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How to Defer Invoicing / Revenue
Recognition Based on Customer
Acceptance (OM & AR)

Michelle Taylor
DARC Corporation

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 DARC Lines of Business

• Consulting Services • Production Support

• Program Management, Functional, Technical, • 24x7 Functional & Database
Architecture

• Accelerators for Interfaces and Conversions

• Organizational Change Management
• Mergers & Acquisitions
• Communications, Documentation, Training
• Global Consolidation

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 Speaker’s Qualifications

• Implementing Oracle Applications for over 14 years

• Certified Expert Consultant, Oracle E-Business Suite R12 Supply Chain:
Order Management
• Certified Implementation Specialist, Oracle E-Business Suite R12 Supply
Chain: Order Management
• Certified Implementation Specialist, Oracle E-Business Suite R12 Supply
Chain: Inventory
• Oracle Supply Chain Management R12.1 PreSales Specialist
• Oracle Supply Chain Management R12.1 Sales Specialist
• Oracle Financial Management R12.1 Sales Specialist
• Certified Professional Consultant, Oracle E-Business Suite R11i Supply
Chain: Order Management

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 Agenda

• Introduction
– Description, Benefits & Definitions
• Setup Steps
• Process Flow & Processes Review
– Acceptance Helpful Hints
• Revenue Recognition Overview
• Considerations
• Summary

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 Description & Benefits - Customer Acceptance Based
Deferrals for Invoicing & Revenue Recognition

• Businesses have the requirement to DEFER Revenue

Recognition until receipt of a sales order shipment has been
formally acknowledged / accepted by a customer
• Benefits
– Reduce …
• Administrative Costs – Revenue Accounting Maintenance / Mgt
• Revenue Recognition inconsistencies (audit)
– Improve …
• Compliance to corporate governance regulations /
requirements

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 Description & Benefits - Customer Acceptance Based
Deferrals for Invoicing & Revenue Recognition

• Customers have the requirement to DEFER Invoicing until they have

formally acknowledged / accepted the receipt of goods and / or
services from a sales order shipment
– Eliminates the need to manage / monitor the time lags between ship
date, transit time values & invoice date
• Benefits
– Reduce …
• Administrative Costs – AP Maintenance / Mgt (customer side)
• Administrative Costs – AR Maintenance / Mgt (vendor side)
– Improve …
• Overall customer service

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 Definition - Acceptance Types

• Explicit Acceptance
– Can be record Manually or Programmatically
– Using the Order Information Portal (OIP) the sales order lines can be
marked as Accepted by an External or Internal (CSR) Customer
(separate setups required) to record acceptance explicitly
– Order Import / Process Orders API
– Notification if Acceptance done in AR Revenue Mgt> Revenue
Accounting form
• Implicit Acceptance
– Can ONLY be recorded Programmatically
– Revenue Contingency / Deferral Reason has to be defined with an Event
Attribute Date that has a value for Expire Days
– Implicit Acceptance Request Set – concurrent programs used to record
implicit acceptance

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 Definition - Acceptance Deferral Types

• Pre-billing Acceptance
– Always tied to Invoicing Removal Event
• Defers Invoicing AND Revenue Recognition
– Can be Implicit or Explicit
– Sales Order Line Workflow process is held at Invoice Interface
Eligible – Pending Customer Acceptance
• Sales order line workflow status is reflected as Pending pre-
billing acceptance post ship confirm

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 Definition - Acceptance Deferral Types

• Post-billing Acceptance
– Always tied to Customer Acceptance Removal Event
• Defers ONLY Revenue Recognition
– Can be Implicit or Explicit
– Sales Order Line Workflow process is held at Close Line Eligible
– Pending Customer Acceptance
• Sales order line workflow status is reflected as Pending post-
billing acceptance post ship confirm
• Invoice generated but Revenue Deferred and held in the
Unearned Revenue Account until Acceptance is completed

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R12 Setup Steps

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 R12 Setup Steps – Order Management

