Difference between Inter-Project Billing and Intercompany Billing

Enterprises face complex accounting and operational project issues that result from both:1 Centralized project management through sharing resources across organizations

2 Decentralized project management through subdividing a project into related

Oracle projects, provides the Inter company and inter-project billing features to address these issues.

P r o j e c t E x a m p l e

C o m p a n y A B C i s a c o n s t r u c t i o n c o m p a n y w i t h a m u l t i p l e o r g a n i z a t i o n s t r u c t u r e , a s i l l u s t r a t e d b e l o w :

B G I

U S

J a p a nU S

J a p a n

L o s A n g e l e s S a n F r a n c i s c o N e w Y o r k T o k y o

B u s i n e s s G r o u p

S e t o f B o o k s

L e g a l E n t i t y

O U

The Los Angeles operating unit, ABC’s headquarters, received a contract from a UK local resources.

In order to expand its business the UK customer wants ABC to construct buildings in San Francisco, New York, and Tokyo to establish the business.

ABC calls this project “Project X” and wants to track it using Oracle Projects.

ABC will plan and construct the buildings using resources from the Los Angeles operating unit. Employee EMPJP from its Japan subsidiary will act as an internal consultant to add special features to suit the Japanese climate. The San Francisco, New York and Tokyo operating units are each responsible for the successful completion of these buildings with their local resources.

Company ABC can choose to implement either Intercompany Billing or Inter Project Billing features of Oracle Projects.Structure will be as below if Company ABC chooses to implement Inter Project Billing feature:

Inter-Project Billing:

P r i m a r y P r o j e c t w i t h S u b c o n t r a c t e d P r o j e c t s

– P r o v i d e r O r g a n i z a t i o n s B i l l P r o j e c t O w n e r v i a I n t e r p r o j e c t B i l l i n g

N e w Y o r k

L o s A n g e l e s

S a n F r a n c i s c o T o k y o

P r o j e c t X

U KC u s t o m e r

C u s t o m e r I n v o i c e

L o s A n g e l e s

X - S a n F r a n c i s c o X - N e w Y o r k X - T o k y o

I n t e r p r o j e c t I n v o i c e s

• A B C d i v i d e s P r o j e c t X i n t o s e v e r a l r e l a t e d c o n t r a c t p r o j e c t s .

• T h e L A o p e r a t i n g u n i t o w n s t h e p r i m a r y c u s t o m e r p r o j e c t , o r r e c e i v e r p r o j e c t , a n d b i l l s t h e e x t e r n a l c u s t o m e r . T h e r e l a t e d p r o j e c t s , o r p r o v i d e r p r o j e c t s , a r e s u b c o n t r a c t e d t o t h e i r r e s p e c t i v e i n t e r n a l o r g a n i z a t i o n s a n d i n t e r n a l l y b i l l t h e L A o r g . t o r e c o u p t h e i r c o s t s .

P r o j e c t C u s t o m e r

R e c e i v e r P r o j e c t

P r o v i d e r P r o j e c t

E x p e n d i t u r e s

R e c e i v e r O r g a n i z a t i o n

Structure will be as below if Company ABC chooses to implement Inter Company Billing feature:

Inter Company Billing:

G l o b a l P r o j e c t ( c h a r g e d - t o f r o m a n y w h e r e )

– C e n t r a l i z e d P r o j e c t O w n e r s h i p

– C e n t r a l i z e d C u s t o m e r B i l l i n g

P r o j e c t C u s t o m e r

C r o s s - c h a r g e d P r o j e c t

E x p e n d i t u r e s

L o s a n g e l e s S a n F r a n c i s c o T o k y oN e w Y o r k

P r o j e c t X

U KC u s t o m e r

C u s t o m e r I n v o i c e

C o s t s C o s t s C o s t s C o s t s

• L A o p e r a t i n g u n i t ( p r o j e c t o w n e r o r r e c e i v e r o r g a n i z a t i o n ) c e n t r a l l y m a n a g e s P r o j e c t X

• A l l f o u r o u ’ s ( t h e p r o v i d e r o r g a n i z a t i o n s ) i n c u r p r o j e c t c o s t s a n d c h a r g e t h e m d i r e c t l y t o P r o j e c t X .

