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Oracle® Fusion Applications Financials Implementation Guide
11g Release 1 (11.1.2)
Part Number E20375-02
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12 Define Payables

This chapter contains the following:

Define Automated Invoice Processing Configuration

Manage Common Options for Payables and Procurement

Manage Invoice Options

Manage Payment Options

Manage Tax Reporting and Withholding Tax Options

Define Payables Configuration

Define Payables Tax and Withholding

Define Automated Invoice Processing Configuration

Integrated Invoice Imaging Solution: Overview

Paper invoices are still prevalent in today's business world prompting most organizations to implement some form of imaging capability for their payables department to help reduce receipt-to-payment cycle and meet audit requirements. This involves implementing multiple point solutions with the following challenges:

Given this a la carte selection process, the result is a disjointed bolt-on solution footprint unique to each implementation that cannot leverage native ERP capabilities and efficiencies. Such implementations often rely on custom user interfaces or push raw data directly through open interfaces, and completely bypass native ERP transaction entry and validation.

Oracle is the only vendor in the market today offering a fully integrated invoice imaging solution that provides a seamless user experience, supporting the entire invoice life cycle from scanning, recognition, and routing, to invoice entry, approval, and payment - all based on a unified security model. This end-to-end solution is certified and supported by Oracle on a common provisioning framework, with minimal setup and configuration required, thereby reducing the total cost of ownership.

Integrated Invoice Imaging Components: How They Work Together

The Oracle Fusion Payables invoice imaging process begins with invoices arriving in the mail room. Imaging specialists prepare and sort them based on parameters, such as geography, invoice amount, and due date, and then scan the invoices using Oracle Document Capture.

Images are then sent over a network file share to a central Oracle Forms Recognition server for intelligent data recognition and extraction. Any invoices that fail data extraction or validation are sent to Oracle Forms Recognition Verifier for manual resolution.

Once data recognition is completed, the invoice images are sent to Oracle Imaging and Process Management for storage and routing to accounts payable specialists using Oracle BPEL Process Manager workflows.

Accounts payable specialists can view the list of scanned images for invoice entry in the Scanned Invoices region of the Invoices work area and proceed with invoice entry using dual monitors where the invoice entry page is displayed on one monitor, and the image is displayed on the other. During invoice entry, key invoice header attributes are already prepopulated with the data extracted by Forms Recognition, thus reducing entry time and data entry errors.

Document Capture

Document Capture plays the first crucial role in digitizing paper invoices to images to support the automation necessary for streamlining invoice processing. It is designed for high volume, centralized image capture, where batches of invoices can be scanned at a time. The architecture supports implementation scenarios where companies can centrally scan all invoices by having suppliers send invoices to one location, or they can scan documents in field offices using multiple Document Capture instances.

Document Capture runs on desktop personal computers connected to scanners, and converts paper invoices to industry-standard image formats. It supports most enterprise class scanners and the leading high-volume document scanning interfaces: Image and Scanner Interface Specification (ISIS), Kofax Adrenaline, and Kofax VirtualReScan. Document Capture includes instant image processing with built-in features, such as deskew, despeckle, and black border removal to improve scan quality.

Document Capture also provides image thumbnail support during batch review so imaging specialists can quickly review the quality of all images within a batch. Imaging specialists can also append, insert, replace, and delete pages within a batch using drag-and-drop functionality.

Once invoices are scanned, the images are automatically sent to Forms Recognition for intelligent recognition, the next step in invoice processing.

Forms Recognition

Forms Recognition offers cutting-edge intelligent recognition capabilities for extracting the key invoice header data from scanned images. This extracted data is later prepopulated directly into the invoice entry user interface.

Unlike other solutions that use supplier-specific templates to extract information, Forms Recognition can intelligently locate data within the invoice, regardless of its location on the image and whether or not it has processed invoices from that supplier before. As new suppliers are added, or an existing supplier changes its invoice layout, Forms Recognition can extract data from these new invoice layouts without additional configuration.

Forms Recognition has self-learning intelligence to improve scan accuracy for suppliers over time, and provides flexibility to define specific rules for attributes, such as format masks on invoice number and PO number, to further boost recognition results. You can also configure validations for the extracted data against the Oracle Fusion Applications database. This results in highly accurate data recognition that dramatically decreases the need for human intervention to correct and resolve exceptions.

For Payables invoice processing, PO number, supplier, invoice number, invoice amount, and invoice date are extracted as part of the predefined configurations.

Upon successful data recognition, the invoice images and extracted information are automatically sent to the Imaging and Process Management repository. Imaging and Process Management then stores the invoice images in the content repository and routes them to individual accounts payable specialists. Once the Forms Recognition application is set up, all these steps are executed without human intervention.

Forms Recognition consists of the following components:

Forms Recognition Designer

Forms Recognition Designer enables you to customize the invoice recognition process, such as information to be extracted, and verification of the processing results. Such configurations are stored in the Forms Recognition project file and its associated initialization (.ini) file.

The project file contains the definition of the attributes to be recognized, database queries to import list of values for validation, and so on. Payables delivers a preconfigured initialization (.ini) file to be used for your implementation project.

The Forms Recognition Designer is used only during implementation time and is not part of daily processing.

Forms Recognition Runtime Service

Forms Recognition Runtime Service runs in the background as a server process. Each Forms Recognition Runtime Service instance can be configured to perform specific steps within the overall process, and multiple Forms Recognition Runtime Service instances can be run on a single master server. For scalability purposes, you can set up multiple servers, each running multiple instances of the Forms Recognition Runtime Services that can be centrally managed through the Forms Recognition Runtime Service Management Console.

Each Forms Recognition Runtime Service instance can be configured to either run the Import, Export, and Clean Up service, or the Recognition, Classification, and Extract service. Batches that cannot be completely processed by Forms Recognition Runtime Service are forwarded to the quality assurance application called Forms Recognition Verifier to be corrected manually.

Forms Recognition Verifier

Forms Recognition Verifier is the quality assurance application of the Forms Recognition suite. The application detects all documents with data recognition problems and presents them to the operator for verification.

If Forms Recognition Runtime Service fails to extract and validate an invoice in a batch, the entire batch is marked as failed and will not be exported to the image repository. Recognition failure is most likely due to one of the following:

An accounts payable specialist reviews incomplete batches using Forms Recognition Verifier and resubmits them after correcting the exceptions.

The Forms Recognition Verifier, like Document Capture, is another client application providing multiple deployment options. Forms Recognition Verifier can either be set up on each designated user's workstation, or users can access Forms Recognition Verifier instances using remote desktop technologies.

Imaging and Process Management

Imaging and Process Management is part of the Oracle Enterprise Content Management suite. This is where invoice images are stored and routed to accounts payable specialists. For the rest of the invoice life cycle, any reference to the invoice image points to the Imaging and Process Management repository so documents are never replicated.

Images sent by Forms Recognition are imported by the Imaging and Process Management Input Agent, which is a scheduled process. Images must be associated with a data file containing information on the image location, as well as the extracted data. For the invoice imaging solution, the data file is generated by Forms Recognition Runtime Service after successfully completing the data recognition.

Imaging and Process Management and the content server, part of Enterprise Content Management, give you the flexibility to attach configurable storage and security policies to content. For example, for invoices you can set metadata to determine how long the documents will be stored, on what storage device, and who will be able to access and view them. The ability to move images over storage devices as needed maximizes the use of your infrastructure.

After images are stored, Imaging and Process Management creates a BPEL Process Manager task for each invoice, which then routes the images to appropriate accounts payables specialists for data entry. Imaging and Process Management also provides an image viewer embedded within the Payables application, allowing users to review and annotate the images.

Invoice Image Routing Process and Payables Invoices Work Area

Imaging and Process Management utilizes business process management technologies for image routing. Image routing is done through a BPEL process containing the payload information as well as business rules. A new instance of the BPEL process is generated when an invoice image is saved successfully in Imaging and Process Management, which is then routed based on the configured rules.

Once routing rules are set up, the whole process is automated so accounts payable personnel do not have to worry about keeping track of invoices that need to be assigned to various accounts payable specialists for data entry.

Payables provides a sample approval rule for image routing based on the invoice amount. This rule must be modified for the implementing company's application users. Additional routing rules can also be configured using predefined invoice header attributes.

The Invoices work area optimizes the operational efficiency by leveraging information driven architecture to push scanned invoices automatically to accounts payable specialists so that they can proceed with invoice entry without searching for the information.

The main user interfaces pertinent to the invoice imaging flow are as follows:

During transaction entry, accounts payable specialists can view and annotate the invoice image using the embedded Imaging and Process Management image viewer. Upon saving the invoice, the invoice image is automatically linked to the document as an attachment and will be available throughout the invoice life cycle.

