92976147 Retroactive Pricing

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Retroactive Pricing

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Retroactive Pricing

Contents

Introduction.3

Setup...3

Methods of Updating the Retroactive Pricing5

Retroactive Pricing Cycle.5

Change Order Workflow Setup.22

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Introduction

Prices for items on blanket agreements can change over the effective period of anagreement as a result of ongoing negotiations between the buyer and the supplier. Infact, it is common practice in certain industries to initiate and execute against anagreement with an interim price. A firm price may get finalized several months into thelife of the agreement. In these scenarios it is possible that the updated price is applicable

retroactively. Oracle Purchasing allows buyers to make price changes on global blanketagreements and on blanket agreements.

With 11.5.9, Blanket Releases and Standard Purchase Orders that have not beenreceived or billed will be updated with retroactive price change(s) entered on theircorresponding Blanket Agreement / Global Blanket Agreements.With 11.5.10, Oracle Purchasing can optionally update prices on orders (BlanketReleases & Standard POs) to reflect the latest agreement price, even if there has beenreceiving and invoicing activities against them.

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Additionally, for orders that have been received, Oracle Purchasing automatically adjuststhe accrued liability to reflect the latest pricing. Finally, for orders that have beeninvoiced, Oracle Purchasing automatically generates price adjustment invoices in OraclePayables. Depending on the nature of the change, the Payables department can thenprocess either a payment or a debit memo request against the price adjustment invoice.

Setup

Profile Option Setup

User Profile Name: PO: Allow Retroactive Pricing of PosProfile Option Name: PO_ALLOW_RETROPRICING_OF_POPossible Values for the Profile option: blank, Never, Open Releases, All Releases

Profile option 'PO: Allow Retroactive Pricing of POs' must be set to determine if blanket

releases and standard purchase orders can be mass updated with retroactive pricechange(s) entered on their corresponding Blanket Agreement. If this profile is not set oris set to Never, the 'Apply Retroactive Price Update to Existing PO/Releases' checkboxwill be disabled in the Blanket Agreement Approval window and the 'Retroactive PriceUpdate of Purchasing Documents' concurrent program will not update anyReleases/Standard POs.

Archive Mode

In the Document Types Form, the Archive on for Standard POs and Releases must beset to 'Approve'.If the profile option PO: Allow Retroactive Pricing of Pos is set to 'All Releases', then

retroactive pricing will be performed on all releases (including those which haveaccrual/liability accounting entries, accrued receipt, or invoices), if the archive mode forthat operating unit is set to Approve.Navigation:Purchasing ResponsibilitySetup > Purchasing > Document Types

Retroactive Price Adjustment Account

In the Receiving Options Form, Retroactive Price Adjustment Account must be set.Navigation:Purchasing ResponsibilitySetup > Organizations > Receiving Options

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Cumulative Pricing

Cumulative Pricing with Retroactive Pricing is not supported.In the Blanket Purchase Agreement, "Cumulative Pricing" checkbox under Agreementtab should be disabled.

Encumbrance

Retroactive Pricing is not supported in encumbered environments. Encumbranceaccounting must be turned off. If PO Encumbrance is on, then:

The 'Apply Retroactive Price Updates to Existing PO/Releases' check box will notbe displayed on Blanket Approval window even if the profile option, PO: AllowRetroactive Pricing of POs is set to Open Releases Only.

The 'Retroactive Price Update of Purchasing Documents' concurrent program willnot perform any processing.

Methods of updating the Retroactive Pricing

Once the Blanket Agreement line has been updated with a new price, the RetroactivePrice Update process will update the associated Blanket Releases with the new price.If the Global Blanket Agreement line has been updated with a new price, thenRetroactive Price Update process will update the associated Standard Purchase Orderwith the new price.

Retroactive Pricing can be updated using any of the following method.

While approving the Blanket Purchase Agreement, In approval Window >

Additional Options Tab page, by selecting the option 'Apply Price Update toExisting POs and Releases'.

By running the concurrent program 'Retroactive Price Update on PurchasingDocuments'.

Retroactive Pricing Cycle

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The following steps outline the Retroactive Pricing Cycle with an Example of BlanketRelease. The same cycle is also applicable for the Standard Purchase Order createdbased on the Global Blanket Purchase Agreement.

