3.2 Supplier Invoice Processing: Invoice Types, Components and Distribution Sets
Key Takeaways
A Payables invoice has a header, lines, distributions and installments; installments carry the due dates, due amounts, discount dates and payment method.
Invoice types include Standard, Prepayment, Credit memo, Debit memo, Withholding tax, Interest, Standard invoice request, Credit memo invoice request and Payment request.
Distributions are created by matching, by a distribution set, by allocating freight or miscellaneous lines, or manually on Manage Distributions.
A 100 percent distribution set allocates by fixed percentages, while a 0 percent (skeleton) set creates the distributions and leaves the amounts for the user to enter.
Allocate All Lines prorates a freight or miscellaneous charge, less inclusive tax, across item lines; Allocate Specific Lines can use selected lines, amounts or percentages.
The published objectives are Describe Supplier Invoices processing and Manage Distribution sets. You need to recognize each invoice type and component, and predict what the distributions will be after you match, allocate or apply a distribution set.
Invoice types
| Type | Description |
|---|---|
| Standard | A supplier invoice for goods or services |
| Prepayment | An advance payment to a supplier. After the first validation its status is Unpaid until it is paid (section 4.3). |
| Credit memo | A supplier document that gives a credit |
| Debit memo | Created when a supplier doesn't send you a credit memo document, so you record the credit yourself |
| Withholding tax | Generated automatically to pay a tax authority. Can be created manually if Allow manual withholding is enabled (section 7.3). |
| Interest | Generated automatically for interest on overdue invoices when interest invoices are enabled |
| Standard invoice request | A non-PO invoice submitted in Supplier Portal, waiting for the requester's approval |
| Credit memo invoice request | A non-PO credit memo submitted in Supplier Portal, waiting for the requester's approval |
| Payment request | A request from Oracle Expenses or Oracle Receivables to pay someone who isn't set up as a supplier, such as an employee reimbursement or a customer refund |
Invoice components
An invoice has four components:
- Header: invoice number and amount, supplier and site, payment terms, currency, dates, and the default liability distribution.
- Lines: the goods and services, including tax, freight and miscellaneous charges. Lines also carry the details needed by Oracle Assets, Projects and Purchasing. They can be created by matching to a PO, receipt or consumption advice, or entered manually.
- Distributions: the accounting information, meaning the accounting date, distribution combination and project details. Accounting entries are created from distributions.
- Installments: due dates, due amounts, discount dates and payment method. Payment process requests select installments (section 7.1).
Line types:
- Item: goods and services.
- Freight and Miscellaneous: charges that can be allocated to item lines.
- Prepayment: created automatically when a prepayment is applied or unapplied.
Tax and withholding appear in the Taxes section of the invoice pages rather than as user-entered line types.
How distributions are created
Oracle lists four ways:
- Matching to a purchase order, receipt or consumption advice (section 3.3).
- A distribution set.
- Allocating a freight or miscellaneous line.
- Manually on the Manage Distributions page.
Tax distributions are usually created when the invoice is validated.
The distribution combination on the invoice line only defaults into Manage Distributions. Changing a distribution there doesn't change the line's value. Subledger Accounting can also be set to take accounts from a source other than the invoice distribution (section 5.3).
Freight and miscellaneous allocations
Allocating a charge creates distributions that use the same distribution combinations as the item lines it is allocated to. With Landed Cost Management configured, the charge becomes part of the item cost. Tax is calculated automatically when you choose an allocation action, so the inclusive tax is known.
- Allocate All Lines spreads the charge, less inclusive tax, across all item lines in proportion. Oracle's example: an invoice for USD 110 has item lines of USD 75 and USD 25 and freight of USD 10. Allocating to all lines creates freight distributions of USD 7.50 and USD 2.50.
- Allocate Specific Lines lets you choose the target lines, give an amount for each line, or give a percentage for each line.
You can change saved allocations until the distributions are generated. If no allocation is done and the Common Options Freight or Miscellaneous distribution is blank, the charge is prorated across item lines.
Distribution sets
A distribution set creates distributions automatically for invoices that aren't matched to purchase orders. Oracle's example is an advertising supplier whose expense is split across four departments.
Key facts:
- Distribution sets are defined for invoice business units, not shared through reference data sets.
- A default distribution set can be set on the Site Assignments tab of the supplier site. You can also pick or override a set during invoice entry.
- A set can include income tax types (for 1099 suppliers), project information (copied to the distribution and overridable), and descriptive flexfields (copied to the distribution).
- Tax codes aren't used in distribution sets.
With percentages or without
| Set type | How it works | Use it when |
|---|---|---|
| 100 percent distribution set | Each line has an account and a percentage. Percentages must total 100 and may include negative values. | You know the split, for example rent at 70% sales facility and 30% administration |
| 0 percent distribution set (a skeleton set) | Each line has an account and no percentage. The distributions are created and the user enters the amounts. | The accounts are known but the split changes each time, for example facilities expense split by monthly headcount |
A skeleton set doesn't mean a partially defined account that the clerk finishes off. It means the accounts are complete and the amounts are blank. If an invoice is saved with distributions that don't add up to the line amount, validation places a Dist Variance hold, which can't be released manually (section 4.1).
Putting it together: an unmatched utility invoice
A USD 1,000 utility invoice arrives for site POWERCO. Its site assignment has the default distribution set FACILITIES-SPLIT, a 100 percent set with 60% to 10-100-6200 and 40% to 10-200-6200.
- The invoice is entered with one item line of USD 1,000. The distribution set creates USD 600 and USD 400 distributions.
- Validation calculates tax and checks for holds. With Hold unmatched invoices set to No for this site, no Matching Required hold is placed.
- Installments come from the payment terms and terms date.
If the business unit instead used a 0 percent set, step 1 would create two USD 0 distributions. The clerk would have to enter 600 and 400 before validation could pass.
Facilities costs are always charged to the same three department accounts, but the split changes every month based on headcount. Which distribution set design fits best?
A 0 percent distribution set of the three accounts, with amounts entered per invoice
A 100 percent distribution set with the three accounts at 33.33%, adjusted after validation
A distribution set with the natural account left blank so the clerk completes it
A distribution set with a tax code on each line so the tax engine splits the amounts
An invoice totals USD 110: item lines of USD 75 and USD 25 plus a USD 10 freight line with no inclusive tax. The clerk chooses Allocate All Lines on the freight line. What distributions are created for the freight?
One USD 10 distribution to the Freight account in Common Options
Two USD 5 distributions, one for each item line
USD 7.50 using the first item line's account and USD 2.50 using the second
USD 10 added to the first item line only, because it is the larger line
Oracle Expenses needs Payables to reimburse an employee who isn't set up as a supplier. Which Payables invoice type is created?
Standard invoice request
Debit memo
Interest
Payment request
Sections you finish are checked off in the contents.