P2P (Procure to Pay) setup in Oracle R12

 The Procure-to-Pay (P2P) setup in Oracle R12 is a comprehensive process that integrates purchasing, receiving, and accounts payable. The P2P cycle begins with the procurement of goods or services and ends with the payment to the supplier. Here’s a detailed guide to setting up the P2P cycle in Oracle R12:

1. Set Up System Administration

• Navigation: System Administrator → Security → User → Define
• Steps:
  1. Create and define user accounts.
  2. Assign appropriate responsibilities related to Purchasing, Payables, and Inventory.
  3. Set up profile options for each responsibility, such as MO: Operating Unit, GL Set of Books, and HR: Business Group.

2. Define Key Flexfields

• Navigation: Setup → Financials → Flexfields → Key → Segments
• Steps:
  1. Set up Accounting Flexfields for defining the Chart of Accounts (COA).
  2. Define other necessary flexfields such as Asset Key, Location, and Category flexfields.

3. Set Up Inventory Organization and Items

• Navigation: Inventory → Setup → Organizations → Organizations
• Steps:
  1. Define inventory organizations and parameters for receiving and inventory management.
  2. Create and define items in the Inventory module, setting up purchasing, costing, and inventory attributes.
  3. Assign items to categories and define item templates for standardization.

4. Set Up Purchasing Module

• Define Financial Options:
  • Navigation: Purchasing → Setup → Organizations → Financial Options
  • Steps: Configure financial options, such as payables, purchasing, and assets options for each operating unit.
• Define Purchasing Options:
  • Navigation: Purchasing → Setup → Organizations → Purchasing Options
  • Steps: Set up default options for purchase orders, requisitions, suppliers, and receiving controls.
• Set Up Document Types:
  • Navigation: Purchasing → Setup → Purchasing → Document Types
  • Steps: Define and configure various purchasing document types, including purchase orders, blanket purchase agreements, and contracts.
• Define Approval Hierarchies:
  • Navigation: Purchasing → Setup → Approvals → Approval Groups
  • Steps: Set up approval hierarchies and assign approval limits for purchase orders and requisitions.

5. Define Suppliers and Supplier Sites

• Navigation: Purchasing → Supply Base → Suppliers
• Steps:
  1. Create supplier records and define supplier sites with payment, purchasing, and receiving details.
  2. Assign supplier sites to the appropriate operating units and business functions.

6. Set Up Receiving and Inspection

• Navigation: Purchasing → Setup → Receiving → Receiving Options
• Steps:
  1. Configure receiving options for each inventory organization, including receipt routing, over-receipt tolerance, and inspection requirements.
  2. Define receiving controls, such as enforcement of purchase order matching and receipt routing.

7. Set Up Accounts Payable (AP)

• Define Payables System Setup:

  • Navigation: Payables → Setup → Options → Payables System Setup
  • Steps: Configure payment terms, matching options, invoice tolerances, and accounting settings.

• Define Payment Terms:

  • Navigation: Payables → Setup → Invoice → Payment Terms
  • Steps: Create and define payment terms that will be assigned to suppliers and invoices.

• Define Bank Accounts and Payment Methods:

  • Navigation: Payables → Setup → Payment → Banks
  • Steps: Set up bank accounts and payment methods (e.g., check, wire transfer) for disbursing payments.

8. Configure Invoice Matching and Tolerances

• Navigation: Payables → Setup → Invoice → Matching
• Steps:
  1. Set up invoice matching options, including 2-way, 3-way, or 4-way matching for purchase orders, receipts, and invoices.
  2. Define tolerance levels for price and quantity variances between purchase orders and invoices.

9. Set Up Workflow and Notifications

• Navigation: Workflow Administrator → Workflow Builder
• Steps:
  1. Set up workflows for purchase requisition and purchase order approvals, including notifications and escalation rules.
  2. Configure workflows for invoice approvals and payment processing.

10. Set Up Taxation

• Navigation: E-Business Tax → Tax Configuration
• Steps:
  1. Define tax regimes, tax codes, and tax rates applicable to procurement transactions.
  2. Assign tax codes to suppliers, items, and purchase orders as needed.

11. Set Up Purchase Requisition and Order Management

• Navigation: Purchasing → Requisitions → Requisitions Template
• Steps:
  1. Create requisition templates for commonly purchased items or services.
  2. Set up rules for automatic creation of purchase orders from requisitions and configure document approval processes.

12. Set Up Integration Between Modules

• Navigation: System Administrator → Profile → System
• Steps:
  1. Ensure that integration between Purchasing, Inventory, and Accounts Payable is correctly configured.
  2. Set profile options such as "PO: Set of Books" and "GL Ledger Name" to facilitate smooth data flow.

13. Set Up Reporting and Alerts

• Navigation: Reports → Run → Submit a New Request
• Steps:
  1. Configure standard and custom reports for the P2P cycle, including spend analysis, supplier performance, and payment aging reports.
  2. Set up alerts and notifications to monitor critical P2P activities such as overdue invoices or unapproved requisitions.

14. Perform a Test Run of the P2P Process

• Steps:
  1. Create and approve a purchase requisition, generate a purchase order, and receive goods or services.
  2. Enter and match supplier invoices, and process payments to ensure that the entire P2P cycle is functioning correctly.

15. Go-Live and Monitor

• Steps:
  1. Once everything is tested and working correctly, go live with the P2P process.
  2. Continuously monitor the process, address issues promptly, and refine setups as needed.

After completing these steps, your Oracle R12 environment should be fully configured to support the Procure-to-Pay process, from procurement through payment.