Integrated Invoice Imaging Implementation: Critical Choices

The typical topology for implementing the Oracle Fusion Payables invoice imaging solution usually involves setting up one or more locations for invoice scanning and data recognition depending on throughput, geography, and audit requirements.

Note

There is only one instance of Oracle Imaging and Process Management, image routing Oracle BPEL Process Manager server, and Payables application in any Oracle Fusion Applications implementation.

A critical component in this topology is the network file share, or file system, where invoice images are transferred from scanning locations to the Imaging and Process Management image repository. You must set up a file share for the following folders:

Key points to consider for the topology:

Document Capture

Hardware Requirement

Install Document Capture on a machine with minimum duo-core processor and 4 GB RAM.

Scanning Recommendations

Each scanner requires a dedicated Document Capture instance to support the scanning process. Following are key implementation recommendations:

Other Image Processing Recommendations

Use TIFF image format with International Telegraph and Telephone Consultative Committee (CCIT) Group IV compression at 300 dpi for optimal balance between scan quality and image size. JPEG format is not recommended as the lossy compression logic results in loss of image details affecting recognition accuracy. This configuration should already be set up in the predefined Document Capture scan profiles.

For the image batch size, less than 25 images per batch is recommended to avoid delay caused by recognition exception, as Forms Recognition only pushes a batch to Imaging and Process Management when all images in the batch are processed successfully.

To optimize for high volume scanning, set up the Document Capture Commit Server to schedule image export to the Forms Recognition Import folder every ten to fifteen minutes.

Forms Recognition

Forms Recognition consists of Oracle Forms Recognition Runtime Service, Oracle Forms Recognition Designer, and Oracle Forms Recognition Verifier, each with different implementation considerations.

Forms Recognition Runtime Service

Forms Recognition Runtime Service is the data recognition component, and each Forms Recognition Runtime Service instance can perform one of the following tasks:

Hardware Requirement

Forms Recognition Runtime Service should be installed on a machine with minimum duo-core processor at 2 GHz and 2 GB RAM per core. In most cases, a server with quad-core processor and minimum 8 GB RAM is recommended so more Forms Recognition Runtime Service instances can be dedicated to the resource intensive recognition task.

Note

The number of Forms Recognition Runtime Service instances running on a server must not exceed the number of processor cores. For example, you should run up to four Forms Recognition Runtime Service instances on the typical quad-core server.

Scalability Considerations

If one server is not sufficient for your processing throughput requirement, you can set up multiple servers running Forms Recognition Runtime Service to be managed by the same Form Recognition Runtime Service Manager.

Consider the following points when determining the number of Forms Recognition Runtime Service instances needed for your implementation:

In a typical quad-core server, this means that you will have a total of three Forms Recognition Runtime Service instances - one running Import, Export, Clean Up, and three running data recognition.

Other best practices include:

Forms Recognition Designer

The Forms Recognition Designer is a client tool for configuring implementation details, known as a project, and its initialization (.ini) file. A preconfigured initialization (.ini) file is installed as part of Oracle Fusion Applications to be used for your customized project. You must modify the project and the .ini file on site to update the Oracle Fusion Applications database connection information, the Forms Recognition Import, Batch, and Export folder locations, and any additional data validation to be performed.

Since the number of users performing this task is limited, it is recommended that remote desktops or Citrix accounts be provided for Forms Recognition Designer access to centralize installation and maintenance effort.

Forms Recognition Verifier

The Forms Recognition Verifier is a client tool for resolving recognition exceptions, which in most cases are handled by the payables department. Each Forms Recognition Verifier instance must access the Forms Recognition Batch folder and should be colocated with the Forms Recognition Batch folder to minimize image loading time.

Since the number of users performing this task is limited, it is recommended that remote desktops or Citrix accounts be provided for Forms Recognition Verifier access to centralize installation and maintenance effort.

Imaging and Process Management and Routing

The common provisioning framework installs and preconfigures the Imaging and Process Management image repository, but prior to running the provisioning process, the file system for the Imaging and Process Management Input Directory, which is the same as the Forms Recognition Export folder, must be set up. It is recommended that the Imaging and Process Management image repository be colocated with the Imaging and Process Management Input Directory to minimize network traffic when transferring images.

The average size of a black-and-white invoice image saved in TIFF format with CCIT Group IV compression at 300 dpi is 40 KB per page. It is critical that invoices are digitized using the Adaptive Thresholding technology to remove gray scaling, otherwise the image size can go up to 300 KB per page. You can use this sizing information, together with the estimated invoice volume, to determine the amount of storage needed for Imaging and Process Management.

A default image routing rule, based on the invoice amount assigned to individual users, is delivered as part of the provisioning process. You must modify these routing rules using the BPM Worklist application to achieve the desired specialization within the payables department. For example, routing can be based on supplier, PO prefix, or invoice number prefix, to ensure the right group of payables specialists process invoices based on their specific assignments. Moreover, to achieve optimal load balancing among specialists, and to avoid task reassignment, routing rules should be set up to assign invoices to a user group instead of an individual accounts payable specialist.

Installing and Configuring the Integrated Invoice Imaging Solution: Explained

The Oracle Fusion Payables integrated invoice imaging solution provides predefined configurations for Oracle Document Capture, Oracle Forms Recognition, Oracle Imaging and Process Management, and routing rules.

Setting Up Document Capture

Document Capture is a Windows based application that must be installed on every Windows machine that is connected to the scanner.

Payables provides a predefined configuration (a File Cabinet) for invoice processing. You can modify the configuration according to your requirements.

A Document Capture file cabinet defines how documents are scanned, processed, and saved. It encapsulates the following information:

The following table provides details on the Payables predefined file cabinet, called Payables Invoice with OFR, with the artifact name of ApInvoiceOfrCabinet.zip.


File Cabinet Component

Details

Attribute Definitions

Unique Reference Number (URN) generated automatically by Document Capture

Other attributes are recognized by Forms Recognition so there is no need to have other attributes

Commit Profiles

AP_INV_OFR

  • Commit Driver - Commit Text File

  • Document Output Format - TIFF Multiple Page

Scan Profile Name

Payables Invoice with OFR

Index Profile Name

Not applicable as Document Capture does not perform data capture

For more information on configuring Document Capture for Oracle Fusion Payables, see the Oracle Fusion Applications Post-Installation Guide. For more information on administering Oracle Document Capture, see the Oracle Document Capture Administrator's Guide.

Setting Up Forms Recognition

The predefined Payables initialization (.ini) file supports optical character recognition (OCR) and extraction of the following invoice header attributes:

For invoice line attributes, accounts payable specialists must provide line information manually during invoice entry.

Caution

Do not update the export section of the .ini file as it is critical for proper integration with Imaging and Process Management.

For more information on the additional attributes that are supported, see the Oracle Forms Recognition AP Solution Guide. For more information on installing the Payables .ini file, see the Oracle Fusion Applications Post-Installation Guide.

Setting Up Imaging and Process Management

Imaging and Process Management is installed as part of Oracle Fusion Applications and the Payables Invoice Application, Input, and Search definitions are predefined. As part of the provisioning process, you must specify the location of the input directory from where Imaging and Process Management imports images.

Sign in to Imaging and Process Management with a user having the FUN_FINANCIAL_APPLICATION_ADMINISTRATOR_JOB role to access the predefined configuration details.

Imaging and Process Management configurations that are pertinent for Payables include:

Payables Invoice Application

The Payables Invoice Application definition captures details on how invoice images are stored, such as application security, document security, and workflow configuration, as described in the following table.


Property

Property Component

Details

Application Security

Not applicable

Application security captures the roles, also called security groups, that can access the application definition and modify the details. By default, the FUN_FINANCIAL_APPLICATION_ADMINISTRATOR_JOB role is given access to the Payables Invoice Application definition.

Document Security

Roles

The following roles are given access to view, write, and delete invoice images:

  • AP_ACCOUNTS_PAYABLE_MANAGER_JOB

  • AP_ACCOUNTS_PAYABLE_SPECIALIST_JOB

  • AP_ACCOUNTS_PAYABLE_SUPERVISOR_JOB

  • FUN_FINANCIAL_APPLICATION_ADMINSTRATOR_JOB

Document Security

Document Access

In addition to view, write, and delete, Imaging and Process Management lets you annotate the image. To annotate, you must have access to either Annotate Standard or Annotate Restricted. If you have the Annotate Restricted access, you can create annotations that can be hidden from users without Annotate Restricted access.

Users with the FUN_FINANCIAL_APPLICATION_ADMINISTRATOR_JOB role can only view document and grant document access to other job roles or users.

