Devendrakumar Rajendran - A Blog to Oracle Financials World

Futures Contract is determined without extra cost Future has right and obligation for both buyer and seller Quantities, Unit Price, and Tenure are Pre-determined Options Options comes with extra purchase cost - premium has to be paid for. Options has right but does not have obligation- Parties can use call or put method as optional Buying and selling depends on parties wish to use for or not Both the methods are widely used by companies to minimize their financial risk. Its a hedging tool to minimize the risk exposure of underlying assets Widely used in capital markets in stock trading and commodities Capital value can be protected to a certain extent if market goes down and abnormal and if market goes high- buyers will have a option to buy at lesser price than at the usual selling price in the market.

Futures and options are widely used in financial markets to minimize the risk of underlying asset price. Example Company procures raw material of Rs.100 for their manufacturing and price suddenly increase into Rs 130 within 3 months of time. This has several impacts for manufacturers to produce their goods and sell it in the Market. This price fluctuation will disrupts the business operations. So to avoid these kind of circumstances company will initiate a future contract agreement with their sellers to supply goods at predetermined price at specified intervals of time irrespective of disruption in prices in the market. Now lets look at the scenario- if company booked their future purchase order agreement with seller. Price of commodity is Rs 100 and agreement period is 1 year If price of commodity goes to Rs 130- Buyer don't have to incur the loss of increase in price hike in raw material- since seller ships goods at agreed price in the contract irrespective of market price. If pr...

Reverse Factoring is also referred as supply chain finance. Only difference between factoring and reverse factoring is who originates the factor transaction. If supplier initiates it by selling their accounts receivable then its factoring If ordering party initiates with factor agent (third party) then its a reverse factoring. Example- American company sells tonnes of soya/corns per trade with Dhofar Cattle feed and raises commerical invoice of 1 Million USD and invoice due date is 90 days from the date of purchase. Dhofar cattle feed (Buyer) can initiate a request with banks/financial institutions indicating fund 80% of invoice value before due date to its sellers in this arrangement banks will fund to seller based on buyers instruction and charges nominal fees from seller Advantages for seller- Working capital and cash flows immediately Reduced risk Cash flow at less interest charges Advantages for buyer- Maintain good relationship with sel...

Factoring is one of the popular method used by business to improve their working capital requirements This type of finance is referred as debtor finance in which business sells its accounts receivable(invoices) to third party and it is referred as factoring at discounted rate. A business sometimes need of cash instantly- Inorder to meet the cash needs business will sometimes factor its receivables assets to meet the present Factoring is sale of receivables to third party - complete selling of accounts receivable invoice Invoice discounting on the other hand refers borrowing that involves use of accounts receivable assets as collateral of loan Three parties involved in factoring 1. factor one who purchases receivable 2. one who sells the receivable 3. debtor who is liable of payment for goods and services rendered Example Entrust DataCard sells card printing solutions to Bank of America and raised commercial invoice value of $500,000 USD and invoice d...

Payment File Formats ISOXML - standard based XML set by ISO organization- Most of global clients prefer to go with this format EDIFACT Paymul- Electronic Data Interchange format set by industry of commerce and trade united nations PEXR2002-xml and flat - SAP standards- Intermediatory document (IDOC) - Preferred mainly by SAP customers MT101- Payment file message contains single payment transaction and standards set by Swift. This message supports only in Swift FIN channel Most of the banks also supports their own/ proprietary file formats that enables ease of use and market access for auto integration Account statement file formats MT940 and MT942 - Prior Day and Intra Day statements offerings by Swift standards CAMT53 and 54 -Prior Day and Intra day statements - standards set by ISO organization BAI2PD and BAI2ID - Prior Day and Intra day statements - standards set out by banking administration institute EDIFACT statements- UN standards

FileAct is a channel that enables communication between financial institution/banks and big corporates to automate payments, collections, trade, and securities services FileAct by default provides cryptographic services- Hence, files that are transmitted over the network is safe and secure Its a open community where corporates can subscribe with swift network and reach correspondent bank Integration and IT costs can be reduced through automatic integration with banks and financial institutions Corporates can use single channel to communicate with multiple banks and access to multiple markets FileAct provides two types of services, Store and Forward Real Time Corporates and Banks deal with requestor and responder domain names to send and receive files Swift FileAct supports all types of fileformats and attachments. Message type can be classified through request types FileAct supports both the flows (Corporate to bank) and (bank to Corporate) ...

