LV thạc sỹ_Apply ERP solution for public financial management

Through structure of State Budget, we canknow about social economic development level, economic capability and management of State.. The first: Relation between Total of Revenue and Tota

UNIVERSITE LIBRE DE BRUXELLES NATIONAL ECONOMICS UNIVERSITY

Vietnam – French Community of Belgium Master Programmes

MASTERS IN PUBLIC MANAGEMENT AND ECONOMICS

THESIS APPLY ERP SOLUTION FOR PUBLIC FINANCIAL MANAGEMENT CASE STUDY: PAYABLE RESPONSIBILITY IN BUDGET MANAGEMENT

INFORMATION SYSTEM (TABMIS) PROJECT

Prepared by:

Instructors:

Hanoi, November 2010

I would like to express my deepest sense of gratitude to my supervisor Dr …for her patient guidance, encouragement and excellent advice throughout this study.

I would like to express my gratitude to the leaders and experts of the ministries

of finance, the central state treasury, project management TABMIS who spent time

to interview, get survey to collected information for my thesis

Finally, I take this opportunity to express my profound gratitude to my belovedparent, parent in law, my wife and children for their moral support and patienceduring my study

Although I have tried to complete the thesis with all the enthusiasm and mycapacity, however inevitable shortcomings, I hope to receive your comment for mythesis

Executive summary

The thesis concentrates on application of ERP in public finance

management, that detail in budget management, through Treasury And Budget

Management Information System (TABMIS) The TABMIS is one component ofpublic finance reform project in Vietnam However, the research concentrates onState budget expenditure management To understand clearly on the above issue,the theory will research the general background of State Budget and State BudgetManagement including: structure, functions, tasks, role, organization and realsituation of State Management in Vietnam Besides, the theory researches on ERPmodel, detailed eBS production of Oracle Co-operation, concentrate on expendituresubsystem and related subsystems The thesis will answer those questions:

1 Characters of State Budget Management in Vietnam?

2 The strong and weak points of State Budget Management system?

3 How is information system to State Budget Management?

4 What are restrictions of information system in State Budget Management andresolving trends?

5 Is ERP system suitable to apply in State Budget Management in Vietnam?

6 How are resolutions of application ERP in State Budget Management witheBS production?

7 How is project management arrangement?

8 To answer the above questions, the research uses the methodology of logicsystem approach to solve problem, abstract and model the main subjects ofthe research The result of the research will be “to be process” at level 1 This

is a logistic diagram that defines subjects and interactive information betweensubjects in ERP model of TABMIS project on budget management inVietnam

Table of content

INTRODUCTION 2

CHAPTER I: THEORY OF STATE BUDGET MANAGEMENT, ERP MODEL 7

I.1 G ENERAL THEORY OF S TATE B UDGET M ANAGEMENT

7 I.1.1 State budget Overview 7

I.1.2 Budget Management 14

I.2 I NTRODUCTION TO ERP MODEL

17 I.2.1 ERP Model 17

I.2.1 ERP Components 18

I.3 EBS-O VERVIEW

19 I.3.1 Technical architecture 20

I.3.2 Business architecture 22

I.3.3 Oracle Payable Module 27

CHAPTER II: ACTUAL SITUATION OF BUDGET MANAGEMENT IN VIETNAM 37

II.1 C HARACTERISTICS BUDGET EXPENDITURE MANAGEMENT IN V IETNAM

37 II.1.1 The Budget plan 37

II.1.2 Allocate budget expenditure in Vietnam 37

II.1.3 Accounting posting and settlement of state budget: 38

II.2 S TATE BUDGET EXPENDITURE CONTENTS :

38 II.2.1 Contents and structures of state budget expenditure 38

II.2.2 Management tools for state budget expenditures: 40

II.3 C URRENT PUBLIC EXPENDITURE STATUS FOR INDUSTRIES IN V IETNAM :

40 II.3.1 Actual situation of the state budget: 40

II.3.2 Current of information systems in budget management in Vietnam 46

II.3.3 Problems in budget management 47

CHAPTER III: AN ERP FOR BUDGET MANAGEMENT IMPROVEMENT IN VIETNAM 50

III.1 TABMIS PROJECT

50 III.1.1 Introduction to TABMIS project 50

III.1.2 Organization chart of TABMIS Implementation Unit 53

III.2 ERP SOLUTION OF TABMIS PROJECT - E BS .