Difference, Advantages and Disadvantages between Inter-Project Billing and Inter Company Billing Process flow:

S. No Inter-Project Billing Inter company BillingDefinition Definition

1 Inter–project billing generates invoices for work performed between two projects. During Project Setup a subcontracting relationship must be defined between the provider project and the receiver project (also referred as Subcontracting). Once the work has been performed, the provider project generates a Receivables invoice for work/expense incurred to the receiver project. The receiver project automatically

Inter company billing, a processing option within the cross charge feature, generates invoices for work performed between two organizations. The provider operating unit generates a Receivables invoice, which is then interfaced to the receiver operating unit’s Payables system as a Payables invoice. When a company cross charges transactions across a legal entity boundary, inter company billing documents are usually required by law. Companies that cross charge within a

receives this internal invoice as a payables invoice during the AR invoice tieback process. The invoice is then treated as any other supplier invoice and is interfaced to projects as costs on the receiver

legal entity can also use inter company billing to formalize their cross charge process.

2 Create the following documents, which offset each other for a net profit and loss effect of zero:

1 The provider operating unit generates AR invoices, which record internal revenue and accounts receivable balances against the receiver operating unit.

2 The receiver operating unit accepts the corresponding Payables invoices, which record internal costs and accounts payable balances against the provider operating unit.

Same as in Inter Project Billing

Setup Steps Setup Steps1 Each Provider OU must set the flag

‘Provider for Internal Billing’ and specify the internal supplier in Internal Billing of implementation options.

Each Provider OU must set the flag ‘Provider for Internal Billing’ and specify the internal supplier in Internal Billing of implementation options.

2 Receiver OU must set the flag ‘Receiver for Internal Billing’ and specify the internal customer in Internal Billing of implementation options.

Receiver OU must set the flag ‘Receiver for Internal Billing’ and specify the internal customer in Internal Billing of implementation options.

3 Each provider OU must create a provider project and own it completely. Each provider project must have an Agreement and baselined Funding to generate inter-project billing invoice. Customer of this project should be same as the customer specified in Internal

Each provider OU must create an Intercompany Billing project with project type having Intercompany flag = yes. Each Intercompany Billing project must have an Agreement and baselined Funding (please note Funding of Intercompany Billing project will be automatically baselined because the

Billing of implementation options in the Receiver operating unit.The Provider Project can have internal and external customers and can be used to bill the external customer.

Intercompany flag = yes for the project type) to generate intercompany billing invoice. Customer of this project should be same as the customer specified in Internal Billing of implementation options in the Receiver operating unit.IC Billing Project is a dummy project and can be used to bill the internal customers only.

4 Funding Limit is checked for Inter Project Billing

There is no Funding Limit for the Inter company Billing Project

5 Provider Project can be Multi-Currency Billing enabled

Inter company Billing Project cannot be Multi-currency enabled but Inter company Invoices can be generated in currency different form functional currency

6 Receiver OU must create a Receiver project and use this to bill the customer directly.

Receiver OU must create a Receiver project and use this to bill the customer directly.Intercompany Tax Receiving task must be specified for this project in the Cross Charge Setup.

7 Nothing needs to be specifed in the Provider OU under Provider Controls

Each Provider OU must specify the Receiver OU, Legal Entity, Allow Cross Charge, Processing Method, Intercompany Billing Project and Invoicing group under Provider Controls

8 Each Receiver OU must specify the Provider OU’s under Receiver Controls of the Provider/Receiver Controls

Each Receiver OU must specify the Provider OU’s under Receiver Controls of the Provider/Receiver Controls

9 In Customers and Contacts form link the Receiver Project to each Provider Project created in the Provider OU’s. One Receiver Project can be linked to several Provider Projects of different OUs vice versa is not possible.

