Oracle Cloud Cost Accounting and Receipt Accounting (Costing) provide great improvements over the older Oracle tech stack, also known as the E-Business Suite (EBS) solution.
Organization structure and period close
Cost Organizations and Profit Center Business Units are new concepts in the cloud that gives the opportunity to track “inter business unit” profits and classify the profits in separate cost elements within the different cost organizations. The ability to group Inventory Organizations under the Cost Organizations provides ease of use and streamlined period end processes. Speaking of the month end close, the Cost Accounting and Receipt Accounting offers built-in infolets and period checks and validations. These tools empowers the Cost Accountant by showing potential period end issues proactively. Oracle Transactional Business Intelligence provides many subject areas for the Cost Accountant to develop reports to review and drill down upon transactions.
One of the biggest changes over EBS solution is the fact that Oracle has moved the costing related decisions and policies to the item level as opposed to the inventory organization level. Using the flexible structure, items under the same inventory organization can have different cost profiles such as standard, average and actual costing. For example, a manufactured item can be driven with a standard rolled up cost, but repair items can be opted in for actual costing method under the same roof.
The Cloud Costing solution provides greater flexibility with overhead rules. Based on business needs, companies can set up overhead rules as granular as transaction types and item categories within the same Cost Organization. For example, Inventory Organizations can add a certain percentage of the material cost of PO receipts as the “Purchasing Overhead” on certain items. Another organization can add a dollar expense per shipment sent out of their facilities to account for shipment supplies.
Starting with Release 20A, Oracle Cloud solution has integrated Project Accounting with Cost Accounting. This gives project centric organizations to track their costs at project or project/task level.
Subledger Accounting (SLA) Rules
Oracle Costing solution integrates with general ledger quite seamlessly. Out-of-the-box standard mapping sets let the organizations create complex accounting rules for Inventory, Receiving, Shipping, Manufacturing transactions, in short for Operational transactions. If the standard mapping sets do not satisfy the business needs, rules can be written without any development objects using the functional setup manager.
In short, Oracle Cloud Costing provides an enhanced, flexible and robust solution for organizations. Key Considerations for a Costing Implementation:
- Cost Organizations and Enterprise Structure: Profit Center Business units drive the Cost Organizations. The need for the inter organization pricing and the internal profit/loss tracking will be the most important contributors in this decision.
- Need for additional cost books: Each organization is required to have one primary cost book per cost organization for regulatory purposes. If the company needs a track cost for reporting purposes, then the secondary cost book may be considered. For example, a multi-national company may perform Cost Accounting in local currency, but also want to track cost in parent company’s currency.
- Cost Organization Inventory Organization Relationship: Points to consider would be data security, period close process, reporting requirements and cost policy requirements. Inventory Organizations roll up to cost organizations for uniform costing within the cost organization.
- Cost Policy for Items and defaulting rules: Cost Profiles define the costing policy that will be applied to the inventory items. Is the item going to be costed with standard or average cost method? What will be the valuation unit going to be? Tracking cost at project level, or cost organization level? These are the decisions that need to be made before items are assigned to cost profiles. Once transacted, an item’s cost profile cannot be changed.
- Cost Elements Cost Components mapping: Cost component mapping to the cost elements impact the costing profiles that impact item cost policies.
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