Friday, October 18, 2013

Overview of Procure to Pay Cycle and Order to Cash cycle.


Procure to Pay:
First let’s see what the heading itself means? Procure to Pay means Procuring Raw Materials required to manufacture the final or finished Goods to Paying the Supplier from whom the material was purchased. But this is not just two steps. It involves many steps. Let’s see the steps and Oracle Application involved in performing those steps.
1.      Oracle Purchasing: You enter Suppliers of different materials and products you want to purchase to manufacture a finished good that your organization plans to sell.
2.      Oracle Purchasing: You prepare a Request for Quotation (RFQ) and send it to different suppliers to get the best and/or economical price for the product.
3.      Oracle Purchasing: Suppliers sends their quotations and you upload those quotations in Oracle Purchasing to get the best three quotes and further to get the one best quote.
4.      Oracle Purchasing: You prepare a Purchase Order(PO) against the best RFQ to buy the goods from the supplier who quoted the suitable price and sends the PO to that supplier
5.      Oracle Purchasing: The supplier receives the confirmation of purchase from PO and ships the ordered goods. You receive the goods enter a Goods Received Note (GRN) in Oracle Purchasing.
6.      Oracle Inventory / Oracle Assets: It’s up to you whether you want to receive the goods at your head office or you Inventory directly. In either case you move the received goods to your different Raw Material Inventory from Oracle Purchasing to Oracle Inventory and the Item Count increases. If the item is Asset Type then it will move to Oracle Assets at the time of Invoice creation in Oracle Payables.
7.      Oracle General Ledger: Once you move the goods to Oracle Inventory, it sends the Material Accounting to Oracle General Ledger.
8.      Oracle Payables: After this the supplier sends you the invoice for the purchased goods and you Enter or Match the invoice against the PO from Oracle Purchasing in Oracle Payables. As said before, if the item is Asset in nature then it will move to Oracle Asset.
9.      Oracle General Ledger: When you enter the invoice it means that you have created a Liability against that supplier and also you have recorded the expense incurred or asset purchased. Oracle Payables sends the invoice accounting to Oracle General Ledger.
10.  Oracle Payables: You pay the invoice and settle the Liability.
11.  Oracle General Ledger: The liability is settled and your cash movement account is updated.
12.  Oracle Cash Management: As you pay the invoice Oracle Payables sends the payment information to Oracle Cash Management for Bank Reconciliation. Once reconciled, Oracle Cash Management sends the updated Bank/Cash accounting entry to Oracle General Ledger.
13.  Oracle General Ledger: Your cash at bank is updated with actual balance.
14.  Oracle Process Manufacturing(OPM) / Oracle Discrete Manufacturing(ODM): You start the manufacturing of your final product. Both OPM or ODM requests the different raw materials from you inventory organizations and manufactures a finished good.
15.  Oracle Inventory: As the raw materials are issued to OPM and ODM the inventory sends the issuing material accounting to General Ledger and decreases the Item Count from the Raw Material Store. As the finished good is prepared, Oracle Inventory receives the finished good in Finished Good Store and increase the Item Count.

Now the final product is ready to be sold in the market and from here the O2C cycle starts.

Order to Cash Cycle:
Order to Cash means Customer’s Order Placing to Vendor’s Cash Receiving. When your final product is ready to be sold, you market it. The customer gets fascinated with the marketing campaign and decides to buy your product and from here starts the O2C cycle.
1.      Oracle Order Management: Customer places the order.
2.      Oracle Order Management: You enter the customer order
3.      Oracle Inventory: Check the available unit and the quantity ordered by the customer.
4.      Oracle Order Management: You ship the product to customer site and decreases the Finished Goods inventory.
5.      Oracle Receivables: The customer receives the product and you invoice the customer.
6.      Oracle General Ledger: You record your revenue and receivables.
7.      Oracle Receivables: The customer pays and you receive the cash/check.
8.      Oracle Cash Management: Oracle Receivables sends the customer receipt for Bank Reconciliation. After reconciliation, Oracle Cash Management send the actual bank balance or Oracle General Ledger.
9.      Oracle General Ledger: You have the actual bank balance.
This is how the P2P and O2C cycle works, but this is not the only way, obviously there are many other applications with different cycles. This is one of them

1 comment:

Srinivas Reddy said...

Dear sir,

Can you please let me know how to change location in goods receipt note.

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