Plsql apis Faster transaction processing. Code executes directly on database server with not much io disk reads Code reusability- write once and call from multiple applications Modular design- clean and neat. Serving specific business processes and functions Reusuable libraries bring down development and testing efforts.. Quality and greater efficiency business examples Create an invoice api, receipt api, asset additons, dereciations api, GL journal apis What invoice api does, It creates an sales invoice for any business entity. How the skeleton design looks like, Invoice business validations Invoice header Invoice lines Business calculation logics Tax calculations Calculate sales commissions Exception handling scenarios Transaction handling - commit, rollback, and savepoints Apis will be called from multiple business applications within a company or external partners- it can be java, dot net, or any platform just to correlate above business example-...

Fixed Assets Additions Transfer in-transfer out Allocations Depreciation Retirements Gain/Losses Asset maintenance (warranty, insurances, repairs, services) finance cost and transaction inquiries Create accounting Transfer to gl and posting Major asset classes for any business are PPE- plants, property, equipments/machinery depreciation is calculated based on useful period, cost value, and salvage value Most common type of depreciation method used across industries.. Flat rate- straight line calculation Production per unit method.. assets retirement will be after useful life period.. If asset is sold out before useful period, and disposal price is more than the net book value than the price is recorded as gain.. Other way- if sold less than net book value - then its a loss.. How net book value is calculated Net book value = total cost less accumulated depreciation Depreciation is calculated based on asset cost less salvage value and arrived number is di...

General Ledger This module is one of the important area for any business organization.. What you can do with this module- Journals Budgets balance inquiry Prepare financial statements (Balance sheet, pl statement, cash flow analysis) Core setups and definitions- Currencies Calendar Chart of accounts Conventions 4C's- Ledger Ledger is associated to a legal entity Ex- let's take a company going to start a business in india per central government regulations ledger setup will be- Currency- INR Calendar- Apr20 to Mar21 (called as fiscal year for accounting) Chart of accounts - design will be based on enterprise needs.. based on number of operating units, products and services they are into.. and management reporting needs.. Conventions- accrual/cash basis journals, budgets, account balance inquiries are the important functional areas for business Journals- records total dr and cr entries from sub ledger budgets- you can prepare with respect to o...

Technical stack within ebusiness suite r12 Oracle forms- Oracle bip reports PLSQL apis, packages, procedures, functions Open interface tables Oracle workflows Oracle alerts Oracle schedulers Host scripts- it can be for linux or solaris oracle oaf framework Page personalization form personalizations Conversions and migrations unit Many more functional setups that support technical stack Application object libraries support- Define forms Define form functions Define menu Define responsibility Define executables Define concurrent programs Define requests Define request sets Define lookups Register flexfields (knowledge and descriptive) Define profile options Define application messages I may missed out few things.. it will take time to recall past experiences.. Many more.. plenty.. It will take a decade to become a masterpiece within erp framework. Slow and steady wins the race.. this rule i am applying to knowledge and gaining insights Brain should...

Procure to pay lifecycle within ebusiness suite r12 Create requisition Create purchase order Take internal approval process- PO goes approval stage Send document to supplier supplier fullfillment - goods will be sent to warehouse Gate in- Create po receipt and stock into warehouse inventory Inventory on-hand quantity increases raw materials are input for manufacturing Billing and invoicing to supplier Payments Create accounting Transfer to gl Post gl Affects ledger outstanding balance Accounting entries.. inventory account increases (dr) while receiving stocks Inventory decreases(cr)- at the time of moving materials for manufacturing Liability account increases (cr) at the time of invoicing liabilities gets knock off at the time of payment - thus decreases (dr) Expense account increases(dr) at billing Cash account decreases (cr) at clearance and settlement

Accounts payables what corporate do? Purchase raw materials or discrete assembly- make that as a input to their business to make finished goods and proceed sales Raise commercial invoice and account it under liabilities and expenses. Invoice is recorded with supplier name and how much corporate has to pay for.. less credit memo if any - for return goods or defects less prepayments if any token advance Apply taxes.. it can be vat, gst, state tax,county tax, city tax levy per country less withhold tax-remit it to tax revenue department Apply discounts- It can be bank charges It can be early payment to suppliers Record final invoice has liability Make a payment remittance with bank payment mode eft or cheques Accounting entries.. liability to expense cash clearing to liability cash to cash clearing Transfer to gl hits 4 control accounts with respective totals A single journal gives snapshot of it Post to gl Cash account will result in credit balance...

Accounts payables Invoice and billing invoice accounting Payments Transfer to ledger Post to gl Gl balances supplier liability, Short term and long term liabilities Financial statements This is one part of sub ledger flows and corporate needs.. Another flows- How to automate with banks.. Transmission protocols and servlets Payment systems Payment gateway / payment processors auto clearing houses file formats Payment remittance Payment clearance Load account statements Auto reconciliation Cash forecast and positioning Other part of corporate to bank and bank to corporate flows Within oracle erp - many more features.. just for info and knowledge.. World is big to sail...