BPEL Configuration

NA

BPEL configuration stores the details of the services initiated by Imaging and Process Management that publishes the invoice data and images to the scanned invoices table.

Caution

Do not modify this configuration since it is critical for routing invoices to the invoice entry user interface.

Payables Invoice Input

The Payables Invoice Input definition captures details of the data files associated with scanned images, such as order of fields and file format masks, as described in the following table.


Property

Property Component

Details

Field Mapping

Input Mapping

The order and type of data in the input data file. The predefined input mapping fields are supplier, purchase order, invoice number, invoice amount, invoice date, tax registration number, and business unit.

The input data file is created by Document Capture and Forms Recognition and the mapping defined here is in sync with the mapping defined in the Document Capture and Forms Recognition configurations, so this should not be modified unless all three configurations are modified together.

Field Mapping

Input Mask

The file naming pattern consisting of a file name prefix and an extension. The predefined input mask is APINV*.001. The asterisk is a wild card representing one or more characters.

The predefined Document Capture and Forms Recognition configurations already follow this naming format so this should not be modified unless all three configurations are modified together.

Field Mapping

Delimiter

The character used as a field delimiter within the input data file. The predefined delimiter is the vertical bar (|).

The predefined Document Capture and Forms Recognition configurations already follow this delimiter format so this should not be modified unless all three configurations are modified together.

Input Security

Not applicable

The roles that can modify the input definition. By default, the FUN_FINANCIAL_APPLICATIONS_ADMINISTRATOR_JOB role is given access to the input definition.

Payables Invoice Search

The Payables Search definition captures details on how to search invoices, such as fields to search, and which roles can search, as described in the following table.


Property

Description

General

The search name, description, instructions, and the maximum number of search results. The predefined search name is Payables Invoice Search with a maximum of 200 search result rows.

Results Formatting

Labels assigned to each column in the result table. The predefined column labels are Invoice Number, Invoice Date, Invoice Amount, Supplier, Purchase Order, Tax Registration Number, Document ID, and Document Creation Date.

Conditions

Filtering expression used to limit search results.

Parameters

Attributes that users can search on. The predefined search columns are Supplier, Purchase Order, Invoice Number, and Document Creation Date.

Security

The predefined roles and permissions are as follows:

  • AP_ACCOUNTS_PAYABLE_MANAGER_JOB can view, modify, and delete.

  • AP_ACCOUNTS_PAYABLE_SUPERVISOR_JOB can view and modify.

  • AP_ACCOUNTS_PAYABLE_SPECIALIST_JOB can view.

  • FUN_FINANCIAL_APPLICATION_ADMINISTRATOR_JOB can view, modify, delete, and grant access.

Setting Up Routing Rules

When an invoice is stored in Imaging and Process Management, it is sent to the accounts payable specialists for invoice entry completion based on the defined routing rules. When you access Payables, the Invoices work area displays the list of assigned images.

Payables provides a predefined approval rule called FinApImageTransferRequestForAction. The approval rule assigns the image to a user if the amount is greater than 1000, otherwise the image is assigned to a different user. Since the rule definition includes sample users, you must reconfigure the rule before using it.

For more information on configuring routing rules, see the Oracle Fusion Middleware Modeling and Implementation Guide for Oracle Business Process Management.

Manage Common Options for Payables and Procurement

Common Options for Payables and Procurement: Critical Choices

Common Options for Payables and Procurement are setup options that are used by features throughout the procure-to-pay business flow, such as default accounts, additional legal entity information, accounting options, and self-billed invoices.

Set options for the following:

Default Distributions

Default distributions are used to define the various accounts applicable for accounting for payables transactions. Invoices may get some distributions from supplier site assignments and others from the common options setup.

Offset Segments

If you enter invoices for expenses or asset purchases for more than one primary balancing segment value, you might want to use automatic offsets to keep your Oracle Fusion Payables transaction accounting entries balanced. If you do not use automatic offsets, Payables creates a single liability accounting entry for invoice transactions and a single cash type accounting entry for payment transactions.

Currency Conversion

This tables lists the options you can set for currency conversion.


Option

Description

Require conversion rate entry

Require a conversion rate whenever you enter an invoice or a payment in a currency other than your ledger currency. If you maintain daily rates, Payables populates the rate automatically based on the date and the rate type you enter. If daily rates do not exist for the date and rate type, and if this option is enabled, you cannot enter or save the transaction. If the conversion rate type is User, then Payables always requires that you enter the conversion rate. You cannot create accounting entries for, or pay foreign currency invoices without conversion rates.

If you do not enable this option, after you have entered invoices or created payments, you can enter conversion rates manually or by using the Apply Missing Conversion Rates program. When you create a bills payable, you are required to enter a maturity rate, rate type, and date.

Conversion rate type

Default conversion rate type when you enter invoices or create payments. You can change it at invoice entry or payment creation time.

Realized Gain or Loss Distributions

Default realized gain and loss accounts for payments from each of your bank accounts. If the conversion rate changes between invoice entry and payment, the application automatically calculates the realized gain or loss and records it in these accounts.

Expense Accruals

Determine when to accrue for expense items.

Self-Billed Invoices

This tables lists the options you can set for self-billed invoices.


Option

Description

Gapless invoice numbering

Enable gapless, that is, no breaks in numbering, invoice number generation for your buying organization during pay on receipt processing. You can enable gapless numbering for the entire business unit with this setting or limit it to a supplier site.

Buying Company Identifier

A unique identifier for the business unit that is included in the invoice number created by the pay on receipt process and in the debit memo number resulting from return receipts.

Legal Entity Information

This tables lists the options you can set for legal entity information.


Option

Description

VAT Registration Member State

If your company operates in a member state of the European Union, select the name of the country.

VAT Registration Number

If your company operates in a member state of the European Union, enter the value-added tax (VAT) registration number for your organization. Your organization is assigned a VAT Registration Number if you register to pay VAT. The first two characters of a VAT registration number are the country code for the country or state where the registered company or organization is located.

Bill-to Location

Enter the bill-to location to provide default values. The application uses the Bill-to Location to derive legal entity information.

Default Distributions: Explained

Default distributions are used to define the various accounts applicable for accounting for payables transactions. Invoices may get some distributions from supplier site assignments and others from the common options setup.

Default Distributions

The following default distributions are defined on the Manage Common Options for Payables and Procurement page.

Automatic Offsets: Explained

If you enter invoices for expenses or asset purchases for more than one primary balancing segment value, you might want to use automatic offsets to keep your Oracle Fusion Payables transaction accounting entries balanced. If you do not use automatic offsets, Payables creates a single liability accounting entry for invoice transactions and a single cash type accounting entry for payment transactions.

When you use automatic offsets, Payables automatically creates balancing accounting entries for your transactions. The general ledger account that each offsetting accounting entry is charged to depends on which offset segment method you use, Primary balancing segment or All segments, except natural account.

Invoice Accounting Entries

Although Payables builds the general ledger accounts to which amounts are charged differently, depending on the method you use, in either case Payables automatically allocates amounts for the following invoice accounting entries:

Payment Accounting Entries

Payables allocates amounts for the following payment accounting entries:

Offset Segments: Critical Choices

If you want Oracle Fusion Payables to create balanced accounting entries for your invoice and payment transactions without having to define intercompany or intracompany rules, select the segments you want to override on the offset entry lines. Consider this option carefully before setting it. Changing automatic offsets after creating accounting entries can result in accounting inconsistencies or slow performance. This option is also used by Oracle Fusion Receiving to derive the receiving inspection account based either on the accrual distribution at the time of receipt, or on the charge distribution at time of delivery.

More complex offsetting requirements can be met by disabling automatic offsets and setting up intracompany or intercompany rules at the ledger level in Oracle Fusion General Ledger.

Note

If you enable additional balancing segments for your chart of accounts, you must define intracompany or intercompany rules if you want the intercompany engine to balance the journal entry by these additional balancing segments.

Select how to offset segments from the following options:

None

Payables uses the invoice liability distribution as the liability entry line account without overriding any segments. Receiving uses the receiving inspection distribution defined for the destination organization. If you anticipate creating invoices that cross balancing segment values, then either set up automatic offsets in Oracle Fusion Payables or intracompany or intercompany rules in Oracle Fusion General Ledger.

Primary Balancing Segment

Payables uses the invoice liability distribution and overrides the primary balancing segment with the one from the charge distribution to build the liability entry line account. The resulting journal entry is balanced by the primary balancing segment. Receiving uses the receiving inspection distribution for the destination organization, and overrides the primary balancing segment with the one from the PO charge distribution to build the receiving inspection entry line account.

This figure shows how an invoice liability entry line account is built when the offset segment method is set to Primary balancing segment. The invoice distribution combination provides the primary balancing segment value and the liability distribution on the invoice header provide the remaining segment values.

