Inter Company Billing

Inter Company Billing is a method of billing work performed by a provider operating unit and charged to a project
owned by a receiver operating unit. The provider operating unit creates a Receivables invoice, which is interfaced as
a Payables invoice to the receiver operating unit.

Using this method, Projects generates physical invoices and corresponding accounting entries at agreed upon transfer
prices between internal seller (provider) and buyer (receiver) organizations when they belong to different legal entities
or operating units.

For Inter Company Billing the Provider and Receiver must be in different legal entities.

Setup & Example

Consider the following Operating units which belong to two different legal entities.
Legal Entity 1 - Projects Vision Communications  Receiver Operating Unit

Legal Entity 2 - Projects Vision Services  Provider Operating Unit

Projects Vision Services provides resources to work on a project related to Project Vision
Communications.

1. Go to Setup Costing Provider and Receiver Controls.

Query up the Provider Operating Unit (Vision Services in our example)
Under the Provider Controls Tab.
Setup the Receiver details as follows:
 Receiver Operating unit = Vision Communications
 Enable Allow Cross Charge
 Processing Method = Inter Company Billing
 Inter Company Billing Project = (Inter Company Project created in Provider OU)
 Enter an Invoice Grouping Method.

2. Go to Setup Costing Provider and Receiver Controls.

Query for the Receiver OU (Vision Communications in our example)
Under the Receiver controls Tab, setup the Provider details as follows:

 Operating Unit = Vision Services

 The supplier will be defaulted based on the setup done in the Implementation Options screen
in Vision Services (Provider OU) under the Internal Billing Tab.
 Enter a Supplier Site (mandatory). If not done the Receiver project will not be available in the
Pre-Approved batches screen to enter Expenditure Items.
3. A Transfer Price Schedule should exist for the corresponding Provider and Receiver combination

4. Auto accounting Setup – The function “Intercompany Invoice Accounts” should be configured
5. In Projects Vision Communications OU (Receiver Operating Unit)
 Create a project "Contract New Project"
 Enable Cross charge at both Project and Task Levels.
 Under the Cross Charge Section, assign an Intercompany Tax Receiving Task at the
project level
6. In Projects Vision Services OU (Provider Operating Unit)
 Create an Intercompany project type (Intercompany Billing should be enabled)
 The project type should be a Contract project type
 Create a template and project based on the above project type.
  In the project, under Customers and Contacts, ensure that the customer contact is be the
one defined, in the Vision Communications (i.e. Receiver OU) in the Implementation
Options screen Internal Billing Receiver Options (Customer name)
 The project should have baselined funding.

7. Enter a pre-approved Expenditure Item against project "Contract New Project"

8. Distribute the cost. Note: The expenditure item should be entered and distributed from the
Provider Responsibility

9. From The Provider Responsibility Run PRC: Generate Intercompany Invoices for a Single Project.
10. Approve and Release the Invoice.
11. Run PRC: Interface Intercompany Invoices to Receivables
12. Go to a Receivables Responsibility for the operating unit and run the Auto invoice Import
Program.
13. Run PRC: Tieback Invoices from Receivables

Once the processes are successfully completed, data will be inserted into the following AP tables:
AP_INVOICE_LINES_INTERFACE
AP_INVOICES_INTERFACE

14. Run the Payables Open Interface Import from a Payables responsibility (In the Receiver OU i.e.
Vision Communications Responsibility)
15. Run PRC: Interface Supplier Costs (In the Receiver OU i.e. Vision Communications Responsibility)

Transfer Price Rules

Transfer price refers to the price that two organizations agree upon for cross charge purposes. Transfer price rules
allow you to indicate how the transfer price is calculated. The calculations are based on

Transfer Price Basis – Base the transfer price on the raw cost, burdened cost, or revenue amount of the
transaction

Cross-charge calculation method – you can optionally burden, use bill rate schedules or a percentage markup to
calculate the transfer price from the basis

To define a Transfer Price Rule -

Navigate to Setup  Costing  Cross Charge  Transfer Price Rules

1. Enter a unique Rule Name.

2. Select type Labor or Non-Labor
3. Specify the description and effective dates.
4. For Basis select Raw Cost, Burden Cost or Revenue
5. Select one of the following Calculation Methods to determine the transfer price.

 Basis - Use the transfer price with no further adjustments.

 Burden Schedule - Specify name of the burden schedule to apply to the basis.
  Bill Rate Schedule - For Operating Unit, specify the name of the operating unit that owns the bill rate
schedule that you want to use. For Schedule Specify the schedule bill rate schedule name to apply to the
basis.

