What to Convert in GL: Balance or Transaction Detail

A key question which all consultants face while handling GL conversion is what to convert, whether to convert the prior period balances or to convert the detailed transactions.

Typically most organisations while converting GL from a legacy system bring in only the balances data and very rarely do we bring in the transactions details. The reasons for the same is as follows:

1. Usually there is a change in COA while moving from legacy GL to Oracle GL, hence the code combination would never be the same in legacy and Oracle.

2. Drill down from Oracle GL to Oracle sub-ledger is not possible as there is no linkage between sub-ledger data and GL data post conversion.

3. The legacy system is usually archived for a defined period of time due to audit and legal reasons. This archived instance can be used for resolving historical audit and reconciliation issues that may arise at a later point in time.

However, if we are upgrading from an older version of Oracle to a new one, then it makes sense to bring in the transaction data because drill down feature would be available and code combination would remain the same across both the versions. But, here again, we need not bring in the transaction details for all historical data but only for a small period range, typically we convert transaction details from start of the year to the cut-over date and balance data for prior period-years.

Retainage and Retainage Release in Or...

Retainage and Retainage Release in Oracle Payables for a Complex Purchase Order

Retainage represents funds withheld from payment to ensure that the contractor finishes work as agreed. The buying organization releases these funds only after verifying that the contractor has fulfilled all contractual obligations. Retainage is also called "retention" or "contractual withholds".
With Oracle's Complex Work feature, contract administrator can negotiate retainage terms with the contractor and capture these as part of the contract. These terms include Retainage Rate and Maximum Retainage Amount.

Retainage Rate
The Retainage Rate determines the percentage of the amount requested that will be withheld before releasing payments to the contractor. This attribute appears on the PO Line if the Document Styles enables the use of Retainage. The Retainage Rate specified on the PO Line is applied to all Standard Invoices billed to the Pay Items of the respective Line. Based on the Retainage Rate, a certain percentage of the Standard Invoice Amount is with-held as a Retained Amount.

Maximum Retainage Amount
The Maximum Retainage Amount defines maximum amount of Retainage that can be withheld on a Contract Line. The Maximum Retainage Amount attribute appears on the PO Line if the Document Style enables the use of Retainage. Every time Retainage is withheld on an Invoice, the application checks that the total retained amount does not exceed this value.

 

Set Up Steps for Complex Purchase Orders and Retainage
Following three mandatory setups steps are required if the complex purchase orders and retainage feature will be used.

1. Create a new document style in Oracle Purchasing for handling Complex PO.
Responsibility: Purchasing
Navigation: Setup > Purchasing > Document Styles > Create
Define whether the complex PO can include advances, retainage, and progress payments

 

2. Create a retainage account in Financials Options setup.
Responsibility: Payables
Navigation: System Administrator > System Profile Options
Set the value for POR: Amount Based Services Line Type profile option to ‘Fixed Price Services’

 

3. Create a retainage account in Financials Options setup.
Responsibility: Payables
Navigation: Setup > Options > Financials Options
Enter the retainage account to use during accounting

 

 

Entering a Complex PO

1. Create a Purchase Order using Buyer Workbench. Select the Document style ‘Complex PO’ just created earlier
Responsibility: Purchasing
Navigation: Buyer Work Center > Orders

 

2. Enter the PO Header and Line details

 

3. Click on ‘Update’ icon on the PO line and enter the Maximum Retainage Amount and the Retainage Rate

 

4. Enter the additional pay items for which a payment should be made 

 

5. Enter the PO Charge account on PO Distribution and Save and Approve the PO

 

 

Entering Payable Invoices

1. Once supplier sends the invoice after the first milestone is met, raise a PO matched invoice
 

 

2. Oracle automatically creates a Retainage line based on the Retainage Rate defined earlier on the Purchase Order

 

 

3. Supplier sends the invoice after the second milestone is met. Raise a PO matched invoice

 

 

4. Oracle automatically creates a Retainage line based on the Retainage Rate defined earlier on the Purchase Order

 

 

5. At the end of the project the supplier can submit a Retainage Release Invoice for release of retainage withheld on the Contract. If the contractual clauses or other conditions governing the release of the retainage are met, the buyer can release the retainage amount applicable. Oracle has introduces a new Invoice type called ‘Retainage Release’ for this purpose

 

 

6. Enter the PO number for which you want to release the Retainage

 

 

7. Enter the Retainage Amount that you want to release and click on ‘Release’. You cannot enter an amount greater than the Retained Amount

 

 

8. An invoice of Invoice Type ‘Retainage Release’ is created for the Retained Amount

 

 

9. The Retainage details will be visible at invoice Lines

 

 

10. The Retainage Account will then be offset to Supplier Liability account for subsequent Payment

 

Recording a Refund of a Prepayment or Advance

The other day someone asked me how to do we collect a refund from an employee to whom we have made an advance payment (prepayment). There are a couple of approaches that can be used. The same approach applies to refund from suppliers as well.

Approach 1: Invoice to retire the prepayment and then Debit Memo for refund.

Step1: Create a standard invoice and apply the remaining amount of prepayment to it.

Step2: Then enter a debit memo and pay it with a Refund payment in the Payments window.The result will be that the outstanding prepayment / advance made is no longer there as this is matched to the invoice and the refund that is collected from the employee is matched to a Debit Memo in AP so that the refund is also recorded in Oracle. However, one needs to ensure that the expense account that you use in the invoice to retire the prepayment and Debit Memo for the refund is the same account.

Approach 2: Create an invoice to retire the prepayment to an amount equal to the refund. This approach to handle this scenario is pretty straight forward.

Step1: Create a standard invoice equal to the refund amount and apply the outstanding amount of prepayment to it.

Approach 3:If the employee is a salesperson or someone who would incur employee expenses regularly, then in that case the easist option would be to leave the advance / prepayment amount as-is and match it to the expense the person incurs next time around.