1. Using Revenue Management
  2. Guidelines for Integrating Revenue Management with Order Management and Cost Management

Guidelines for Integrating Revenue Management with Order Management and Cost Management

You can integrate Oracle Revenue Management with Oracle Order Management and Oracle Cost Management.

This integration automates revenue recognition based on your company's policies to address IFRS 15 and ASC 606 accounting standards for sales orders from Order Management that represent contracts with customers.

With this integration you can easily recognize the associated cost of goods sold in Cost Management in the same period and in proportion to the revenue recognized in Revenue Management.

Use this feature to:

  • Automatically import order lines for shippable and non-shippable goods and services.

  • Manage changes throughout the sales order life cycle, such as revisions to the order quantity or selling price, as well as return orders.

  • Apply the billing lines generated in Receivables to the accounting contracts, and offset the corresponding contract asset balance.

  • Integrate Cost Management to recognize the associated cost of goods sold in the same period and the same proportion to the revenue recognized in Revenue Management.

  • Provide complete revenue and cost of goods sold information from Cost Management to help you perform detailed gross margin analysis.

Sales Order and Accounting Contract Creation

Order Management integrates sales order transactions and order fulfillment information to:

  • Revenue Management for revenue processing

  • Cost Management for cost of goods sold processing

  • Receivables for invoice processing

You run the Extract Sales Orders for Revenue Management process to upload sales orders, return orders, order revisions, and fulfillment information to Revenue Management. You can schedule this process to run once or at regular intervals.

Revenue Management applies user-configurable rules to identify the accounting contracts and their performance obligations. One accounting contract may contain one or more sales orders from various source systems. Conversely, one sales order with multiple order lines may result in one or more accounting contracts. Each sales order line becomes a promised detail line in Revenue Management.

Order Fulfillment and Revenue Recognition

When an order line is shipped, fulfilled, or successfully transferred to the customer, Order Management relays the fulfillment information, such as the fulfilled quantity, amount, and date, to Revenue Management. This enables Revenue Management to record the satisfaction events and recognize revenue accordingly. Order Management supports multiple shipments (system splits) of an order line. Revenue Management maintains the presentation of multiple shipment order lines. One order line in Order Management corresponds to one promised detail line in Revenue Management.

For service orders, Revenue Management automatically recognizes revenue over the service duration based on the satisfaction plan assigned. Satisfaction plans are assigned to the order lines as revenue scheduling rules. The default satisfaction plan uses the daily rate in revenue calculation.

Order Fulfillment and Receivables Recognition

Typically, Order Management immediately transfers fulfilled sales order lines to Receivables. With this integration, Receivables generates invoices that debit the Receivables account and credit the Revenue Clearing account.

When you apply invoices to the revenue accounting contracts using the Import Billing Data from Receivables process, Revenue Management debits the Revenue Clearing account and credits the Contract Asset account.

Order Revision and Contract Modification

At times you need to revise orders once or multiple times before fulfilling a sales order. Let's say you need to update the selling price or ordered quantity. This change may result in an increased or decreased transaction price. Revenue Management automatically revises the corresponding accounting contracts to reflect the order changes.

Once an order is fulfilled, you must issue a return material authorization (RMA) in Order Management to revise an order. An RMA can include a partial or full shipment return, price reduction, or early termination of subscription services with recurring billing. Revenue Management automatically processes the RMA as a contract modification.

Revenue and Matching the Cost of Goods Sold

Once revenue is accounted for, Revenue Management relays the revenue information to Cost Management to recognize the cost of goods sold in the same period and in the same proportion as the revenue recognized in Revenue Management. In addition, the revenue and the cost of goods sold information available enables entities to perform detailed gross margin analysis in Cost Management.

Configuration Steps

Follow these steps to configure your integration with Order Management and Cost Management:

  1. Define the lookup code VRM_COSTING_INTEGRATION under the lookup type ORA_AR_FEATURES in the Manage Receivables Lookups page.

  2. Configure Revenue Management System Options:

    • Assign the Extraction Start Date for the Source Document Type DOO Sales Order. The first data extract may have historical sales transactions submitted up to 90 days prior to the current date.

    • Assign the currency conversion type. The currency conversion type assigned to the order line takes precedence over the default system option value.

    • Assign contract accounts.

    • Assign review and exemption thresholds.

    • Assign the IFRS 15 and ASC 606 adoption period.

  3. Define pricing dimension structures for standalone selling prices according to the entity's pricing policy for sales order items.

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