Oracle R12 Financial Concepts - Organisational Structures

Oracle's new Financial Concepts manual provides a useful and practical overview of the structural elements within release 12.

Getting the structural elements correct within Oracle is a critical success factor for any Oracle system, notably organisational structures and flexfield design, particularly the chart of accounts, as these elements dictate the transactional and information flow through the applications.

In terms of structure, release 12 highlights the concept of system entities building upon the existing organisational classifications with 2 new crucial additions - Government Reporting Legal Entity and Ledger, giving the following "important system entities:

• Business Group and Departments
• Government Reporting Legal Entity (GRLE)
• Legal Entity
• Ledgers
• Operating Unit
• Inventory Organization
• Human Resources Organization

In terms of how these organisations are used, Oracle recommends looking at 3 axis - legal axis, business axis and reporting access.

Looking at the legal axis - business groups hold legislative codes determining what country specific HR / Payroll functionality is used, Government Reporting Legal Entities define which organisations hold contracts of employments, with Ledgers defining the financial legal dimension.

It should be noted that operating units hold transactions relating to a particular legal entity, and inventory is owned by legal entities. Any movement between them being an inter-company transaction.

Business organisations can be defined using HR organisations, the key here is to ensure that employee related transactions can be tied to ledger. A common example in global organisations being an employee who is on secondment may belong to a particular business organisation for business reporting, but his transactions would be required to be processed in the correct legal organisation.

If we equate ledgers to sets of books (SOB), then in terms of organisational structures there is no real change. The replacement of SOB by an organisational classification being an architectural change, though it is recognised that the ledger set up consolidates and develops existing functionality to produce a more comprehensive solution.

The use of Government Legal Reporting Entities is very useful, as it allows business organisations to be flexed to meet the challenges within a business, whilst still allowing for a separate legal employing structure which tens to be a lot less flexible.

One very welcome addition to the Oracle Documentation is the Oracle Financials Concepts Guide Release 12 authored by Seamus Moran. This manual not only outlines the concepts, but provides practical examples and tips for existing Oracle users.

Information: Oracle Documentation Library

http://www.foresightglobal.co.uk/Resources/oracle_R12Resources.htm#Oracle%20Documentation