Primary balancing segment offset method

All Segments, Except Natural Account

Payables uses the charge distribution combination from the invoice distribution and overrides the natural account segment with the one from the invoice liability distribution to build the liability entry line account. The resulting journal entry is balanced by all segments, except the natural account segment. Receiving uses the charge distribution and overrides the natural account segment with the one from the receiving inspection distribution for the destination organization to build the receiving inspection entry line account.

This figure shows how the liability entry line account is built when the offset segment method is set to All segments, except natural account.

All segments except natural account
offset method

Creating Balanced Liability Account Entries by Primary Balancing Segment: Example

This example uses a single invoice with two items to illustrate how to build liability accounts against different companies.

Scenario

A supplier sends you an invoice for two items. Each item should be charged to a different company.

Transaction Details

The invoice details are as follows:

Analysis

The accounting flexfield structure consists of the following segments:

Each primary balancing segment value represents a company. The default liability account for the supplier site in this example is 00-LIAB-000. The offset segments method on the Manage Common Options for Payables and Procurement page is set to Primary balancing segment.

This table lists the distribution combination information that you enter for each item line on the invoice.


Invoice Distribution Combination

Debit

Credit

01-EXP1-111

60

02-EXP2-222

40

Resulting Liability Account Journal Entries

This table lists the liability accounts and amounts that are automatically created when you account for the invoice.


Liability Account

Debit

Credit

01-LIAB-000

60

02-LIAB-000

40

Creating Balanced Liability Account Entries by All Segments Except Natural Account: Example

This example uses a single invoice with two lines to illustrate how to build the liability accounts using the All segments, except natural account offset segments method.

Scenario

A supplier sends you an invoice for two items. The offsetting account must retain all segments but the distribution's account segment.

Transaction Details

The invoice details are as follows:

Analysis

The accounting flexfield structure consists of the following segments:

Each primary balancing segment value represents a company. The default liability account for the supplier site in this example is 00-LIAB-000. The offset segments method on the Manage Common Options for Payables and Procurement page is set to All segments, except natural account.

This table lists the distribution combination information that you enter for each item line on the invoice.


Invoice Distribution Combination

Debit

Credit

01-EXP1-111

60

02-EXP2-222

40

Resulting Liability Account Journal Entries

This table lists the liability accounts and amounts that are automatically created when you account for the invoice.


Account

Debit

Credit

01-LIAB-111

60

02-LIAB-222

40

Accruing Expense Items: Critical Choices

The Accrue Expense Items option on the Manage Common Options for Payables and Procurement page determines when to accrue for expense items. Select from one of the following:

Note

Inventory items are always accrued at receipt.

At Receipt

Accrue for expense items when receipts are created. You can override this setting on the PO schedule for expense destination types.

Period End

Accrue for expense items at period end. Select this method if the expenses must be booked at the end of the period. While closing the period, expense accruals will be created for all receipts that do not have invoices. These accrual entries will be reversed when the next period is opened.

FAQs for Manage Common Options for Payables and Procurement

What's the difference between conversion rate gain or loss distributions and realized gain or loss distributions?

Conversion rate gain or loss distributions represent rate variances for inventory items or expense items that accrue on receipt. The invoice validation process calculates the variance between the invoice and either the purchase order or the receipt, depending on the match option.

Realized gain or loss distributions represent rate variances between invoice entry and payment. The gain or loss is calculated at payment issue, maturity, or clearing depending on the Account for Payment option setting, as well as at prepayment application.

Realized gain or loss is always calculated at foreign currency prepayment application time, regardless of the Account for Payment setting.

Manage Invoice Options

Invoice Options: Critical Choices

Invoice options are settings and default values that control how Oracle Fusion Payables processes invoices for a business unit. You can specify options for the following invoice areas on the Manage Invoice Options page:

Invoice Entry and Matching

This table lists the options you can set for invoice entry and matching.


Option

Description

Require invoice grouping

Requires that you enter the name of a group when creating an invoice.

Allow document category override

Allows override of the document category that is automatically assigned to an invoice if the Sequential Numbering Enforced profile is set to Partially Used or Always Used. If the profile is set to Not Used, the application does not assign a document category to an invoice, and you cannot set this option or enter a document category for an invoice.

Allow adjustments to paid invoices

Lets you cancel or add lines to paid invoices. In addition, you can unmatch an invoice from a purchase order that is not finally matched, and match the invoice to a different purchase order. You cannot modify distributions because it would affect the accounting.

Recalculate invoice installments

Recalculates installments during the invoice validation process.

Receipt acceptance days

Specifies the number of days added to the Goods Received date when recalculating installments.

Accounting date basis

Provides the basis for the default accounting date. If you select Goods received or invoice date, and the invoice does not have a date for goods received, then the application uses the invoice date as the default accounting date. If you select Goods received or system date, and the invoice does not have a date for goods received, then the application uses the system date as the default accounting date.

Allow final matching

Lets you perform a final match when you match an invoice to a purchase order, or when you adjust a matched invoice distribution. You cannot perform a final match when matching invoices to receipts.

Allow matching distribution override

Allows override of the invoice distribution created from matching an invoice to a purchase order.

You cannot override the distribution for a matched invoice if you accrue at receipt. In addition, you cannot override the distribution if the purchase order is projects-related, and the item destination for the purchase order distribution is inventory.

Transfer PO distribution additional information

Transfers descriptive flexfield information from the purchase order distribution to the invoice distribution when you match an invoice to a purchase order. If you enable this option, make sure that the flexfield structure is the same for the purchase order distributions and the invoice distributions.

In addition to the options previously listed, you can specify default values for the following attributes on both the Manage Invoice Options page and on the supplier setup. Payables uses the default values from the Manage Invoice Options page, unless you specify a different value for the supplier.

Discounts

This table lists the options you can set for discounts. You can also set these options on the supplier setup, except for Discount Allocation Method. The values for these options on the supplier setup are: Yes, No, Default from Payables Options.


Option

Description

Exclude tax from calculation

Subtracts the tax amount from the invoice amount during invoice entry, when calculating the discountable amount for an installment. If you enable this option, you cannot select a Discount Allocation Method of Tax lines and single distribution.

Exclude freight from calculation

Subtracts the freight amount from the invoice amount during invoice entry, when calculating the discountable amount for an installment.

Discount allocation method

Allocates discounts across distributions.

Always take discount

Takes the available discount for a supplier, regardless of when you pay the invoice.

Prepayments

This table lists the options you can set for prepayments.


Option

Description

Payment terms

Represents default payment terms. For example, you may want to have immediate payment terms for all prepayment type invoices.

Settlement days

Specifies the number of days to add to the system date to calculate the default settlement date for a prepayment. You cannot apply a prepayment to an invoice until on or after the settlement date.

You can also set this option on the supplier setup. The value for the supplier setup determines if this option is used.

Use distribution from purchase order

Builds the distribution combination for the matched invoice distribution by taking the purchase order distribution combination and overriding the natural account segment with the one from the supplier site prepayment distribution or, if not defined, from the common options prepayment distribution.

Show available prepayments during invoice entry

Displays the number and amount of available prepayments during invoice entry.

Approvals

You can use the invoice approval workflow to automate your invoice approval process. The workflow determines if an invoice requires approval, and if so, automatically routes the invoice to the applicable approvers who then approve or reject the invoice.

This table lists the options you can set for the invoice approval process.


Option

Description

Enable invoice approval

Processes invoices through the approval workflow. The approval workflow is automatically initiated for payment requests and self-service invoices that are created in Oracle Fusion Supplier Portal and not matched to a purchase order.

Require validation before approval

Processes only invoices that are validated. Enable this option if you need the invoice validation process to create tax distributions for an invoice before approvers review it. Payment requests and self-service invoices created in Supplier Portal that are not matched to a purchase order always require approval before validation, regardless of the option selected.

Require accounting before approval

Processes invoices that are accounted.

Allow force approval

Allows managers to override the workflow and manually approve invoices. For example, you might want to force approval of an invoice if the invoice approval workflow does not complete, or if you have authority to pay an invoice without using the workflow process.

Interest

This table lists the options you can set for interest on overdue invoices.


Option

Description

Create interest invoices

Calculates interest on overdue invoices and creates interest invoices. You can also set this option on the supplier setup. The values for this option on the supplier setup are: Yes, No, Default from Payables Options.

Minimum interest amount

Minimum amount of calculated interest below which an interest invoice is not created.

Interest allocation method

Allocates interest across distributions.

Interest expense distribution

Distribution combination used if allocating interest expense to a single distribution.