6. In the Apply field, enter a percentage (zero or any positive number)

The % is the amount of markup or discount to the transfer price amount calculated by the rule. A number less
than 100 indicates a discount, greater than 100 indicates a markup.

Transfer Price Schedules

A transfer price schedule is a list of transfer price rules. In the simplest transfer price schedule there would be one
transfer price rule which all provider and receiver pairs would use.

Oracle Projects supports more complex schedules so your organizations can negotiate their own transfer price rules.
You can define one transfer price schedule consisting of different rules for different organization pairs or multiple
schedules consisting of different rules for the same pair of organizations.

You can assign different transfer price schedules at the project and task levels.

To define a Transfer Price Schedule, navigate to Setup  Costing  Cross Charge  Transfer Price Schedule

1. Enter a unique schedule name.

2. Select type (Labor or Non-Labor)
3. Specify the description and effective dates.
4. Enter the lines.

Line num - Enter a line num greater than zero.

Provider - Enter the provider operating unit, organization name

Receiver (optional)- Enter Receiver Operating unit, organization name.

If we leave Receiver blank then this transfer price schedule applies to any receiver organization receiving
transactions from the specified Provider organization.

Labor and Non-Labor Rules - select the corresponding Labor or Non-Labor Rules as defined above.

Apply % - The % is the amount of markup or discount to the transfer price amount calculated by the rule. A
number less than 100 indicates a discount, greater than 100 indicates a markup.
 Transfer Price Amount Type -
 Cost and Revenue - Applies to all the Cross Charge Transactions
 Cost - Applies to transactions when the assigned work type has an amount type to Cost
 Revenue – Applies to transactions when the assigned work type has an amount type to Revenue

Effective Dates - Effective dates for the line.

Default - Choose one schedule line to be default to this schedule. Project uses this line to derive the transfer
price if none of the lines match your transaction. It is not mandatory to define one line as default; however,
if it cannot determine a rule to apply to a transaction then an error message is raised.

Transfer Price Amount Calculation

Case 1 -
Define a Rule as follows:

Type = Labor
Basis = Raw Cost
Use = Basis
Apply = 100 %

Attach the above rule to a Schedule. In the Schedule

Apply % = 100 %
Transfer amount type = Cost

Attach the schedule at the task level.

Based on the above setup, this rule is used only for Labor Transactions.

Assume we have entered a Pre-Approved Time Card and distributed the cost, and let us assume that Raw Cost is
Calculated as - 2000 once the cost is distributed.

Now when we run the Distribute Borrowed and Lent Process, Transfer Price is calculated as follows:

Since the rule is based on Raw Cost, Raw cost of the transaction is considered.

Initial Transfer Price = (Raw Cost * Apply % in the Rule)

= (20000 * 100/100) = 2000.

Since the Schedule also has the Apply % as 100.

Final Transfer price amount = (Initial Transfer Price * Apply % in the Schedule Line) =
(2000 * 100/100) = 2000.

In this case Transfer Price Amount will be - 2000.

In the same example let’s assume that at both rule and schedule we have defined Apply % = 50.

Initial Transfer price = (Raw Cost * Apply % in the Rule)

= (2000 * 50/100) = 1000.

Once the rule % is applied, the schedule % is applied on the calculated Amount

Final Transfer Price Amount (Initial Transfer Price * Apply % in the Schedule Line) = (1000 * 50/100) = 500.

Since the Schedule also has the Apply % as 50. In this case Transfer Price Amount will be - 500

Case 2 – Rule Using Bill Rate Schedule

With the same above example, let’s say, instead of using Basis, we have selected "Bill Rate Schedule"

The rule is defined as follows

Type = Labor
Basis = Raw Cost
Use = Bill Rate Schedule and a Rate schedule is attached.
Apply = 50 %
Attach the above rule to a Schedule. In the Schedule:

Apply % = 50 %
Transfer amount type = Cost

Attach the schedule at the task level.

Enter a Pre-Approved time card with quantity 50 and distribute the cost.

If the rate defined in the rate schedule attached above is 200 then the transfer price is calculated as follows:

In this case since a rate schedule is attached, raw cost will not be taken into consideration.

Initial Transfer Price = (Quantity * Rate * Apply %) = (50 * 200 * 50/100) = 5000

Final Transfer Price = (Initial Transfer Price * Apply % defined at the Transfer Schedule Line level) =
(5000 * 50/100) = 2500

The Transfer Price will be 2500.

