Nov 14, 2023
00:00
Welcome to the Oracle University Podcast, the first stop on your
cloud journey. During this series of informative podcasts, we’ll
bring you foundational training on the most popular Oracle
technologies. Let’s get started.
00:26
Nikita: Hello and welcome to the Oracle University Podcast. I’m
Nikita Abraham, Principal Technical Editor with Oracle University,
and with me is Lois Houston, Director of Innovation Programs.
Lois: Hi there! Last week, we had David “Barney” Barnacle, Sr.
Principal ERP Learning Strategist, with us, who spoke about Procure
to Pay and Asset Acquisition to Retirement, which are two major
business processes within the Oracle Financials Business Process
Model. Barney is here with us for one last time this season to take
us through the last two business processes, Accounting
Transformation and Budget to Report.
01:02
Nikita: Welcome back, Barney!
Barney: Hi Niki! Hi Lois!
Nikita: So Barney, what can you tell us about Accounting
Transformation?
Barney: Accounting Transformation is one of the most important
business processes in the Oracle Cloud Financials Business Process
Model. All our enterprises are required to record their financial
transactions, and the Oracle Fusion Cloud: ERP application supports
businesses in recording these transactions with the help of best
practice life cycles like Invoice to Cash, Procure to Pay, and
Asset Acquisition to Retirement.
01:32
Nikita: Everything we’ve discussed in our previous episodes.
Barney: Right. Now, Accounting Transformation refers to the process
of converting business transactions from Oracle subledgers, or
transactions from external source systems, into detailed, auditable
journal entries.
Source systems are typically industry-specific applications that
are either purchased from third parties or built internally within
the customer organization. Examples of such systems include core
banking applications, insurance policy administration applications,
billing applications, and point of sales applications.
And to do this transformation, we have a very powerful tool called
the Accounting Engine. If the accounting engine is only used in
Oracle Cloud Subledgers (for example, Assets, Payables, etc.), then
this engine is referred to as the Subledger Accounting Engine.
02:24
Lois: And what does this Subledger Accounting Engine do?
Barney: The Subledger Accounting Engine, also known as SLA, is
loaded with predefined event models and accounting methods, i.e.
the accounting rules. And within this engine, users can also create
user-defined accounting methods, i.e. new rules, to achieve
multiple financial reporting requirements. The accounting engine’s
job is to convert business transactions into auditable and balanced
accounting journal entries.
02:55
Lois: Is SLA a separate product?
Barney: SLA is not a separate product itself but is Oracle’s
common engine, which caters to the accounting needs of all the
Oracle subledgers. Subledger Accounting is a rules-based accounting
engine that is centralized for use by all the Oracle Cloud
subledgers.
03:13
Nikita: So how does Subledger Accounting work?
Barney: When using Oracle Cloud Financials, financial transactions
such as invoices or payments are recorded in the Oracle Cloud
subledger products, whereas transactions from legacy systems are
recorded in Oracle Fusion Cloud Accounting Hub.
Each financial transaction has some accounting event type
associated with it. For example, creating a customer invoice,
adjusting a payment, validating a supplier invoice, and so on.
As I was saying earlier, Subledger Accounting has predefined
accounting rule sets, also known as accounting methods. And these
accounting methods follow industry practices (for example, Standard
accruals).
03:53
Nikita: And how do accounting rules work?
Barney: The accounting rules pick the accounting event type
associated with the business transaction. It uses relevant
transaction attributes like Amounts, Currencies, Dates, Customers,
or Suppliers. Then, it converts the transactional attributes into
balanced and auditable Subledger and ultimately General Ledger
journal entries, which may also require the copying or complete
creation of account code combinations.
04:19
Lois: Can all the accounting requirements of a business be met with
the help of standard accounting methods?
Barney: No, Lois. Sometimes, standard accrual accounting methods
don’t meet all the accounting or business requirements. But then
subledger accounting can support user-defined accounting methods to
generate different accounting entries to support these different
regulatory or business requirements. For example, by using a local
GAAP.
04:44
Nikita: Barney, can you tell us in more detail the various steps
involved in the accounting transformation process?
Barney: So, the first step is to record business transactions
using modern business life cycles.
As the user processes these transactions, with such actions as
create, validate, adjust, delete etc., these actions are recorded
as event types. The accounting engine uses these types and the
accounting method rules to create detailed subledger journals. It
is the accounting rules that take the transaction source
attributes, such as amount, date, customer supplier, etc., and
converts them into a balanced detailed subledger journal that can
be audited. If there are insufficient or incorrect account or no
account values within the source transactions, then the account
rules, mapping sets, and user-defined formula that can be
configured to create the correct account combinations.
05:39
Barney: To create these journals, the create accounting process can
be automated to run on a regular basis, typically at least once a
day. The Create Accounting process first generates detailed
subledger journals in draft or final mode within the SLA data
repository. If these SLA journals are in final mode, then they can
also be transferred to create summarized or detailed general ledger
journals. Once posted, these GL journals update the account
balances of all dimensions stored within the GL Essbase cubes.
From these account balances, you can create flexible financial
reports to meet the requirements of all stakeholders. And the best
part is any role that’s assigned SLA privileges can carry out these
tasks.
