Overview of Integrating Order Management with Revenue Management

Automate how Revenue Management gets sales order data from Order Management so Revenue Management can recognize revenue for the sales order.

Revenue Management uses this data to create a customer contract and record the performance obligations for the contract. Revenue Management recognizes revenue for the performance obligations when Order Management fulfills the sales order.

Use this integration to meet IFRS 15 (International Financial Reporting Standard) and ASC 606 (Financial Accounting Standards Board and International Accounting Standards Board) requirements.

• Identify the contracts you have with your customers for your order lines.

• Identify the performance obligations that the contract specifies.

• Determine the transaction price, which is the price you charge your customer to fulfill the order line according to the contract requirements.

• Recognize the revenue that you realize when you meet the performance obligation, such as fulfilling the order line by the requested fulfillment date.

Note

• Revenue Management automatically calculates the transaction price according to the sum of the selling price, and allocates the transaction price to each performance obligation.

• Use this integration to manage change throughout the sales order lifecycle, including revisions to the quantity or price on the order line, return order, and so on. Revenue Management automatically modifies the contract to reflect these changes and reallocates the new price to the performance obligation.

Here's how it works.

Explanation of Numbers

1. An Order Entry Specialist creates a sales order in the Order Management work area, or you import one into Order Management.

2. You use the Extract Sales Orders for Revenue Management scheduled process to interface the sales order so Revenue Management can process revenue and Cost Management can process the cost of goods sold.

3. Revenue Management uses rules that you set up to identify accounting contracts and their performance obligations. One accounting contract might reference one or more sales orders from different source systems, or several contracts might reference one sales order that has more than one order line. Each sales order line becomes a promised detail line in Revenue Management.

4. Order Management sends fulfillment details, such as the fulfilled quantity, amount, and delivery date. It sends these details when the line reaches the Ship Confirm status regardless of which step you specify as the fulfillment completion step. For details about this step, see Guidelines for Setting Up Orchestration Process Steps.

   Order Management sends fulfillment details for each fulfillment line, such as the fulfilled quantity, amount, and delivery date. It only sends these details when the line reaches the Shipped status for an outbound line or Delivered status for a return line. Order Management uses this behavior regardless of the orchestration process step that you specify as the fulfillment completion step. Order Management uses this behavior even if you set up your own step in the orchestration process and specify it as the fulfillment completion step.

   One fulfillment line in Order Management corresponds to one promised detail line in Revenue Management. If Order Management splits a fulfillment line, then Revenue Management represents each of these split lines as one promised detail line.

5. Revenue Management records the event that satisfies the performance obligations, then recognizes revenue.

   • If the item on the fulfillment line is a service item or subscription item, then Revenue Management automatically recognizes revenue for it over the full duration of the service or subscription, according to the satisfaction plan for the item.

   • You can set up the satisfaction plan in Revenue Management and use a revenue scheduling rule to assign it to each fulfillment line.

   • The default satisfaction plan uses the daily rate to calculate revenue.

6. Order Management sends the fulfillment line to Receivables, Receivables creates an invoice to debit the Receivables account and credit the Revenue Clearing account, then sends it to your customer.

7. Revenue Management sends revenue details to Cost Management so Cost Management can recognize the cost of goods sold in the same time frame and in the same proportion that Revenue Management uses to recognize revenue.

8. Cost Management can use these details to analyze gross margin.

Guidelines

• If you revise the price or quantity on an order line, then Revenue Management automatically revises the corresponding accounting contracts to reflect these revisions.

• If you return a sales order, then Revenue Management automatically modifies the contract to reflect the return. You can return part or all of a shipment, reduce the price in the return, or cancel a subscription or service that has recurring billing.

  For details about how to set up Order Management to return a sales order, see Guidelines for Processing Return Orders.

• Make sure each service item or subscription item includes a start date and an end date before you run the scheduled process.

• You can invoice an internal material transfer or internal order in Receivables but this integration doesn't integrate them with Revenue Management.