• Enable Customer Acceptance

– Customer acceptance can be enabled at OU level through OM
system parameter: Enable Fulfillment Acceptance – Y / N
– Once enabled the AR API is called to invoke the rules engine to
validate customer acceptance on every sales order line
• Enable function security within responsibilities’ menus
– Sales Orders: Fulfillment Acceptance
– Sales Orders: Update Acceptance Attributes
• Enable Folder Fields for Customer Acceptance – SO / QSO
– Order Organizers’ SOL Results tab
– Sales Order Forms Lines’ Regions - Others tab

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 R12 Setup Steps – Order Management

• User Access to Order Information Portal (required to perform

Manual Explicit Acceptance)
– External User – Actual Customer User
– Internal User – CSR
• Otherwise Insufficient Privileges Error Message will be
displayed after clicking the Fulfillment Acceptance (B)

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R12 Setup Steps – Order Management – Customer
Acceptance Data Fields via Folder Tools

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R12 Setup Steps – Order Management – Customer
Acceptance Data Fields via Folder Tools

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 R12 Setup Steps – Accounts Receivable /
Revenue Mgt – Create Revenue Contingencies

• Define Revenue Contingency / Deferral Reason

– Create Revenue Contingency / Deferral Reason (Acceptance
Name) via Receivables Revenue Management set ups
– Create Assignment Rule(s) to link the Revenue Contingency /
Deferral Reason (Acceptance Name) to – based on customer, site,
item, etc

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 R12 Setup Steps – Accounts Receivable /
Revenue Mgt – Create Revenue Contingencies

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R12 Setup Steps – Accounts Receivable / Revenue
Mgt – Revenue Contingency Assignment Rules

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 R12 Setup Steps – Accounts Receivable / Revenue
Mgt – Revenue Contingency Assignment Rules

• Revenue Contingency / Deferral Reason (Acceptance Name) and their related

Event Attributes can be defaulted during order creation when the AR API that
is called from OM (NOT Traditional Order Management Defaulting Rules)
─ If Enable Fulfillment has not been activated – the AR API will NOT be
called to invoke the related AR Revenue Contingency defaults EVEN IF
Assignment Rules (can be assigned to customer, site, item, etc) have been
setup

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Process Flow & Processes
Review

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 Customer Acceptance Process Flow
SETUP PROCESS
Acceptance attributes
can be defaulted or be
Enter & Book
Set deferral reason(s) specified for SO line
Sales Order
in AR Revenue Mgt Process Acceptance

Explicit
Pick Release & Ship
Confirm Material Pre-billing Type of
Enable Fulfillment Acceptance
Acceptance in OM
Pre or Post
Yes
Billing?
Acceptance Implicit No Record Acceptance
Required? (OIP/ Order Import)
Expiration
No Post-billing Period past?
Legend Auto-
Yes
Invoice
Automated process creates
Process
invoice
Acceptance
Normal Flow (Conc Progs)
(without Acceptance)

Pre-billing Flow

Post-billing Flow

Revenue Recognition

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 R12 Process - Order to Cash
w/ Customer Acceptance

• Enter & Book orders that are subject to Customer Acceptance -

viewing / updating (if appl.) order line Acceptance Attributes
• Pick Release and Ship Confirm goods – view workflow line status
transition
– Pending pre-billing acceptance
– Pending post-billing acceptance
• Perform Acceptance / Rejection
– Implicit (Programmatic only) or Explicit (Manual via OIP or Order
Import / Process Order API)
• View Acceptance Details in SO line and / or in OIP> Order Status (T)
• View Invoice and Revenue Recognition acceptance related details
from AR / Revenue Mgt

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 Pre-Billing Acceptance
with Explicit Process Description

• Pre-Billing Acceptance (Invoicing Removal Event)

– Sales Order Line in Pending pre-billing acceptance workflow status
post ship confirm
– Invoicing AND Revenue Recognition deferred
– Record Acceptance via Order Information Portal (OIP)> Order
Status (T) or Order Import/ Process Orders API [EXPLICIT]
– Line status transitions to Closed and line gets interfaced to AR
• The Acceptance Date is the Invoice Date in AR
• Could have different values for Ship Date and Invoice Date as
a result
– Invoice generation and Revenue Recognition happen consecutively

