Definition of the Business Units
In PeopleSoft applications, a business unit is an organization or organizational subset that is independent with regard to one or more accounting or operational functions. Business units are flexible structural devices that you can use to implement PeopleSoft products based on how a business is organized. In PeopleSoft Payables, a business unit is defined as an independent transaction-processing entity.
When deciding on the business units for the organization, take a close look at the existing structure of the system. Examine the organizational elements (such as company codes, organization codes, and division codes) and relate them to business units. Consider whether you can simply map existing structures to business units or whether you need to modify structures to make the best use of PeopleSoft Payables.
For example, suppose that an organization has multiple subsidiaries. Each subsidiary operates as a separate entity with its own payables department and its own rules for invoicing and for tracking payables transactions. In such a case, it makes sense to set up separate payables business units for each subsidiary.
First, determine how many business units to use for the organization. Then consider the various payables processing rules and reporting requirements of the organization. Ask yourself whether you need to report some transactions separately from others. Also, consider whether some transactions must be reported together.
As you determine the optimal business unit structure for the organization, keep in mind that certain features such as the Interunit Accounting feature require multiple business units. You may decide to set up separate business units even if you do not need them for processing reasons. For example, you may want to maintain accounting control and balances at a level lower than the company level.
Be sure to consider general ledger distribution as you determine how many business units you need. Before establishing payables business units, you must establish general ledger business units. If you use only Oracle's PeopleSoft financial applications, generally the PeopleSoft Payables business units are the same as the PeopleSoft General Ledger business units. You set up the general ledger first and then set up PeopleSoft Payables to mirror the general ledger. If you use a different general ledger system, then you cannot use business units. In that case, you must carefully consider how to distribute from PeopleSoft Payables to the general ledger.
Once you create your business units, you associate the payables business units with the general ledger business units. The association does not need be one-to-one; you can consolidate multiple payables business units in one general ledger business unit. However, you cannot associate a single payables business unit with multiple general ledger business units. That is, you cannot have one payables business unit that distributes to multiple general ledger business units (with the exception of interunit accounting entries). This diagram illustrates this concept.