This step is not required in this case

10 This step is not required in this case Set Allow cross charges from other OUs to yes and specify the Labor and Non labor Transfer Price schedule at the project and task level for the Receiver Project in Receiver OU.

11 Provider OU’s incur costs and Provider OU’s incur costs and charge to

charge to the respective provider project.

the Receiver project directly that is created in the Receiver OU through which the customer is billed

12 Events can be entered as cross charge transactions on provider project

Events cannot be entered for Receiver Project (Cross Charged Project) as cross charged transactions in the Provider OU

13 Distribute costs in Provider OU Distribute costs in Provider OU14 Receiver Project is still not ready to

bill the external customerReceiver Project is ready to bill the external customer

15 Run the Streamline Interface Process to Interface Costs to AP for Expense Reports and to GL for other expenditure transactions from Provider OU

Run the Streamline Process to Interface Costs to AP for Expense Reports and to GL for other expenditure transactions from Provider OU

16 Run Generate Draft Invoice to generate the inter-project invoice for the provider project in provider OU. Bill Amount is calculated as per the Billing setup of the project/task based on the actual cost incurred.

Run Generate Intercompany Invoice for the Intercompany Billing Project in Provider OU. Bill Amount is calculated as per the Transfer Price Schedule of the Cross Charged Project at the project/task level based on the actual cost incurred.

17 Approve and release the inter-project invoice.

Approve and release the intercompany billing invoice.

18 Run the Streamline Interface process with streamline option as XI: Interface Draft Invoice to AR to interface the inter-project invoice to Receivables of Provider OU.

Run the Streamline Interface process with streamline option as XIC: Interface Intercompany Invoice to AR to interface the intercompany invoice to Receivables of Provider OU.

19 Tieback process of the above streamline process creates IP Payables invoice in Receiver OU for the Receiver Project

Tieback process of the above streamline process creates Payables invoice in Receiver OU for the Cross Charged Projects

20 Import the Payables invoice from open invoice interface to create the supplier invoice and transfer to GL

Import the Payables invoice from open invoice interface to create the supplier invoice and transfer to GL

21 Interface this payables invoice to Oracle projects of Receiver OU as a normal supplier invoice charged to the Receiver Project. This steps gets the actual costs to the Receiver OU

This step is required to take the internal costs to Oracle projects of the Receiver OU

22 Now the Receiver Project is ready for billing the external customer in Receiver OU and can generate Draft Invoice for Receiver Project and interface it to AR of Receiver OU. Unless step 17 is performed it is not

In this case Cross Charged project is ready to bill the external customer as soon as the costs incurred on cross charged project are distributed.

possible to bill the customer because the expenditure is still not charged to the receiver project.

23 Run update project summary amounts for the receiver project in Receiver OU

Run update project summary amounts for the receiver project in Receiver OU

24 Costs are owned by the Provider OU Costs are owned by the Provider OU25 Decentralized Project Ownership

and Centralized Customer BillingCentralized Project Ownership and Centralized Customer Billing

Advantages Advantages1 Flexibility in managing the provider

projectSimple project creating and maintainence

2 Each provider is treated and processed the same way as any other external customer contract project

All the expenditures against the receiver project whether cross charged or not are available for external customer billing and project tracking via PSI

3 The customer receives timely consolidated invoices from Receiver OU which owns the project for all the work performed regardless of which OU provides the resources.

Disadvantages Disadvantages1 With distinct project structure this

requires additional overhead in creating and managing additional provider projects

Requires additional initial overhead for implementing the cross charge feature and creating intercompany billing projects to collect cross charge transactions within each provider organization.

2 The receiver projects status and external customer invoicing depend upon timely completion of the internal billing from all provider projects