Retroactive Pricing

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Retroactive Pricing 1

Transcript of Retroactive Pricing

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Retroactive Pricing

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Retroactive Pricing

Contents

Introduction……………………………………………………………………………………….3

Setup……………………………………………………………………………………………...3

Methods of Updating the Retroactive Pricing…………………………………………………5

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 an agreement as a result of ongoing negotiations between the buyer and the supplier. In fact, it is common practice in certain industries to initiate and execute against an agreement with an interim price. A firm price may get finalized several months into the life 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 blanket agreements and on blanket agreements.

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

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Additionally, for orders that have been received, Oracle Purchasing automatically adjusts the accrued liability to reflect the latest pricing. Finally, for orders that have been invoiced, Oracle Purchasing automatically generates price adjustment invoices in Oracle Payables. Depending on the nature of the change, the Payables department can then process 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 Pos’Profile 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 price change(s) entered on their corresponding Blanket Agreement. If this profile is not set or is set to ‘Never’, the 'Apply Retroactive Price Update to Existing PO/Releases' checkbox will be disabled in the Blanket Agreement Approval window and the 'Retroactive Price Update of Purchasing Documents' concurrent program will not update any Releases/Standard POs.

Archive Mode

In the Document Types Form, the ‘Archive on’ for Standard POs and Releases must be set 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 have accrual/liability accounting entries, accrued receipt, or invoices), if the archive mode for that 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 Agreement tab should be disabled.

Encumbrance

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

The 'Apply Retroactive Price Updates to Existing PO/Releases' check box will not be displayed on Blanket Approval window even if the profile option, PO: Allow Retroactive Pricing of POs is set to Open Releases Only.

The 'Retroactive Price Update of Purchasing Documents' concurrent program will not perform any processing.

Methods of updating the Retroactive Pricing

Once the Blanket Agreement line has been updated with a new price, the Retroactive Price 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, then Retroactive Price Update process will update the associated Standard Purchase Order with 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 to Existing POs and Releases'.

By running the concurrent program 'Retroactive Price Update on Purchasing Documents'.

Retroactive Pricing Cycle

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The following steps outline the Retroactive Pricing Cycle with an Example of Blanket Release. The same cycle is also applicable for the Standard Purchase Order created based 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 PriceNavigation: 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 > Additional Options Tab page, select the option 'Apply Price Update to Existing POs and Releases'

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BPA Status is changed to ‘Approved’. Released amount still shows the same value.

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 Deferred Status.

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Step 11 – Run Workflow Background ProcessNavigation: Reports > Run

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

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

Query the Blanket Purchase Agreement 5894. 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. Check the accounting information for the Receive and Deliver Transactions.

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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.

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

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Find the invoice for the BPA 5894

No changes

Step 16 – Run ‘Create Adjusting Documents in Payables Program’Navigation: Other > Requests > Run

Single Request - Execute the request - ‘Create Adjusting Documents in Payables Program’ 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 Update on 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

Query the Blanket Purchase Agreement 5894. 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 > Additional Options Tab page, Do not select the option 'Apply Price Update to Existing POs and Releases'.

BPA Status is changed to ‘Approved’. Released amount still shows the same value.

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

Find the BPA 5894 Check the Approval Workflow Details. Choose Inquire menu > View Approval through Workflow.

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Note that the Workflow is completed.

Also the activity ‘Does User want to Mass Update Releases’ is returning the value ‘No’.

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

Check the Releases created against the BPA 5894. Release price for the releases are not changed to the new BPA price. Release 5894-1. Approved Release. Received & Billed.

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Release 5894-2. Approved Release. Not yet Received / Billed. Release 5894-3. Incomplete Release.

Release: 5894-1

Release: 5894-2

Release: 5894-3

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

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

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Step 7 – Check the Release Details (Informational Step – No Action Taken)Navigation: Purchase Orders > Releases

Check the Releases created against the BPA 5894. 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-approval of Releases re-priced by the Retroactive Price Update of Releases concurrent program.

Set Header Level Attribute, 'Change Order Header Auto Approve Retroactively Priced Releases', to Yes to automatically route the Blanket Releases and Standard Purchase Orders re-priced by the concurrent program thorough the Change Order Workflow process without subjecting them to other checks (that are 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 is set to No, the Open Releases/Standard POs that were re-priced will be processed by Standard Change Order Workflow functionality (which includes existing checks made before determining whether the document will go through manual 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 Retroactively

Priced Releases' Specify the Value as ‘Y’

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