Learn using Sub Ledger Accounting (SLA) in R12 Oracle Payables

Sub Ledger Accounting (SLA) is a Rule-Based accounting engine that defines how journal entries are generated in sub-ledger transactions in Oracle sub-ledger applications. However, SLA also supports external applications generating accounting information which ultimately needs to be transferred to Oracle General Ledger. Before we get into SLA we need to know few of the basic concepts like event types, event class, etc.

Event Class - classifies transaction types for accounting rule purposes. E.g. in Payables, following are possible event classes: Invoice, Debit Memo, Prepayments, Refunds and Payments.

Event Type - for each transaction type, defines possible actions with accounting significance. E.g. in Payables, following are possible event classes: AP Invoice Events – Validation, Adjustment and Cancellation. Similarly we will have event types for other event classes.

In most of the cases we would not need to customize SLA and accounting features will work same as 11i. Some of the typical business scenarios where we would need to customize SLA in Payables are as follows:

• To have a different Liability account based on Operating Unit for which the invoice is entered.
• To have different natural account (expense) based on different Invoice Type and Invoice Line type.
• To have different natural account (expense) and different liability account based on different criteria like supplier type, entering currency, pay group, etc.
• The cost center segment of Invoice distribution Liability account shall be picked from the Invoice distribution Account while the other segment values from the Liability account defined at supplier site.

To cater to some of the above requirements we can use other alternatives like using distribution sets also. But setting up a custom SLA for such scenarios is an easier approach with lower user maintenance. I will try and show a simple scenario of how to derive custom accounting for a business scenario using SLA in Oracle Payables.

Business Scenario: We need to define different liability account (natural account segment) based on Supplier Type so that business can track the liability by supplier type. The other segment values will default from supplier site. I am limiting this example to only one supplier type “Contractor". The objective would be to have a different natural account for Liability account for invoices of supplier type "Contractor" alone, while for other supplier types the normal liability account should default.

Solution:

Step1: First define a mapping set for various supplier types.

Navigation: Setup > Accounting Setups >Sub Ledger Accounting Setups >Accounting Methods Builders > Journal Entry Setups > Mapping Sets

Step2: Define ADR (Account Derivation Rules)

Navigation: Setup > Accounting Setups >Sub Ledger Accounting Setups >Accounting Methods Builders > Journal Entry Setups > Account Derivation Rules

Step3: Define JLD (Journal Line Definition)

Navigation: Setup > Accounting Setups >Sub Ledger Accounting Setups > Accounting Methods Builder > Methods and Definitions > Journal Line Definitions

Always create a copy of the seeded JLD and do not modify a seeded JLD. We will create a copy of ACCRUAL_INVOICES_ALL for our Chart of Accounts ‘Operations Accounting Flex’ only. Add the custom ADR created to ‘Liability, Basic’ (Line Assignment)

Step 4: Setup AAD (Application Accounting Definition)

Navigation: Setup > Accounting Setups >Sub Ledger Accounting Setups > Accounting Methods Builder > Methods and Definitions > Application Accounting Definition

Create a copy of seeded AAD only and do not modify existing AAD. I am creating a custom AAD called ‘TEST_AAD’ for COA ‘Operations Accounting Flex’.

Step 5: Setup SAM (Subledger Accounting Methods)

Navigation: Setup > Accounting Setups >Sub Ledger Accounting Setups > Accounting Methods Builder > Methods and Definitions > Subledger Accounting Methods

Create a copy of a seeded SAM and do not modify seeded SAM. Add the custom AAD to the Event Class ‘Payables’.

Step 6: Assign the custom SAM to Primary Ledger

Navigation: Set ups > Accounting Setups > Ledger Setup > Define > Accounting Setup

Verification of new SLA rule:

Create an invoice for supplier type ‘Contractor’ and create accounting

Liability Account for Supplier Type “Contractor” is 01-000-2990-0000-000

Liability Account for other Supplier Types is 01-000-2210-0000-000

Payables Duplicate Invoices

A common requirement that is there in almost all Payables department is to identify potential duplicate invoices. The standard Oracle report 'Invoice Audit Listing' is not effective when it comes to list down potential duplicate invoices. The 'Invoice Audit Listing' is more of a listing and the payables manager has to spend time and effort in analysing this report. Also, not to mention when it comes to performance this report takes quite a while to complete if you mention a very old 'Begin Invoice date'.

A common requirement that comes to my mind is to report all invoices which are of same amount and currency from a supplier within a given time period. Although this report is a relatively simple report to design, but as a thought i feel this should be included as a standard report in payables.

Indian Megavendors

The other day i was reading an article in http://specials.rediff.com/money/2008/aug/13slide1.htm on India's top three IT companies. As per this article, Gartner has come out with a report in which they predict that, Tata Consultancy Services, Infosys Technologies, and Wipro Technologies, collectively referred as 'India-3,' will emerge as the next generation of IT service megavendors. These vendors are increasingly being considered for strategic service deals, and will augment or, in some cases, replace today's acknowledged megavendors by revenue -- IBM Global Services, Accenture and EDS -- in this space by 2011, says Gartner.

Obviously this means there will be a lot of consolidation that is bound to happen in the IT space in India, as there are a lot of tier-2 firms who cannot match the pace of growth of the top 3 firms in India. This means some of these small IT companies will be forced to sell out as the war on margins and cornering a portion of the relatively fixed marketshare will become more acute. However, for the top-3 to actually reach the levels of present generation megavendors, apart from the cost advantage, they have to position on other parameters as well. The article talks of four critical competencies on which the emerging Indian megavendors are positioning themselves.

The competencies are: process excellence; world-class HR practices; providing high quality services at a low cost; the achievement of significant and disproportionate 'mind share' compared to their actual size.

However, the catch is to continue providing high quality services at a low cost and yet try and increase the mind-share further. With wage bills increasing and worries over global slowdown, maintaining low cost is definitely a big challenge. However, i feel where Indian top-3 companies are critically lacking is in thought-leadership. The culture of innovation and path-breaking developments is still not visible. The present day megavendors have primarily reached this position due to a large investment in innovation and thought-leadership. Anyways, interesting times ahead for all in tough situations, and obviously only the toughest will survive and prosper.