Payment Requests

You can specify the following default values for a payment request:

Self-Service Invoices

This table lists the options you can set for invoices created in Supplier Portal.


Option

Description

Limit invoice to single purchase order

Limits an invoice to the schedules belonging to a single purchase order.

Allow invoice backdating

Allows a supplier to enter an invoice for a date in the past.

Allow unit price change for quantity-based matches

Allows a supplier to enter a unit price on the invoice that is different from the unit price on the purchase order.

Invoice Installments: How They Are Recalculated

During invoice entry, Oracle Fusion Payables creates installments automatically using the payment terms and terms date. You can optionally have Payables recalculate invoice installments during the invoice validation process.

Settings That Affect Installment Recalculation

Payables recalculates installments during invoice validation when you set the Recalculate invoice installments option on the Manage Invoice Options page.

Restriction

Installments are recalculated unless you have manually updated any of the invoice installments or split the installment.

Installments are also recalculated if you set the Exclude tax from discount calculation option on the Manage Common Options for Payables and Procurement page and you manually change the tax amount. This re-creation of invoice installments is not based on the Recalculate invoice installments setting.

How Invoice Installments Are Recalculated

Payables uses the most recent of the available start date options and the most favorable of the available payment terms. Payables determines which payment terms are more favorable by comparing the ranks assigned to the terms.

This table shows the start dates and payment terms that installment recalculation uses for matched and unmatched invoices.


Matched to a PO

Start Date

Payment Terms

No

Most recent of the following:

  • Invoice date

  • Terms date

  • Goods received date plus receipt acceptance days

Invoice payment terms

Yes

Most recent of the following:

  • Invoice date

  • Terms date

  • Goods received date plus receipt acceptance days

More favorable of the following:

  • Invoice payment terms

  • PO payment terms

Discount Allocation Methods: Critical Choices

Determine the method to use for distributing the discounts you take when making payments. Select one of the following options:

All Invoice Lines

Oracle Fusion Payables automatically prorates any discounts across all invoice lines. Payables assigns the discount to the charge account unless the invoice is matched to a purchase order with Accrue at receipt enabled, in which case the discount is assigned to the price variance account.

Note

If you exclude tax from the discount calculation and select this method , Payables allocates discounts only to expense lines and not to the tax lines.

Tax Lines and Single Distribution

Payables automatically prorates a percentage of the discount across the tax lines. The percentage of discount prorated is equal to the percentage of the tax lines. Payables credits the remaining discount amount to the Discount Taken distribution on the Manage Common Options for Payables and Procurement page. For example, if your tax distributions are 10 percent of the total invoice amount, Payables prorates 10 percent of the discount amount across the tax distributions and credits the remaining 90 percent of the discount amount to the Discount Taken distribution.

You cannot select this method if you exclude tax from discount calculation.

Single Distribution

Payables credits all discounts to the Discount Taken distribution on the Manage Common Options for Payables and Procurement page. If you enable automatic offsets, and want to distribute discount taken amounts across balancing segments, select the Single distribution method.

Interest Invoices: Explained

Oracle Fusion Payables automatically creates invoices to pay interest for overdue invoices if you enable automatic interest calculation for a supplier, and if you pay an overdue invoice in a payment process request or with a Quick payment. The interest invoice is automatically paid along with the overdue invoice.

To use automatic interest rate calculation, define the interest rates and enable the Allow interest invoices option on the Manage Invoice Options page and the Allow interest invoices option for the supplier. You can add, change, or delete a rate at any time. If a rate is not defined, a zero rate is used.

Note

Payables does not create interest invoices when you pay overdue invoices with a Manual payment.

Interest invoices have the following components:

Number

The interest invoice number is the same as the overdue invoice number, but with the suffix -INTx, where x is the count of interest invoices that were created for the overdue invoice. For example, the third interest invoice created for an overdue invoice has the suffix -INT3.

Terms

The payment terms on an interest invoice are Immediate. If you do not have Immediate terms defined, the interest invoice payment terms are the same as the overdue invoice.

Amount

The amount of the interest invoice is the interest amount owed. Payables calculates interest based on the rate you enter on the Manage Interest Rates page in accordance with the United States Prompt Payment Act. The formula used compounds monthly, up to a maximum of 365 days interest.

Currency

Interest invoices have the same invoice currency and payment currency as the overdue invoice.

Interest Allocation Methods: Critical Choices

Oracle Fusion Payables creates and accounts for interest invoices based on one of the following options:

Single Distribution

Payables creates interest invoices with a single distribution using the Interest Expense distribution on the Manage Invoice Options page.

All Invoice Lines

Payables uses the natural account segment from the Interest Expense distribution on the Manage Invoice Options page when it builds expense distributions for an interest invoice.

Payment Requests: Explained

Oracle Fusion Receivables and Oracle Fusion Expenses can submit requests to Oracle Fusion Payables to disburse funds to a payee who is not defined as a supplier. Payables records these requests as payment requests. You can disburse the funds and manage the payment process using the payment management functionality that is available in Payables.

Create a payment request from Receivables for a customer refund or from Expenses for an expense report. Expenses submits payment requests to request reimbursement of employee expenses to the employee or directly to the corporate credit card provider. Once the Expense Report Auditor has completed their review and determined the expense report is ready for reimbursement, they will submit the Process Expense Reimbursement program to create the payment request real time in Payables. Any exceptions to this process are managed in Expenses.

Note

You can only submit a payment request from other applications; you cannot enter a payment request for a payee directly in Payables.

Setting Up Payment Requests

There are no specific setup steps required to use payment requests however, the following setups do affect the payment request process. Review these setups if you plan to use payment requests.

You can use the following Oracle Fusion Payments setups to manage payment requests separately from other payments:

Reporting on Payment Requests

Track progress of the payment request in the originating application. Once the payment request is approved, you can report on and audit the payment request in Payables using the following reports:

Manage Payment Options

Payment Accounting Options: Critical Choices

Determine when Oracle Fusion Payables creates payment accounting entries.

Important

Carefully consider this setting at implementation time. After you set this option, the only change you can make is from accounting At payment issue to accounting At payment issue and clearing.

Select from the following options:

At Payment Issue and Clearing

Payables accounts for each payment twice as follows:

Realized gain or loss is calculated at all points mentioned.

At Payment Issue

Debit the liability account and credit the cash account. For bills payable, debit the liability account and credit the bills payable account. Then, at payment maturity, debit the bills payable account and credit the cash account. Realized gain or loss is calculated at payment creation and, for bills payable, at payment maturity.

At Payment Clearing

Debit the liability account and credit the cash account when the payment clears. Realized gain or loss is calculated only at payment clearing for both regular payments and bills payables.

Manage Tax Reporting and Withholding Tax Options

Withholding Tax Options: Critical Choices

Withholding tax options are settings and default values that control how Oracle Fusion Payables process withholding for a business unit.

You can set the following withholding tax options:

Use Withholding Tax

Use withholding tax if the tax authority requires your company to withhold taxes from suppliers.

Allow Manual Withholding

Create and adjust manual withholding tax lines for your invoices.

Include Withholding Distributions in Income Tax Reports

Report on federal income tax withheld, for 1099 suppliers.

When Payables automatically creates withholding tax distributions for 1099 reportable suppliers, Payables provides the following values:

Note

Payables provides these values only for distributions it creates automatically. If you create manual withholding tax lines, then you must enter the income tax type and income tax region manually.

When you enable this option, Payables initiates the Update 1099 Withholding Tax Distributions program, which updates these values on existing withholding tax distributions. The program selects distributions to update as follows:

Tax Group

The name of the default withholding tax group for the invoices you enter if there is no withholding tax group at the supplier site assignment level and the Use withholding tax option is enabled.

Apply Withholding Tax

The time when Payables applies withholding taxes to supplier invoices.

Create Withholding Tax

The time when Payables automatically creates withholding tax invoices to remit withheld taxes to tax authorities.

Withholding Amount Basis

This setting indicates whether discount and tax amounts are included in the calculation of withholding tax.

Applying Withholding Taxes: Critical Choices

Determine the time to apply withholding taxes to supplier invoices.

Important

Carefully consider these settings. Changing this option after it is set may impact withholding calculation and you may need to make manual adjustments.

Never

Oracle Fusion Payables will not automatically withhold taxes. You must create withholding tax lines manually.

At Invoice Validation

Taxes are automatically withheld at invoice validation. If you select this option, Oracle Fusion Payables calculates withholding only once. If you adjust an invoice after it was validated, you must adjust the withholding tax manually and the Allow manual withholding option must be enabled.