06:30
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06:59
Nikita: Welcome back. So, transactions are created, accounting is
generated using the powerful SLA engine, and then when that’s done,
organizations can publish their financial reports and submit them
to government authorities and their stakeholders, right? So, how do
they administer control over their financial planning and spending?
And how do organizations create these different reports?
07:23
Barney: Financial reports/statements are key to assessing the
financial efficiency and determining the key performance indicators
of any organization or enterprise. In Oracle Fusion Cloud, we talk
of producing reports across three key axes, the legal, the
management, and the functional axis, to match the varying
requirements of stakeholders.
Some organizations, to drive good financial control, plan and
generate budgets and/or forecasts. This is so that they can
estimate their revenue and expenses for a specific future period.
In fact, some enterprises go much further and use budgetary control
and encumbrance accounting to ensure expenditure remains within
budgeted control levels per period and they can block further
expenditure on items that have spent over planned budgeted
amounts.
08:15
Barney: Other enterprises may have a rolling 12-month budget that
can be updated at the end of each financial period.
Simple to complex budgets or forecasts can be loaded into the GL
Essbase cubes and the planned budgeted account balances over a
period can easily be compared with actual performance using a
variety of financial reporting tools provided by Oracle Cloud. Any
budget variance can be used to drive financial control and
analysis, while contributing to effective, strategic
decision-making.
The Oracle Fusion Cloud Budget to Report process focuses on
planning, accounting for transactions, and reporting financial
information to the appropriate stakeholder.
08:59
Lois: Why is this process so important for organizations? What are
the benefits of budget reporting?
Barney: It is a great way to drive financial control by
efficiently tracking the company's performance versus the budget or
forecast plan. Budget reporting allows an organization to perform
frequent comparisons of forecasted and actual results with the
purpose of fixing the key deviations. It allows organizations to
allocate cash to assets worth the investment, make acquisitions, or
create disposals or disinvestment strategies.
09:32
Lois: Barney, what are the key processes within Budget to
Report?
Barney: Within the Budget to Report processes life cycle, there are
three key subprocesses: managing budgets and forecasts, capturing
transactions (i.e. account balances), and period close to financial
reporting. Accountants will cycle through these three processes on
a regular basis, which is typically monthly.
Let’s start with the Manage Budgets and Forecasts process. This
process refers to the entire cycle of events that start with
planning and formulating and ultimately ends with creating budgets
and forecasts in the application. Oracle General Ledger simplifies
budget and forecast uploads into the system by the use of Excel
spreadsheets.
10:15
Barney: Next is the Capture Transactions and Journal Entry process.
Financial transactions captured in the subledgers are accounted for
via the SLA accounting engine and are converted into detailed
subledger and summarized general ledger journals (i.e. the
accounting process we have just discussed under SLA). Manual
journals can also be created with the use of the user interface or
via spreadsheet uploads. The account combinations on these journal
lines, once posted, that record the actual account balances, which
detail organization revenue, expenditure, taxation, and so on over
a period.
10:52
Barney: The Period Close to Financial Reporting process starts with
the period closure for each subledger application, ensuring all
financial transactions are captured and reported in the correct
period. It includes the reconciliation of all key suspense accounts
or key accounts (for example, cash balances, tax debtors,
liabilities, etc.), special period-end processing, such as foreign
currency requirements for revaluation and translations or
allocation journals to spread the account distribution of central
costs or revenue pools, and the use of consolidation ledgers, with
requirements to move currency account balances between ledgers.
Finally, from these consolidated, reconciled account balances, a
variety of reporting tools can be used to generate the required
financial reports/statements for both internal and external
stakeholders.
11:42
Barney: Some of these reports will include the comparison of actual
versus budgeted values, and any key variances will be used to
revise or amend the budgets/forecast plans. We return to where we
started with a review or modification of our strategic financial
plans.
11:59
Nikita: Barney, what are the key job roles associated with the
Budget to Report process?
Barney: There are three job roles associated with this process that
are predefined as standard by Oracle: General Accountant, Financial
Analyst, and General Accounting Manager.
The General Accountant manages all financial transactions and
revenue, expenses, assets, liability, and equity accounts, and is
responsible for recording accounting adjustments, such as accruals,
allocations, currency revaluations, and translations.
The Financial Analyst analyzes the financial performance of an
enterprise or an organization.
The General Accounting Manager manages the general accounting
functions of an enterprise, including general ledger, subsidiary
ledgers. They also manage period close activities.
12:49
Lois: Any final words, Barney, as we conclude this series on ERP
Financials business processes?
Barney: So, in these last couple of episodes, we discussed the five
financial business process life cycles. These processes are
collectively known as Record to Report.
The Record to Report process includes data extraction, collection,
and processing to deliver accurate and timely financial information
and enhance decision-making within the organization or
enterprise.
Using embedded analytics to drive an error-free financial close
process, Oracle Fusion Cloud can not only automate and transform
the R2R process, but also enable timely, real-time financial
performance reporting.
13:37
Nikita: Thank you so much, Barney, for being our guide and taking
us through the Oracle Financials Business Process Model.
Barney: Thank you. It’s been great being here with both of you.
Lois: If you missed any of our earlier episodes with Barney, you
should go back and check them out. And if you’re interested in
learning more about Oracle’s business process training and getting
certified, visit mylearn.oracle.com. Until next time, this is Lois
Houston…
Nikita: And Nikita Abraham, signing off!
14:03
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