT automate all
their revenue recognition and reporting activities.84% of companies
that initially stated Financials/ERP systems DO automate revenue
accounting are actually using spreadsheets for these activities.The
finance processes that are most difficult to establish internal
controls for are contract management and revenue
recognition.Companies want to spend less time on data aggregation,
manipulation, and validation and more time on business performance
analysis.
Issue with EXCELUsing Excel as the "system of record" for
managing revenueThe problems were...Excessive time and effort
to:analyze and arrange an enormous amount of dataclose the
bookscreate journal entriesensure accuracyIncreased time and effort
to manage accounting controlsInflexible reporting and analysis and
the volume of data was growing
Missing Link92% of companies said above, they are using
spreadsheets for one or more of the following key revenue
recognition and reporting tasks:Applying revenue allocation
rulesRedistributing revenue (e.g. based on SOP 97-2, EITF
00-21)Creating revenue recognition schedules for future
periodsReviewing sales orders to identify deferred itemsPerforming
revenue contribution analysisReporting on future revenue
streamsCreating accounting entries
Regardless of whether your company is private or public, does
your organization recognize the importance of consistent and
reliable revenue recognition ?Revenue RecognitionRevenue
Recognition is Principle of accrual accounting that determines the
period in which revenue is recognizedRevenue recognition is an
earning processThere are rules and regulations on how and when you
can recognize revenueUnder GAAP, there are four basic
criteria:Evidence of an arrangement exists (governing contract
& PO)Delivery has occurred (transfer title and risk of loss)Fee
is fixed or determinable (normal payment terms)Collection is
probable (customer has ability to pay)
Accounting terminology you may hear FASB and IFRS guidelines,
evidence of an arrangement, delivery, fixed fees, collection,
software and non-software rules, multiple element arrangements,
fair value (VSOE, BESP, TPE), relative selling price, revenue
allocation, linked arrangements, acceptance, release events,
contingencies, future upgrades, significant discounts, extended
terms, software is essential to functionality, deferred revenue
release, and so on.In other words its HIGHLYTECHNICALRevenue
RequirementsChallenge that software companies face results from the
volume and complexity of the revenue recognition guidance that
exists.in such case, software arrangements include both software
and services. The services could include installation, training,
software design, or customization and modification of the software.
If the services involve significant customization or modification
of the software, then contract accounting under SOP 81-1 should be
used for the arrangement.therefore , under such senario , Revenue
Requirement should mainly focus on .ComplianceCalculate
VSOE(Vendor-Specific Objective Evidence / ESP (Estimated Selling
Price)Manage VSOE/ TPE(Third Party Evidence)/ESPTolerances
MEA (Multiple Element Arrangements)Track MEA from multiple
sourcesClassify elements
Revenue RecognitionStandalone salesMEARev rec carveouts
according to VSOE/TPE/ESPDeferrals & rev rec timingCOGSsGL
Posting
ReportingRevenue complianceBilling and revenue
reconciliationRevenue forecasts
NotificationsVSOE reference during pricingRev rec related
notifications (approved exceptions, renewals, collectability
status, etc.)
Key Aspects in Revenue RequirementsUser-defined Revenue
ContingenciesFair Value AnalysisAuto Accounting RulesAmortization
Methods
EBS R12 Revenue Management Enhancements, filling the Gap of
Missing LinkOrganizations will also find that Oracle Financials R12
allows them to manage revenue with greater flexibility and improved
accuracy.Partial Period Revenue Recognition enables the generation
of revenue recognition associated with contractsRevenue Deferral
Reasons based on events specific to an enterprises business
practicesCOGS and Revenue Matching synchronize the recognition of
revenue with the associated COGS in compliance with Generally
Accepted Accounting Principles
Customer Acceptance (Oracle Apps Release12 Feature).Email
ThisBlogThis!Share to TwitterShare to FacebookShare to
PinterestCustomer Acceptanceis new feature introduced in
OracleApplicationRelease 12.Customers in some industries have need
to defer invoicing and/or revenue recognition for shipped goods
until the customer receives the shipment and formally accepts the
material.
In Oracle R12 Customer acceptance/rejection can be captured from
customers, customer service representatives, or from an external
system.Customers can perform the acceptance in following
manners.Log into the self-service Order Information portal.Import
customer acceptance/rejection from an external system with Order
Import/Process Order API.Record Acceptance /Rejection fromSales
Order Form.