Taxes are also withheld from prepayments. If you select this option, you might want to time the entry of the prepayment application before the invoice is validated. If you apply the prepayment before the invoice is validated, Payables creates a withholding tax distribution net of the prepayment amount. If you validate the invoice first, Payables creates a withholding tax distribution based on the taxable invoice amount. When the prepayment is applied, then you will have to manually adjust the withholding tax amount and the withholding invoice if the Create Withholding Invoice option is at validation or payment time.

At Payment

Taxes are automatically withheld when you create payments in a payment process request or with a Quick payment.

Creating Withholding Invoices: Critical Choices

Determine when to automatically create withholding tax invoices to remit withheld taxes to tax authorities. Set the Create Withholding Invoice option on the Manage Tax Reporting and Withholding Tax Options page to one of the following:

If you change this option from Never to At payment or At invoice validation, you must ensure that each withholding tax code has an associated tax authority.

Never

Oracle Fusion Payables will not automatically create withholding tax invoices. You must create withholding tax lines manually, run the withholding tax reports to determine the amounts to remit to your tax authorities, and create the withholding tax invoices.

You can create withholding type tax codes without entering a tax authority.

At Invoice Validation

A withholding invoice is automatically created when an invoice subject to withholding tax is validated. You can enable this option only if withholding is applied at invoice validation time.

At Payment

A withholding invoice is automatically created when an invoice subject to withholding tax is paid. You can enable this option if withholding is applied either at invoice validation or at payment.

Withholding Amount Basis: Critical Choices

Use the Withholding Amount Basis option on the Manage Tax Reporting and Withholding Options page to specify whether to include discount and transaction tax amounts in the calculation of withholding tax. Select from the following options:

Include Discount Amount

Include the invoice discount amount when calculating withholding tax amounts for an invoice.

For example, assume you have an invoice for 100 USD. The discount amount taken is 5 USD and the automatic withholding tax rate is 10 percent. If the discount amount is included, the automatic withholding tax amount is 10 percent of 100 USD or 10 USD. If the discount amount is not included, the automatic withholding tax amount is 10 percent of 95 USD or 9.50 USD.

Note

This setting applies only to payment time withholding. You cannot disable this setting if the option Apply Withholding Tax is set At invoice validation. At the time of invoice validation the discount amount that will be taken is unknown, so withholding tax is calculated on the entire invoice amount.

Include Tax Amount

Include the transaction tax amount when calculating withholding tax amounts for the invoice.

For example, assume you have an invoice for 105 USD. The transaction tax amount is 5 USD and the automatic withholding tax rate is 10 percent. If the tax amount is included, the automatic withholding tax amount is 10 percent of 105 USD or 10.50 USD. If the tax amount is not included, the automatic withholding tax amount is 10 percent of 100 USD or 10 USD.

Income Tax Reporting Options: Critical Choices

Set the following income tax reporting options for a business unit:

Use Combined Filing Program

Enable this option if you are using 1099 Combined Filing Program reporting. When you submit the US 1099 Electronic Media report, Oracle Fusion Payables will produce K records for all tax regions participating in the Combined Filing Program that have qualifying payments.

Note

If you use electronic filing to file your tax information with the Internal Revenue Service and you are not participating in the Combined Filing Program, do not enable this option.

Use Supplier Tax Region

Enable this option if you want to use a US 1099 supplier tax region as the default tax region for the invoice distributions. You can override this default region for each invoice distribution on the Manage Distributions page. You can enable this option only if you enable the Use combined filing program option.

Do not enable this option if you do not want to use a supplier site tax region as the default tax region. You must then enter the default tax region you want to use for all invoices in the Income Tax Region field.

The default region you select here determines how many K records the application will produce on your 1099 Electronic Media. The application produces one K record for each tax region. If you are participating in the Combined Filing Program, the application forwards your 1099 qualifying payment information to all the tax regions that participate in the Combined Filing Program. If you enable this option, you may have as many K records as you have different supplier tax regions.

If you enter a default value for the Income Tax Region, you may have only one K record. This would be a K record for that one default tax region. You can override the default tax region for each invoice distribution. In this case, the application will then produce additional K records on your 1099 Electronic Media, one K record for each tax region. The application only produces K records for tax regions that participate in the Combined Filing Program and that you have entered, either as a default value or manually, on a paid distribution for a US 1099 supplier. You can also select to have your US 1099 payment information forwarded to only one tax region regardless of which region your US 1099 suppliers do business from. You do this by entering a value in the Income Tax Region field.

Income Tax Region

Enter the tax region you want to use as the default region for the invoice distributions of your US 1099 suppliers. You can enter an income tax region only if you enable the Use combined filing program option and did not enable the Use supplier tax region option. You can override the default region for each invoice distribution.

US 1099 Reporting: Explained

In the United States, you must report to the Internal Revenue Service certain types of payments you make to 1099 reportable suppliers. In the supplier setup, you can designate suppliers as federally reportable. When you enter invoices for the supplier, you classify invoice distributions by 1099 miscellaneous type using the Income Tax Type field. At year end, you can then report, in standard formats, your accumulated 1099 payment information to the Internal Revenue Service, other tax agencies, and your suppliers.

For each reporting entity, you assign one or more balancing segment values. When you submit 1099 reports for a tax entity, Oracle Fusion Payables sums up the paid invoice distributions that have these company balancing segment values in their accounts.

When you enable the combined filing option, the electronic format of your US 1099 information includes K records for all tax regions or states participating in combined filing that have qualifying payments. The output also includes B records for suppliers with US 1099 payment amounts that equal or exceed the tax region's reporting limit in qualifying states.

Note

If you use electronic filing to file your tax information with the Internal Revenue Service, and you are not participating in the Combined Filing Program, do not enable this option.

US 1099 Reporting Overview

This figure shows the steps for US 1099 tax reporting from setup to output.

US 1099 reporting setup steps

  1. Set up Payables for 1099 reporting.

  2. Enter 1099 details for suppliers.

  3. Enter and pay 1099 invoices. When you enter invoices for 1099 suppliers, enter an income tax type and income tax region for appropriate invoice distributions, or accept the default values from the supplier.

  4. Identify and resolve 1099 exceptions. Submit the US 1099 Invoice Exceptions Report and the US 1099 Supplier Exceptions Report. Generate a Tax Information Verification Letter for each supplier who has not yet furnished or confirmed its tax identification number or tax reporting region.

  5. Optionally withhold tax from suppliers if they have a missing or invalid Tax Identification Number (TIN) and if you have not met the legal requirements of requesting a valid TIN from them.

  6. Update 1099 payment information. Adjust invoice distributions manually on the Manage Distributions page or use the Update and Report Income Tax Details utility.

  7. Generate 1099 reports.


    Report

    Description

    US 1099 Forms

    Reports the total 1099 miscellaneous payments for a particular 1099 supplier, and generates 1099 forms for each tax reporting entity in an organization.

    US 1096 Form

    Summarizes each 1099 form type that is transmitted on paper, as required by the United States Internal Revenue Service. The report is generated on a preformatted Internal Revenue Service form.

    US 1099 Electronic Media

    Generates summarized 1099 information in electronic format as required by the United States Internal Revenue Service.

    US 1099 Payments Report

    Lists payments made to US 1099 reportable suppliers.

Set Up Payables for US 1099 Reporting

This figure shows the steps for setting up Payables US 1099 Reporting.

Steps for Payables US 1099 reporting
setup

  1. If you want to use the combined federal and state 1099 filing and produce K records and B records, set the Use combined filing program option on the Manage Tax Reporting and Withholding Tax Options page.

  2. Set the Include withholding distributions in income tax reports on the Manage Tax Reporting and Withholding Tax Options page. If this option is enabled, then when Payables automatically creates withholding tax distributions it enters MISC4 as the income tax type, and enters the income tax region value if you use combined filing.

  3. If you use combined federal and state filing, define your tax regions.

  4. Define your tax reporting entities.

Define Payables Configuration

Distribution Sets: Explained

Distribution sets automatically create distributions for invoices not matched to purchase orders. For example, you can create a distribution set for an advertising supplier that allocates the advertising expense on an invoice to four advertising departments. Specify a default distribution set at the supplier site assignment level to use for every invoice you enter for that supplier site. If you do not assign a distribution set to a supplier site, you can assign a set to an invoice when you enter it.

If you are creating a distribution set for a federally reportable supplier, you can enter an income tax type.

If you have Oracle Fusion Project Costing installed, you can associate a project with a distribution by entering project information on invoice distributions. If you use a project-related distribution set, the project information on the set is automatically entered on the invoice distribution. You can override project fields on the distribution.

If you enable and use a descriptive flexfield with your distribution set lines, the information is copied to the invoice distributions created by the set.

Define distribution sets either with or without percentages. Percentage distribution sets can include both positive and negative percentages.