54 III.2.1 eBS Selected to TABMIS: 54

III.2.2 Oracle E-Business Suite - eBS- Model 55

III.3 TABMIS- TO BE PROCESS AP .

55 III.3.1 General AP to be process 56

III.3.2 Order Handling process flow of payments 58

REFERENCES OR BIBLIOGRAPHY 61

TABLE OF ABBREVIATION

ADI: Asynchronous Data Interchange

ASNs: Advance Shipping Notices

COGs: Cost Of Goods Sold

DTKB: Treasury Estimate budget

eBS: Electric Business System

EDI: Electronic Data Interchange

ERP: Enterprise resource planning

GDB: General department of Budget

GDC: General Department of Customs

GDP: Gross Domestic Product

GDT: General department of taxation

IAS: International accounting system

IBPS: Inter banking payment system

IFSAS: International Financial System Accounting StandardsIMF: International Monetary Fund

Inter-Treasury: Payment inter-treasury system

JSPs: Java Server Pages

KTKB: Treasury account

MOF: Ministry of finances

PDA: Personal Digital Assistant

PFMRP: Public Financial Management Reform ProjectPL/SQL: Package language/ Sequence query language

RFQs: REQUEST FOR QUOTATION

SQL: Sequence query language

TRM: Treasury Reference Model

TSA: Treasury Single Account

TSA: Treasury Single Account

TTTT-TAB: Payment system-related treasury

USD: United state dollar

WB: World Bank

WTO: World trade organization

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Computerization in budget management has been implementing right from thetime when computers were applied in civil activities (from the 1970s) By the end of1990s of the past century, these applications were mainly developed directly from basetechnologies (such as database, programming languages etc.) However, most of theprograms were developed based on decentralized model or centralized model but smallscope of business and geography as well From the end of this 1990s, a new trend hadbeen implemented by many countries, in which the ERP solution was deployed inmanagement of state budget Especially, the World Bank (WB) and the InternationalMonetary Fund (IMF) had introduced the Treasury Reference Model (TRM),specifying basic model in budget management – which best fits the ERP solution

In Viet Nam, in April 21, 2003, the decision No 432/QĐ- TTg was approved bythe prime minister in order to implement the Public Financial Management ReformProject (PFMRP) to sustain the economic growth, and simultaneously change thepublic financial management mechanism in order to meet the strict managementrequirements of the world finance when Vietnam gain access to WTO The publicfinancial management reform project was funded by the World Bank with totalcontract value of 71,45 millions USD, and split into 3 key components: Firstcomponent: Treasury and Budget Management Information System Secondcomponent: Technical support to enable planning for medium-term finance andexpenditure capability Third component: Technical support to strengthen domesticdebt management capability and debt risk management of state owned enterprises.TABMIS is the biggest component out of the three components Its key objectives are

to develop and implement the integrated Treasury and Budget ManagementInformation System (TABMIS), including deployment of software, integration,technology transfer and technical support in order to reform the budget managementmechanisms, renew business processes etc Total value of this component is 61,42millions USD out of the total contract value of PFMRP of 71.45 millions USD.TABMIS is designed, built based on Oracle applications kit, integrated with the worldbest practices and standards