Case 3 – Using a Burden Schedule

The rule is defined as follows:

Type = Labor
Basis = Raw Cost
Use = Burden Schedule
Apply = 50 %

Attach the above rule to a schedule, and in the schedule:

Apply % = 50 %
Transfer amount type = Cost

Entered a Pre-Approved time card, and distribute the cost. Assume the cost calculated is 3000.

The Transfer Price is calculated as follows:

In this case since a Burden Schedule is attached, based on the Raw Cost, the burden cost will be calculated
considering the burden schedule attached to the rule. Let us assume burden cost calculated is 1500

Initial Transfer Price = (Burden Cost * Apply %) = (1500 * 50/100) = 750

Final Transfer Price = (Initial Transfer Price * Apply % defined at the Transfer Schedule Line level) =
(750 * 50/100) = 375

The Transfer Price will be 375.

Note - Similar Logic applies if we use Basis as Burden Cost or Revenue.

 Intercompany Accounting
PA, AR and AP modules will all create accounting entries to complete the intercompany accounting.

● PA will create the initial expenditure in the Provider OU, which creates half of the accounting required
in the Provider entity. This expenditure will appear on the Project and will reflect the different
Provider and Receiver Operating Units. AP may also create the accounting for the initial expenditure
when it processes a supplier invoice that is cross-charging entities. (Provider OU = OU from where
the cost originates; the OU that provides the service or product being charged. Receiver OU = OU
receiving the cost; since Projects receive cost, the Project OU will always be the same as the Receiver
OU)

o When the expenditure is a cross-charge transaction, the accounting for the debit account (as
explained above) will be overridden to charge the OIE account.

● AR will create an intercompany AR invoice in the Provider OU, which creates the other half of the
accounting required in the Provider entity. It will credit the same OIE line used on the PA expenditure
for the cost amount, and credit a separate OIE line for the markup, thus leaving only the markup in the
OIE line.

● AP will create an intercompany AP invoice in the Receiver OU, which creates the accounting required
in the Receiver entity. This entry will charge the expenditure cost to the account required for the
project charged and charge the markup to the OIE line.

Example:
An employee in the US charges time to a POC project in GB OU. Cost = 400. Markup = 20 (400 x 5%).
Entry #1: PA books debit to OIE and credits Employee’s Home Dept for the cost. PA sends data to AR
system.
Entry #2: AR creates invoice in Provider OU, debits Interco AR, credits OIE for cost and markup
Entry #3: AP creates invoice in Receiver OU, debits Project Account for cost, debits OIE for markup, credits
Interco AP.

Entity Module Transaction Accounting Distributions Dr Cr Line Desc.

Provider Projects Cross-charge Dr. OIE 100000-920170-00000-00-0000- 40 Project Cost
(PA) transaction 000000 0
in PA Cr. Employee 100000-888997-AB123-00-0000- 40 Cost relief for
Home Dept 000000 0 project cost
Receivables AR Interco Dr. Interco 100000-116100-00000-00-0000- 42 Interco
(AR) Invoice AR 908000 0 Receivable
(Provider) Cr. OIE 100000-920170-00000-00-0000- 40 Project Cost
000000 0
Cr. OIE 100000-920540-00000-00-0000- 20 Markup
000000
Cr. Tax 100000-321219-00000-00-0000- 0 Tax (if required
 Liability 000000
Receiver Payables AP Interco Dr. Project 908000-751000-00000-BH-5703- 40 Project Cost +
(AP) Invoice 000000 0 Tax
(Receiver) Dr. OIE 908000-920540-00000-00-0000- 20 Markup
000000
Cr. Interco 908000-316100-00000-00-0000- 42 Interco Payable
AP 100000 0

Net result of entries in Provider entity:

Dr. Interco AR 100000-116100-00000-00-0000-908000 444 Cost, Markup,
Tax
Cr. Home Dept 100000-888997-AB123-00-0000-000000 400 PA Cost
Cr. OIE 100000-920540-00000-00-0000-000000 20 Markup
Cr. Tax Liability 100000-321219-00000-00-0000-000000 0 Tax

Net result of entries in Receiver entity:

Dr. Project P&L 908000-751000-00000-BH-5703-000000 400 Cost + Tax
Dr. OIE 908000-920540-00000-00-0000-000000 20 Markup
Cr. Interco AP 908000-316100-00000-00-0000-400000 420 Cost, Markup,
Tax

Screenshots of fields that determine accounting:

Project Classifications:
Task Service Type:
Options > Tasks > Select task > Task Detail