Distribution Sets with Percentages

Use a 100 percent distribution set when the percentage of expenses to allocate is already known. For example, define a fully allocated distribution set for a rent invoice by assigning 70 percent of the invoice amount to the sales facility expense account and 30 percent to the administration facility expense account.

Distribution Sets Without Percentages

Use a 0 percent distribution set when the percentage of expenses to allocate is not known. For example, define a distribution set with no amounts allocated to the sales facility expense account and the administration facility expense account. You can then enter amounts for the distributions during invoice entry depending on variables such as the monthly head count for each department.

Payment Terms: Explained

Payment terms are used to automatically create installments on an invoice with up to three levels of discount. You can define payment terms to create multiple installments and multiple levels of discounts. Share payment terms across business units through set assignment.

Payment terms consist of one or more lines, each of which creates one invoice installment. Each payment term line and corresponding installment have a due date and up to three discount dates. Each payment term line and corresponding installment also have due or discount amounts. When you define payment terms, you specify either percentages or fixed amounts.

This figure shows the components of a payment term. Each payment term consists of one or more lines, and each line can have up to three discounts. Assign payment terms to one or more sets to share them across business units.

Payment terms components

Important

If you update the payment terms on an invoice, Oracle Fusion Payables immediately recalculates the installments for the invoice. You must re-enter any manual adjustments you made to the previous installment.

Payment Terms Due Dates and Discount Dates

Payment terms due dates and discount dates are based on one of the following:

Note

Only due dates, not discount dates, can be based on a calendar.

Default Payment Terms

If you enter an Identifying PO on an invoice, the purchase order provides the default payment terms. If you do not enter an Identifying PO, the supplier site provides the default payment terms. If there are no payment terms for the supplier site, the payment terms from the Manage Invoice Options page are used. You can override the default payment terms on any invoice.

This figure shows the payment term defaulting flow during invoice entry.

Default payment terms on an invoice

Creating Payment Terms Based on Days: Worked Example

This example demonstrates how to create payment terms that are based on a certain number of days from the invoice terms date.

This table summarizes key decisions for the scenario.


Decisions to Consider

In This Example

Are terms based on amounts or percentages?

Percentages

How many installments and discounts does this payment term have?

The installments and discounts are as follows:

  • First installment: 40 percent due in 10 days with a discount of 5 percent if paid in 7 days

  • Second installment: 35 percent due in 20 days with a discount of 3 percent if paid in 15 days

  • Third installment: 25 percent due in 30 days with a discount of 2 percent if paid in 25 days

Creating Payment Terms Based on Days

  1. On the task list, click Payment Terms to open the Manage Payment Terms page.
  2. Click Create to open the Create Payment Terms page.
  3. In the Name field, enter the payment term name.
  4. Click Add Row in the Payment Term Installments region.
  5. In the Payment Term Installments region, complete the fields, as shown in this table.

    Field

    Value

    Due Percent

    40

    Days

    10

    First Discount Percent

    5

    First Discount Days

    7


  6. Click Add Row in the Payment Term Installments region.
  7. In the Payment Term Installments region, complete the fields, as shown in this table.

    Field

    Value

    Due Percent

    35

    Days

    20

    First Discount Percent

    3

    First Discount Days

    15


  8. Click Add Row in the Payment Term Installments region.
  9. In the Payment Term Installments region, complete the fields, as shown in this table.

    Field

    Value

    Due Percent

    25

    Days

    30

    First Discount Percent

    2

    First Discount Days

    25


  10. Click Save.

Invoice Tolerances: Explained

Invoice tolerances determine whether matching holds are placed on an invoice for variances between invoice, purchase order, and receipt information. When you run the invoice validation process for an invoice matched to a purchase order or receipt, validation checks that the invoice matches the purchase order or receipt within the matching tolerances you define.

For example, if the billed amount for an item exceeds the amount or quantity tolerances, then invoice validation applies holds to the invoice and prevents payment until the holds are released.

There are two types of tolerances. You can define tolerances based on quantity or amount. For each type of tolerance, specify percentages or amounts. Once you define your tolerances, assign them to a supplier site.

Note

If you specify a percentage tolerance of zero, no variance is allowed. If you want a low tolerance, specify a small percentage. If an active tolerance does not have a value, then infinite variance is allowed.

Quantity Based

Quantity-based tolerances apply to invoices that you match to a purchase order where the match basis on the invoice is quantity. You can define the following quantity-based tolerances:

Amount Based

Amount-based tolerances apply to invoices that you match to a purchase order where the match basis on the invoice is amount. You can define the following amount-based tolerances:

Invoice Holds and Releases: Explained

Use the Manage Invoice Holds and Releases page to define the names that you use to manually place and release holds on invoices. Associate names of holds with an invoice hold type and names of releases with an invoice release type. Assign the hold name you define to an invoice to place the invoice on hold. You cannot pay an invoice that has a hold applied to it. Use release names to remove the holds you applied.

Determine whether to allow accounting entry creation for the hold names you define. For example, if you assign a hold name that does not allow accounting to an invoice, you cannot create accounting entries for the invoice until you remove the hold. If you want to use the holds and releases you define in the Holds Resolution workflow process, specify additional hold and release name attributes.

Oracle Fusion Payables predefines hold and release types along with hold and release names that it uses during the invoice validation process. You can query the predefined types and names on the Manage Invoice Holds and Release page, but you cannot modify them.

Invoice Hold Types

This table lists the predefined hold types and whether you can define hold names for them.


Hold Type

Allow User-Defined Hold Name

Account Hold Reason

No

Future Period Hold Type

No

Insufficient Information

No

Invoice Hold Reason

Yes

Invoice Line Reason

Yes

Matching Hold Reason

No

Variance Hold Reason

No

Invoice Release Types

This table lists the predefined release types and whether you can define release names for them.


Release Type

Allow User-Defined Release Name

Account Release Reason

No

Future Period Release

No

Hold Quick Release Reason

Yes

Invoice Quick Release Reason

Yes

Invoice Release Reason

Yes

Matching Release Reason

Yes

Sufficient Information

No

Variance Release Reason

Yes

Payables Calendar Period Frequencies: Points to Consider

When you create a calendar, you must select a period frequency. Period frequencies determine the number of periods per year and the period name format.

Period Frequency

Select from among the following frequencies:

Payables Calendar Periods: How They Are Generated

Oracle Fusion Payables can generate periods automatically when you define a Payables calendar.

Settings That Affect Period Generation

When you create a calendar or add years to an existing calendar, the following attributes control how periods are generated:

Note

If you select a Period Frequency of Other, you must define calendar periods manually.

How Periods Are Generated

This table lists and describes the calendar attributes that are used to generate periods.


Calendar Attribute

Description

Period frequency

Determines the number of periods per year and period name format options.

Periods per year

Identifies the number of periods per year based on the period frequency selected.

Start date

Represents the first date for the calendar and will be the Start Date for the first period.

Period name format

Used along with the period frequency and year to determine the period name.

  • For a monthly period frequency, select MM for a two digit numeric representation of the month such as 01 and 02, or select MMM for a month name abbreviation such as, Jan and Feb.

  • For a quarterly or weekly period frequency, the generated period name will consist of a sequence number appended to the selected frequency for example, Quarter1 or Week1.

Example Calendar Using 4-4-5 Period Frequency

This example shows the periods generated for a calendar with a period frequency of 4-4-5, a start date of 1/1/2011, and a period name format of MMM.


Period Name Prefix

Year

Sequence

Start Date

End Date

Period Name

Jan

2011

1

1/1/11

1/28/11

Jan-11

Feb

2011

2

1/29/11

2/25/11

Feb-11

Mar

2011

3

2/26/11

4/1/11

Mar-11

Apr

2011

4

4/2/11

4/29/11

Apr-11

May

2011

5

4/30/11

5/27/11

May-11

Jun

2011

6

5/28/11

7/1/11

Jun-11

Jul

2011

7

7/2/11

7/29/11

Jul-11

Aug

2011

8

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FAQs for Payables Configuration

What's a Payables calendar?

A Payables calendar is a calendar that you define in Oracle Fusion Payables for automatic withholding taxes, payment terms, and key indicator reporting. Payables calendar periods are completely separate from the accounting periods you define on the Create Accounting Calendar page.

Define Payables Tax and Withholding

Income Tax Region Reporting Limit Methods: Critical Choices

The reporting limit amount is the minimum amount used to determine whether to report on payments to a supplier. If you do not enter a reporting limit amount, the limit is assumed to be zero. If you are doing business within the United States, refer to federal or state tax publications to obtain information regarding the US 1099 reporting requirements for each participating tax region.