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 Pre-Billing Acceptance
with Implicit Process Description

• Pre-Billing Acceptance (Invoicing Removal Event)

– Sales Order Line in Pending pre-billing acceptance workflow status
post ship confirm
– Invoicing AND Revenue Recognition deferred
– Record Acceptance via Implicit Acceptance Request Set - Based
on Event Attribute Expire Days data [IMPLICIT]
– Line status transitions to Closed and line gets interfaced to AR
• The Acceptance Date is the Invoice Date in AR
• Could have different values for Ship Date and Invoice Date as
a result
– Invoice generation and Revenue Recognition happen consecutively

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Sales Order Line BEFORE Ship Confirm
and Pre-billing Implicit Acceptance

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 Sales Order Line AFTER Ship Confirm
but BEFORE Pre-billing Implicit Acceptance

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 Sales Order Line AFTER Ship Confirm
but BEFORE Pre-billing Implicit Acceptance

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Pre-Billing Acceptance Sales Order Line
Workflow Status Diagram

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 Post-Billing Acceptance
with Implicit Process Description

• Post-Billing Accept. (Customer Acceptance Removal Event)

– Sales Order Line in Pending post-billing acceptance workflow status post
ship confirm
– Invoice is generated in AR Revenue is held in Unearned Revenue
account – ONLY Revenue Recognition deferred
– Record Acceptance via Implicit Acceptance Request Set - Based on
Event Attribute Expire Days data [IMPLICIT]
– Line status transitions to Closed
– Upon Acceptance completion the Revenue Recognition reverses the
originally Unearned Revenue account assignment and debits the appropriate
Revenue account
• The Acceptance Date is the GL Date used for when the Revenue is
Recognized

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 Post-Billing Acceptance
with Explicit Process Description

• Post-Billing Accept. (Customer Acceptance Removal Event)

– Sales Order Line in Pending post-billing acceptance workflow status post ship
confirm
– Invoice is generated in AR and Revenue is held in Unearned Revenue
account – ONLY Revenue Recognition deferred
– Record Acceptance via Order Information Portal (OIP)> Order Status (T)
or Order Import/ Process Orders API [EXPLICIT]
– Line status transitions to Closed
– Upon Acceptance completion the Revenue Recognition reverses the originally
Unearned Revenue account assignment and debits the appropriate Revenue
account
• The Acceptance Date is the GL Date used for when the Revenue is
Recognized

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 Sales Order Line
Before Post-billing Explicit Acceptance

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 Sales Order Line
Before Post-billing Explicit Acceptance

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Post-Billing Acceptance Sales Order Line
Workflow Status Diagram

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How to Manually Complete
Explicit Acceptance

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Actions (B) LOV (Header / Lines)

Actions LOV> Fulfillment

Acceptance (Select for Manual
Explicit Acceptance)

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OR Fulfillment Acceptance (B)

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 Manual Explicit Acceptance via Order
Information Portal (OIP)> Order Status (T)

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OIP> Order Status (T)> Process
Manual Explicit Acceptance

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 Confirmation of Manual Explicit
Acceptance in OIP > Order Status (T)

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OIP> Order Status (T) Reflecting Manual
Explicit Acceptance Detail Updates

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 Sales Order Line Others (T) After Completing
OIP Post-Billing Manual Explicit Acceptance

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How to Complete Implicit
Acceptance

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Implicit Acceptance Request Set /
Concurrent Programs

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Sales Order Line Implicit Acceptance
Completed Indicator

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 Helpful Hints - Implicit Acceptance