Profile option: 'PO: Allow Retroactive Pricing of POs' is set as All Releases

Retroactive Price Adjustment Account Value:

Method 1:

Responsibility: Purchasing Responsibility

Step 1 Create BPANavigation: Purchase Orders > Purchase Orders

Create and approve a Blanket Purchase Agreement.

Ensure that Cumulative Pricing under Agreement Tab is disabled.

Step 2 Create ReleaseNavigation: Purchase Orders > Releases

Create Release against the BPA

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Release: 5894-1

Release: 5894-2

Release: 5894-3

Step 3 Create ReceiptNavigation: Receiving > Receipts

Create Receipt against the Release 5894-1.

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Step 4 Accounting Details (Informational Step No Action Taken)Navigation: Receiving > Receiving Transactions Summary

Find the Receipt 9837.

Check the accounting information for the Receive and Deliver Transactions.

Select the Transaction Type > Choose Tools menu > View Accounting.

Receive Transaction:

Receiving Inspection Account Debit @ (PO Unit Price * Received Quantity)

Accrual Account Credit @ (PO Unit Price * Received Quantity)

Deliver Transaction:

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Responsibility: Inventory ResponsibilityNavigation: Transactions > Material Transactions

Query for the Source Document 5894.

Check the Accounting Details for the Deliver Transaction.

Material Valuation Account Debit @ Standard Cost of the item.

Receiving Inspection Account Credit @ (PO Unit Price * Received Quantity)

Purchase Price Variance Account Credit @ Difference in Price.

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Step 5 Create InvoiceResponsibility: Payables ResponsibilityNavigation: Invoices > Entry > Invoices

Create Invoice for the Release 5894-1.

Validate and Create Accounting for the invoice.

Step 6 Accounting Details (Informational Step No Action Taken)Navigation: Invoices > Entry > Invoices

Tools menu > View Accounting

Step 7 Release Details (Informational Step No Action Taken)Responsibility: Purchasing Responsibility

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Navigation: Purchase Orders > Releases

Query the Release 5894-1.

Check the Status, Quantity Received & Quantity Billed.

Step 8 Modify the BPA Price

Navigation: Purchase Orders > Purchase Orders

Query the Blanket Purchase Agreement 5894.

Change the Price. (Changed the Price from 7 to 8)

Step 9 Approve the BPA

Approve the BPA. While approving the BPA, In approval Window > AdditionalOptions Tab page, select the option 'Apply Price Update to Existing POs andReleases'

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BPA Status is changed to Approved. Released amount still shows the samevalue.

The workflow activity 'Retroactive Update Invoiced Releases/Std POs.' is

designed to run in DEFERRED mode.

Step 10 Workflow Details (Informational Step No Action Taken)Navigation: Purchase Orders > Purchase Order Summary

Find the BPA 5894

Check the Approval Workflow Details.

Choose Inquire menu > View Approval through Workflow.

Note the Workflow Activity Mass Update Releases/Std Pos is in DeferredStatus.

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Step 11 Run Workflow Background ProcessNavigation: Reports > Run

Single Request - execute the request Workflow Background Process for theitem type PO Approval and Process Deferred as Yes.

Step 12 Check the BPA (Informational Step No Action Taken)Navigation: Purchase Orders > Purchase Orders


BPA Released amount is changed to new value.

Step 13 Check the Release Details (Informational Step No Action Taken)Navigation: Purchase Orders > Releases

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Check the Releases created against the BPA 5894.

Release price for all the 3 releases are changed to the new BPA price.

Release 5894-1. Approved Release. Received & Billed.

Release 5894-2. Approved Release. Not yet Received / Billed.

Release 5894-3. Incomplete Release.

Release: 5894-1

Release: 5894-2

Release: 5894-3

Step 14 Receipt Accounting Details (Informational Step No Action Taken)Navigation: Receiving > Receiving Transactions Summary

Find the Receipt 9837.

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Check the accounting information for the Receive and Deliver Transactions.

Select the Transaction Type > Choose Tools menu > View Accounting.

Accounting for Retroactive Pricing got created.