Select from one the following methods to compare payments to the reporting limit amount:

Same as Federal

Use the federal reporting limit instead of the region reporting limit amount, which Oracle Fusion Payables has predefined as 600 USD.

Compare Individually

Compare the reporting limit amount to the sum of payments for each 1099 miscellaneous income tax type. For example, the reporting limit for region X is 600 USD. If you make a total of two 400 USD payments to a supplier in region X and classify each payment as a different 1099 miscellaneous type, Payables will not report this supplier to region X because neither individual payment type exceeded the region X reporting limit. In this case, Payables only reports the supplier to the federal tax authorities.

Compare Sum

Compare the reporting limit amount to the sum of payments for all 1099 miscellaneous income tax types. For example, the reporting limit for region X is 600 USD. If you make a total of two 400 USD payments to a supplier and classify each payment as a different 1099 miscellaneous income tax type, Payables will report this supplier to the region X tax authority because the sum of the payments exceeds the region X reporting limit. In this case, Payables reports the supplier to both federal and state tax authorities.

Reporting Entities: Explained

A reporting entity is any person or organization that has a unique tax identification number. Oracle Fusion Payables uses reporting entities for US 1099 reporting. US 1099 reports accumulate the totals for all primary balancing segment values assigned to a reporting entity to derive the total amount paid.

Primary Balancing Segment Values

For each reporting entity, assign one or more primary balancing segment values. Typically, primary balancing segment values represent different legal entities. For example, an enterprise defines a reporting entity called Headquarters which is comprised of Company 1, Company 2, and Company 3. Each company is represented by a primary balancing segment value. When submitting a US 1099 report, Headquarters is entered as the reporting entity for the report. Payables prints the accumulated payments for Companies 1, 2, and 3 on the US 1099 report. Payables sums up the paid invoice distributions that have these company balancing segment values in their accounts.

Note

Primary balancing segment values must be unique across reporting entities.

Reports

You can submit the following US 1099 reports for a specific reporting entity:

Withholding Tax: Explained

You may be required to withhold tax from your supplier invoices and employee expense reports, and pay it to a tax authority on behalf of the supplier. Set withholding tax options on the Manage Tax Reporting and Withholding Tax Options page and on the supplier setup.

The withheld amount is calculated according to how you set the Apply Withholding Tax option. If you apply withholding tax at invoice validation, then the withheld amount is based on the invoice amount. On the other hand, if you apply withholding tax at payment, then the withheld amount is based on the payment amount.

Review withheld amounts online or run the standard reports.

Setting Up Automatic Withholding Tax

To automatically withhold tax, perform the following steps:

  1. Enable the Use withholding tax option and set the other withholding tax options in the Withholding Tax region on the Manage Tax Reporting and Withholding Tax Options page.

  2. Create each tax authority as a supplier with a supplier type of Tax Authority.

  3. Create withholding tax codes.

  4. Create withholding tax groups.

  5. Specify withholding tax details for suppliers.

  6. Define withholding tax certificates to handle rate exceptions.

Withholding Tax Automatically

To perform automatic withholding, you assign a withholding tax group to an invoice line. You can accept the default withholding tax group or select another group. When applying withholding tax, Payables creates one or more withholding tax type invoice lines, updates the withheld amount on the invoice, and updates the unpaid amount on the installment.

For example, if an invoice for 100 USD has withholding tax of 20 USD, Payables creates a withholding tax type invoice line for -20 USD. The withheld amount is -20 USD, and the unpaid amount on the installment is 80 USD.

Restriction

Creating Withholding Invoices

After you apply withholding tax to an invoice, you can optionally create invoices to remit the withheld tax to a tax authority. Payables can automatically create withholding tax invoices, or you can perform this task manually. To create withholding tax invoices automatically, set the Create Withholding Invoice option to specify whether to create withholding invoices at invoice validation or at payment.

Reporting on Withheld Tax

You can run the following reports to satisfy tax authority, supplier, and management reporting requirements:

Withholding Tax Codes: Explained

A withholding tax code is the name for a withholding tax. Withholding tax codes can have multiple rates, effective date ranges, tax amount limits, and taxable amount limits. You must associate a supplier with a type of Tax Authority to a withholding tax code so you can create withholding invoices to pay taxes you withheld from your suppliers.

Creating Withholding Tax Codes

Each tax code has a rate structure to specify amount or rate controls. To define rates for the withholding tax code, you must select a rate type. Oracle Fusion Payables uses the rate type of Standard.

Using Withholding Tax Codes

To use withholding tax codes, assign them to one or more withholding tax groups. When you define a withholding tax code, you can enable the Create withholding tax group option to automatically create a group for that tax code. To handle rate exceptions, define withholding tax certificates for a withholding tax code.

Withholding Tax Code Rate Structures: Points to Consider

When you define a withholding tax code, specify amount or rate controls by selecting one of the following rate structures:

Flat Rate

A flat rate structure has no amount or period limits. Select this option if you do not want to control the tax based on amounts paid. For example, if withholding tax is deducted at a specified rate of 10 percent, create a flat rate tax code with a tax rate of 10 percent.

Period Limit

A period limit structure restricts the amount of tax withheld during a calendar period for a supplier. Withholding stops after you pay a certain amount within the withholding tax period. For example, for each withholding calendar period, no more than 10,000 USD is withheld. Attributes of the period limit rate structure include Calendar and Period.

Restriction

Oracle Fusion Payables will not create a payment for a foreign currency invoice if the invoice has a withholding tax group that uses a period rate structure.

Amount Ranges

An amount ranges structure applies the tax rate to either the amount of the total invoices paid to date, or to the amount of tax withheld to date for a supplier. For example, define a tax that for each year will withhold at a rate of 10 percent until you pay 100,000 USD in invoices, and then withhold at a rate of 15 percent after you pay the 100,000 USD. In addition to these controls, the same withholding tax code can have different rates depending on the effective date. For example, a withholding tax has a rate of 10 percent one year and 11 percent the following year.

Amount rate structures have the following attributes:

Restriction

Payables will not create a payment for a foreign currency invoice if the invoice has a withholding tax group that uses an amount ranges structure.

Withholding Tax Groups: Explained

Withholding tax groups include one or more withholding tax codes. Define withholding tax groups to associate more than one withholding tax code to a single transaction. For example, assign a withholding tax group to an invoice line or distribution if you need to withhold taxes at both the local and country level, each tax withheld at different rates and remitted to different tax authorities.

You can edit a withholding tax group to add more tax codes if needed.

Ranking Withholding Tax Codes

Rank the tax codes in a withholding tax group. When you enter an invoice with a withholding tax group that consists of multiple tax codes, taxes are calculated in order of rank.

Lower ranked taxes are applied to the amount of the invoice or distribution less the previous withholding tax amounts. The highest rank is 1. For example, define a withholding tax group with two tax codes. Tax A for 10 percent has a rank of 1, and tax B for 5 percent has a rank of 2. Payables calculates the withholding tax for a 100 USD invoice as follows: tax A is 10 USD, tax B is 4.50 USD (.05(100 - (100 * .10))).

You can assign the same rank to more than one tax code if you want to use the gross invoice amount to calculate withholding amounts for each tax code. For example, define a tax group with two codes, both with a rank 1 and a rate of 10 percent. On an invoice for 100 USD, two automatic withholding tax lines, each for 10 USD are generated. This is because both automatic withholding tax codes of 10 percent are applied to 100 USD.

Defaulting Withholding Tax Groups to an Invoice

If you do not specify a withholding tax group at the supplier site assignment level, the default tax group on the invoice will come from the tax group in the Withholding Tax region on the Manage Tax Reporting and Withholding Tax Options page. You can override any default withholding tax group at any time.

Withholding Tax Certificates and Exceptions: Explained

Withholding tax certificates specify withholding tax code rate exceptions that are granted by a tax authority. You can define withholding tax code rate exceptions for all invoices of a supplier site or for specific invoices of that site. A tax code can have one or more certificates.

Before defining withholding tax certificates and exceptions, you must:

Certificates

To define a withholding certificate, you must specify a certificate number, type, and priority.

A certificate number can be user-defined or it can be a number assigned to a certificate issued to a supplier by the tax authority.

Oracle Fusion Payables predefines a certificate type of Standard. You can define additional certificate types on the Manage Payables Lookups page.

Only one certificate can be enforced at a time. If you have one or more certificates for the same withholding tax code and the date ranges overlap, Payables applies the certificate with the highest priority, where 1 is the highest priority. If a certificate specifies that the supplier site is exempt from the tax code, then enter 0 as the tax rate.

Note

The tax rate for a withholding certificate overrides all rates for the withholding tax code.

Exceptions

To define an exception for an invoice, specify the invoice number.

Note

The tax rate for an exception overrides all rates for the withholding tax code.