OracleOrder Managementsupports only full acceptance or total
rejection for each outbound order line. One can set the number of
days for implicit acceptance, after the product has been shipped.A
New System parameter Enable Fulfillment Acceptance has been
introduced in R12 at Operating Unit level for this Purpose. Once
this parameter is enabled, theAccounts ReceivablesAPI is called to
invoke therules engineto validate customer acceptance on every
order line.
The basic business need is to defer invoicing and/or revenue
recognition for the shipped goods till the customer receives the
shipment and accepts the material.
Customer Acceptance functionality offers1. Pre Billing and Post
Billing Acceptance2. Explicit and Implicit Acceptance.3. It is
either Full Acceptance or full rejection, as of now it doesnt
support Partial Acceptance.4. It support ATP/PTO/KIT/Service &
Standard item. Acceptance defined at the parent level (Model) only,
and child will inherit that from parent (e.g. ATO/PTO Model).As of
now Oracle in not support Acceptance in RMA Orders.
Setup for Customer Acceptance:1.Customer acceptancecan be
enabled at Operating Unit level through OM systemParameter: Enable
Fulfillment Acceptance Y/N.
2.We need to enablefunction security for a given responsibility
for the following twoFunctions:a. Sales Orders:Fulfillment
Acceptance This ensures that the action attribute Fulfillment
Acceptance is available in the Actions LOV.b. Sales Orders:Update
Acceptance Attributes This allows for updating the acceptance
attributes of Acceptance Name and Acceptance Expire days.These are
attached to the sales order menu ONT_ Sales_Order.
3.Define DeferralReason for Pre Billing AcceptanceDefine
'Deferral reason' under ReceivablesRevenue Managementset
upNavigation: Revenue Management Super User -> Contingency
Search / Definition ->it launches an HTML page.
Define assignment rules to assign the deferral reason to
customer, site, item, etc.
a. For defining aPre-billing Acceptance, use the deferral reason
removal event asInvoicing.
b. For defining aPost-billing Acceptance, use the deferral
reason removal event asCustomer Acceptance.
c. For defining anImplicit Acceptance, we need to define the
Optional time attributes Event Attribute and Days added to Event
attribute.
As shown above please note that Order Management supportsShip
Confirm Dateas only event attribute for the current release.The
Days added to Event Attribute gets defaulted as Acceptance Expire
days inSales Order Line.Note:The deferral reason defined in AR's
Revenue Management setup page is actually used as Acceptance Name
in Order Management
Enable Folder fieldsfor Customer Acceptance in Sales Order Form
as well asQuick SalesOrder Form.
The Invoice Interface Workflow sub process handles sending
interface data to Oracle Receivable for invoice and credit memo
creation.It us ysed to handle pre-billing Customer acceptance. If
an order line requires pre-billing Customer Acceptance, this
sub-process will prevent the order line from being interfaced to
Receivables.
Pre-Billing AcceptanceSales Order Line in Pending Pre-billing
Acceptance. Record Acceptance explicit or implicit . Line status
moves to closed and line gets interfaced to AR. Invoice generation
and Revenue Recognition happen subsequently.
Post-Billing AcceptanceSales Order Line in Pending Post-billing
Acceptance . Invoice generation . Record Acceptance explicit or
implicit. Line status moves to closed . Revenue Recognition happens
once acceptance is completed .
Explicit Acceptance:1. Acceptance through Order Information
Portal, click on Sales Order Actions Fulfillment Acceptance from
Header or Lines.2. Through Order Import.
Implicit Acceptance:1. Deferral reason has to be defined in AR
with event attribute as Ship Confirm date and expiration days.2. An
Implicit Acceptance Request set that records Implicit Acceptance
consists of the following concurrent programs: Generate Pre-billing
Acceptance Program for Pre-billing, Implicit Acceptance Revenue
Contingency Analyzer for Post-billing, Implicit Acceptance
Process Flow (Explicit Acceptance).1.Enter ordersthat need to be
accepted by the customer and this acceptance is to be Recorded by
the Customer Sales Representative.
2.View/update Acceptance fieldson the order line. The Others tab
of the sales orders line displays the folder enabled Acceptance
fields.
3.Sales Order AcknowledgmentReport prints Acceptance
Required.4.Ship Confirm the items mview the line status 'Pending
Pre-Billing / Pending Post-Billing Acceptance'.5.Perform
Acceptance/Rejection.(Below is Example of Pre-Billing Explicit
Acceptance).
6.View Acceptance Detailsin Sales Orders line.
Process Flow (ONLY Screen short) of Implicit Acceptance