• Revenue Management processes all sales orders except for internal material transfers and transfer orders.

• Make sure you assign the Extraction Start Date system option.

  • The scheduled process processes sales orders that you submit on or after the Extraction Start Date in Revenue Management.

  • The first extract can include sales transactions that you submit up to 90 days before the current date.

  • The extract includes only the primary charge for the item, the profit center business unit on the fulfillment line, and flexfield data.

• If you need to set up an extensible flexfield to allow the Order Entry Specialist to identify contracts or performance obligations, then create and use a context named.

  • Revenue_Management_Information_Header on the order header

  • Revenue_Management_Information_Line on the fulfillment line

Specify the Overshipment

If you set the Quantity to Invoice for Overshipment parameter to Shipped Quantity, then an overshipment will increase the transaction price, and the integration updates the accounting contract according to the fulfilled quantity and the transaction price. For details, see Manage Order Management Parameters.

Here's the logic.

If the Shipped Quantity Is	And	Then
Greater than the ordered quantity	You invoice the shipped quantity	Insert a new document line, increment the version and set the quantity so its equal to the shipped quantity. Add a subline that has the quantity for the satisfaction event equal to the shipped quantity.
Greater than the ordered quantity	You invoice the ordered quantity	Add a subline that has the quantity for the satisfaction event equal to the ordered quantity.
Less than the ordered quantity	-	Same as row 1.

For details about these parameters, see Set Up Shipping Tolerances in Order Management.

• Default Value for Overshipment Tolerance

• Quantity to Invoice for Overshipment

Example Flows

Here are descriptions of some typical order flows.

Flow	When do we Recognize Revenue?	Description
Ship and invoice one shipment	When Order Management sends fulfillment details	Applies to shippable items, including various configured items, such as assemble-to-order, pick-to-order, kits, and combinations of these configurations.
Ship and invoice a split shipment	When Order Management sends fulfillment details	Applies when Order Management splits a fulfillment line. Some lines are fulfilled, others are pending.
Ship and invoice a shipment that uses an overshipment tolerance	When Order Management sends fulfillment details	Revenue Management automatically updates the contract with the adjusted price to reflect the overshipment.
For ship only, ship the item but don't invoice it	When Order Management sends fulfillment details	Use this flow to integrate Revenue Management with your legacy billing system.
For bill only, send the invoice but not the shipment because the item isn't shippable	After you submit the invoice	Order Management sends the fulfilled quantity to Revenue Management after you submit the invoice.
For bill only with a service or subscription, send the invoice but not the shipment because the item is a service or subscription. Include more detail that Revenue Management needs for a service or subscription.	Over time according to the daily rate or a satisfaction plan that you set up	Revenue Management automatically recognizes revenue over the duration of the service or subscription, starting according to the start date and stopping according to the end date on the fulfillment line. You can use the Accounting Rule attribute on the fulfillment line to assign the satisfaction plan on the fulfillment line or you can set up Revenue Management to assign it.

Note

• Each flow identifies contracts and performance obligations when the Order Entry Specialist clicks Submit to submit the sales order to fulfillment.

• Each flow recognizes cost of goods sold immediately after it recognizes revenue, except for the service or subscription flow because cost of goods sold aren't applicable for a service or subscription.

Example Transaction

A transaction in Order Management can include two sales orders that use the same purchase order number to identify them as falling under one contract. Revenue Management groups these orders into one accounting contract, and Cost Management matches cost of goods sold to the revenue that Revenue Management recognizes. For details, see Integrate Revenue Management with Order Management and Supply Chain Cost Management at https://www.oracle.com/webfolder/technetwork/tutorials/tutorial/cloud/r13/wn/om/releases/20C/20C-order-mgmt-wn.htm#F13859.

For other details, see ERP Integration of Revenue Management with Order Management and Supply Chain Cost Management with Demo of End to End Flow on Oracle Cloud Customer Connect at https://cloudcustomerconnect.oracle.com.