Oracle fusion cloud has inbuilt iso payment system iso payment system has designed with out-of-the-box features Ability to generate payment instruction in isoxml format uses built-in payment transmission protocols, connectivity, payment security gaps in oracle ebusiness suite r12 has been addressed in fusion accounts payables module As per my research and study- corporate to bank flows been fully addressed within fusion cloud payables (SaaS0

Corporate and Institutional banking- Covers range of services to corporate or commercial clients It can include followings, Receiving payment orders and execution on it - it can be towards supplier payments or employee payroll processing Payments can be initiated via following types- corporate cheques, real time gross settlement, auto clearing house,  book transfers, telex transfers/ or cross border transactions Collection services - direct debit authorization from customer accounts- it can be of home loan EMI collection, insurance premium collection, or lockbox services Trade finance - letter of credit issuance, bank guarantee application, documentary credit, working capital requirements Custody services- Banks acts as a custodian to manage clients assets based on written consents Securities services - FII investments, stocks, bonds, trading, and final settlement Loans, and Mortgages at special interest rates Circulating intra day and end of...

Gross domestic products (GDP) is a monetary measure of the market value of all the final goods and services produced in a specific time period. It is an aggregate measure of production equal to the sum of the gross values added of all resident and institutional units engaged in production and services plus any taxes, and minus any subsidies on products not included in the value of their outputs Determining GDP Three ways 1. Production (output or value added) approach 2. Income approach 3. Speculated expenditure approach The most direct of the three is the production approach, sums outputs of every class of enterprise to arrive at the total. The expenditure approach works on principle that all of the product must be bought by somebody, therefor the value of total product must be equal to people's total expenditure in buying things The income approach works on the principle that incomes of productive factors must be equal to the value of their product,...

Money became a commodity Money market became a component of financial market for assets involved in short term borrowing, lending, buying, and selling with original maturities of one year or less than that Money market has higher liquidity ratio Instruments Treasury bills commercial paper certificate of deposit bills of exchange bankers acceptances repurchase agreements asset backed securities Features Liquidity - carry out shorter maturity period Safety - strong credit rating Discounted price - issued at face value Objective Helps in lowering short term deficits helps central bank in regulating liquidity in the economy helps development of capital market, trade, and industry assists designing effective monetary policies facilitates in streamlining functioning of commercial banks

Capital markets are venues where savings and investments are channeled between the  suppliers who have capital and those who are in need of capital. Entities who have capital include retail and institutional investors while those who seek capital are businesses, governments, and people Capital markets are composed of primary and secondary markets. Primary market - stocks issued by a company to investor through initial public offering Secondary market - stocks are traded day by day through country regulated stock market The most common capital markets are stock and bond market. Suppliers of capital market Households Institutions serving - like pension funds, life insurance companies, non finance companies charitable foundations Users of funds motor vehicle purchasers non finance companies government financing infra companies Capital market sells- financials product Equities Debt securities Funds invested in stocks are for product...

to regulate the issue of Bank notes and keeping of reserves with a view to securing monetary stability in a country and generally to operate the currency and credit system of the country to its advantage; to have a modern monetary policy framework to meet the challenge of an increasingly complex economy, to maintain price stability while keeping in mind the objective of growth Summary Issue of bank notes Keeping eye on reserves monetary policy framework price stability and inflation control objective of economy growth Central banks sets and controls - policy rates - repo, reverse rates, marginal standing facility rate, bank rate reserve ratio- CRR, and SLR exchange rates lending/deposit rates  - Base rate, MCLR overnight, savings deposit rate, term deposit rate market trends- money market, government securities market, capital market PAYMENT AND SETTLEMENT SYSTEMS Payment and settlement systems play an important role in improving overall ...

Trade finance deals with domestic and international trade transactions. Trade requires seller as well as a buyer. various intermediaries banks/financial institutions can facilitate these transactions by financing the trade Seller (Exporter) can request buyer (Importer) to prepay for the goods shipped. buyer may wish to reduce risk by asking seller to document the goods that have been shipped before prepayment Exporter will be required to present bill of loading and other certain documents about shipment importer may provide letter of credit to the exporters bank Exporter bank may make a loan (by advancing funds) to the exporter on the basis of contract Products and services Letter of credit  - promise given by a bank on behalf of buyer to the seller that if seller presents the complying documents to the buyers designated bank as specified by buyer in the purchase agreement then buyers bank will make payment to the seller Bank guarantee -it is a...