Receive Transaction:

Receiving Inspection Account Debit for the Changed Amount

Accrual Account Credit for the Changed Amount.

Deliver Transaction:

Retroactive Account Debit for the Changed Amount.

Receiving Inspection Account Credit for the Changed Amount.

No Accounting Entries happen in Inventory Subledger.

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Step 15 Invoice Details (Informational Step No Action Taken)Responsibility: Payables ResponsibilityNavigation: Invoices > Entry > Invoices

Find the invoice for the BPA 5894

No changes

Step 16 Run Create Adjusting Documents in Payables ProgramNavigation: Other > Requests > Run

Single Request - Execute the request - Create Adjusting Documents in PayablesProgram for the BPA 5894.

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Step 17 Invoice Details (Informational Step No Action Taken)Navigation: Invoices > Entry > Invoices

Find the invoice for the BPA 5894

PO Price Adjustment invoice is created.

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Method 2:Updating the Retroactive Pricing using the concurrent program 'Retroactive Price Updateon Purchasing Documents'.Profile option: 'PO: Allow Retroactive Pricing of POs' is set as Open Releases

Step 1 Profile Option ValueResponsibility: System Administrator ResponsibilityNavigation: Profile > System

Query the Profile Option 'PO: Allow Retroactive Pricing of POs'

Set the value as Open Releases

Step 2 Modify the BPA PriceNavigation: Purchase Orders > Purchase Orders


Change the Price. (Changed the Price from 8 to 8.5)

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Step 3 Approve the BPA

Approve the BPA. While approving the BPA, In approval Window > AdditionalOptions Tab page, Do not select the option 'Apply Price Update to Existing POsand Releases'.

BPA Status is changed to Approved. Released amount still shows the samevalue.

Check the workflow to ensure that there is no call related to Retroactive Pricing.

Step 4 Workflow Details (Informational Step No Action Taken)Navigation: Purchase Orders > Purchase Order Summary

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Find the BPA 5894

Check the Approval Workflow Details.

Choose Inquire menu > View Approval through Workflow.

Note that the Workflow is completed.

Also the activity Does User want to Mass Update Releases is returning thevalue No.

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Step 5 Check the Release Details (Informational Step No Action Taken)Navigation: Purchase Orders > Releases


Release price for the releases are not changed to the new BPA price.

Release 5894-1. Approved Release. Received & Billed.

Release 5894-2. Approved Release. Not yet Received / Billed.

Release 5894-3. Incomplete Release.

Release: 5894-1

Release: 5894-2

Release: 5894-3

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Step 6 Run 'Retroactive Price Update on Purchasing Documents'Navigation: Reports > Run

Single Request - execute the request 'Retroactive Price Update on PurchasingDocuments' for the BPA 5894.

Step 7 Check the Release Details (Informational Step No Action Taken)

Navigation: Purchase Orders > Releases


Release price for the Open releases are changed to the new BPA price.

Release 5894-1. Approved Release. Received & Billed. Price is NOT changed.

Release 5894-2. Approved Release. Not yet Received / Billed. Price is changed.

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Release 5894-3. Incomplete Release. Price is changed.

Change Order Workflow Setup

The PO Change Order Workflow attribute can be set to facilitate automatic re-approvalof Releases re-priced by the Retroactive Price Update of Releases concurrent program.

Set Header Level Attribute, 'Change Order Header Auto Approve RetroactivelyPriced Releases', to Yes to automatically route the Blanket Releases andStandard Purchase Orders re-priced by the concurrent program thorough theChange Order Workflow process without subjecting them to other checks (thatare made to determine whether the document needs to be routed thorough'Change Order Workflow, effectively short-circuiting of these checks)

The default value of the attribute would be set to No. When the above attribute isset to No, the Open Releases/Standard POs that were re-priced will beprocessed by Standard Change Order Workflow functionality (which includesexisting checks made before determining whether the document will go throughmanual re-approval or Change Order workflow)

The workflow file involved is poxwfpoa.wft.

Open the Workflow file in Workflow Builder.

Expand Attributes.

Double Click on the attribute 'Change Order Header Auto Approve RetroactivelyPriced Releases'

Specify the Value as Y

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92976147 Retroactive Pricing

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