• Request Set contains two concurrent programs

– Generate Pre-billing Acceptance Program for Pre-billing, Implicit
Acceptance
– Revenue Contingency Analyzer for Post-billing, Implicit
Acceptance
• Implicit Acceptance Programs validate the Date inclusive of the Time
Stamp value for the related Event Attribute
– Event Attribute is Ship Confirm Date and Expire Day is 1
• Ship Confirm Date value is 17-FEB-2010 16:00:00
• The Implicit Acceptance Request Set will NOT process the
related sales order line record(s) for Acceptance until 18-FEB-
2010 16:00:00 or later

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 Helpful Hints – Acceptance Management

Customer Acceptance Report

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 Helpful Hints – Acceptance Management

Customer Acceptance Report – Sample Output

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Revenue Recognition
Overview

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Post-Billing Revenue Recognition BEFORE
Acceptance – AR Revenue Accounting

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Post-Billing Revenue Recognition BEFORE
Acceptance – AR Revenue Accounting

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Explicit Acceptance Completed via
the Order Information Portal

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 Post-Billing Revenue Recognition
AFTER Acceptance – AR Revenue Accounting

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 Post-Billing Revenue Recognition
AFTER Acceptance – AR Revenue Accounting

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 Post-Billing Revenue Recognition
AFTER Acceptance – AR Invoice Distributions

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 Pre-Billing AFTER
Acceptance – AR BPA Invoice View

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Considerations

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 Considerations - Customer Acceptance Based
Deferrals for Invoicing & Revenue Recognition

• Requirement to complete Invoicing and / or Revenue Recognition

AFTER the sales order shipment is physically received/ formally
acknowledged / accepted

• Receivables / Revenue Management

– Revenue Contingencies / Deferral Reasons (Acceptance Names) cannot
be assigned to transaction lines that have deferred account rules
– Revenue Contingencies / Deferral Reasons (Acceptance Names) and their
related Event Attributes are setup in AR Revenue Mgt but enforced in
Order Management
– Continued on next slide…

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 Considerations - Customer Acceptance Based
Deferrals for Invoicing & Revenue Recognition

• Continued
– Revenue Contingency / Deferral Reason (Acceptance Name) and
their related Event Attributes can be defaulted during order creation
when the AR API that is called from OM (NOT Traditional Order
Management Defaulting Rules)
• Based on Customer Acceptance being activated via the OM System
Parameter: Enable Fulfillment Y / N and the setup of Revenue
Contingency Assignment Rules
─ If Enable Fulfillment has not been activated – the AR API will NOT
be called to invoke the related AR Revenue Contingency defaults
EVEN IF Assignment Rules (can be assigned to customer, site,
item, etc) have been setup

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 Considerations - Customer Acceptance Based
Deferrals for Invoicing & Revenue Recognition

• Order Management
– Once the system applies the Revenue Contingency, it will remain applied to the
Order Line till the user manually removes it from the Sales Order form
– Support for multiple Inventory item types – Standard, Service, ATO / PTO Model and
PTO Kits
• For Service, ATO / PTO Model and PTO Kits – Acceptance contingency is
defined at the parent level, child lines inherit acceptance information from the
parent
– Fulfillment Acceptance functions need to be added to menus
– Only supports Full Acceptance / Rejection for outbound order lines
– Ship Confirm Date is the only event attribute supported for the current release
– Fields of Earliest and Latest Acceptable dates are still only applicable to sales order
line scheduling calculations
– Does not apply to returns, internal orders or retro bill orders

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Summary

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 Customer Acceptance Based Deferrals for
Invoicing & Revenue Recognition - Summary

• Contingency Definition / Deferral Reason (Acceptance Name) and

their related Event Attributes are setup in AR / Revenue Mgt and can
be defaulted during order creation as a result of the AR API that is
called from OM (dependent on additional setups)
• Folder functionality enables user access to Acceptance data details
on sales order lines
• Pre-billing deferral is tied to Invoicing and defers BOTH Invoicing and
Revenue Recognition
• Post-billing deferral is tied to Customer Acceptance and defers ONLY
Revenue Recognition
• Explicit and Implicit Acceptances are supported with standard
functionality (additional setups required)

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Questions?

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