Budget is a key concept in a financial system and there by the most of big ERPsystems such as Oracle, SAP have budget allocation and budget transfer functionality.Budget is allocated based on budget funds, based on parent child and decentralization

of operating units, which are authorized for allocation of state budget In each fiscalyear, a spending unit is allocated with a certain budget amount (detailed by group).This unit will spend upon approved budget Therefore, each spending unit has a fundsource from the state budget with payment obligation (recurrent expenditure, capitalexpenditure) and also fixed assets shall be managed These operating units are required

to manage, track payables for providers and suppliers of goods and services Budgetallocation items and expenditure items are designated and based on the state budget

classification, which is promulgated by the Ministry of Finance This is to ensureexpenditure items spent by spending units are complying and following the rightobjectives and as planned In Vietnam, these expenditure items are managed andcontrolled by the state treasury pursuant to regulations by the law of Vietnam in theuse of state budget For example, payment for suppliers are done via state treasury’saccounts by the state treasury after spending units have completed their procurementprocedures and sent all supporting documents to the state treasury However, theprocess of budget allocation and payment management are distributed and sometimeserroneous since the information is not in sync between allocating units andexpenditure management units at spending units This blocks disbursement of budgetespecially for investment and development projects.

The concept of the Chart of Accounts and its segments in ERP model in generaland Oracle-eBS in particular are useful in state budget allocation and spending Itenables to manage budget levels, decentralization of administrative frontiers, programsand projects, various types of budget sources, budget classification, fiscal years etc.Spending at spending units and spending for capital projects can be done following

“From procurement to payment” process- basic ERP process Management of plannedexpenditures per regulations items and per approved quota and management forprocurement of fixed assets at spending units are also easily managed via accountspayable module and related modules of ERP system Moreover, the Cash Managementfunctionality of ERP also supports the state treasuries at various level very well inbalancing expenditures by spending units against state budget For spending unitshaving revenue collection such as hospitals, notary public’s offices etc, ERP solutionwith Sales, Services, Inventory, Accounts Payable module are also applied to servemanagement work of such units

In the “From procurement to payment” process, the “payment” is the end process,which reflects expenditure related transactions of state budget and other transactionsrecording the cash flow out of the state treasury The process for management ofpayment transaction for beneficiaries as well as payments with commitment in theforms of capital expenditure, recurrent expenditure contacts - Payment Process arepackaged in the Accounts Payable module of Oracle-ERP In Accounts Payable,payment requests or invoices are created for payment processing and interfaced withbank to transfer budget to beneficiaries

Application of ERP in practice is very complicated In order to successfully applyERP, standard processes of ERP project should be studied carefully, here is the Oracle-eBS and the actual requirements in order to convert these requirements to standardprocesses of the applications system Budget expenditure is a key requirement because

it reflects all state budget expenditures for beneficiaries and capital projects under thestate’s management Therefore, studying Accounts Payable Module of Oracle-eBS andcurrent state budget expenditure requirements is one of the most importantrequirement for successfully applying ERP in public financial management This is thereason why I have chosen the topic “APPLY ERP SOLUTION FOR PUBLICFINANCIAL MANAGEMENT CASE STUDY: PAYABLE RESPONSIBILITY INBUDGET MANAGEMENT INFORMATION SYSTEM (TABMIS) PROJECT”

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2 Objectives and content research

In order to have an in-depth understanding ERP system in general and Oralce-eBS

in particular, it is required to have a general understanding of the structure of dataarrangement and collection, processing and storage of data of the system This is thebasis for understanding processes as well as business transactions of ERP system Foreach ERP system, here is Oracle-eBS, which is a resource planning system Thiscomprises of many single modules, these modules are used to manage various businesstransactions by organization However, they are correlated in overall picture In order

to understand mechanisms and operation of Oracle-eBS applications, it is required tounderstand information management model and relationship between modules withinERP system

Payment management is the management of budget expenditure relatedtransactions and other transactions which record cash flows out of the state treasury.Good processing of business transactions allows better management of paymenttransactions for beneficiaries as well as payments with commitment in the forms ofcapital expenditure, recurrent expenditure contracts Accounts Payable Module ofOracle-eBS is used to manage payment related transactions and record outgoing cashflows Accounts Payable is one of the 7 key modules of Oracle-eBS solution inVietnam Therefore, studying standard processes of AP module and paymentmanagement transaction of the state treasury helps to work out the standard “To Beprocesses” at level 1 is a perquisite for applying Oracle –eBS, aiming to manage statebudget expenditures in a proper, correct, timely manner and align with the projectgoal

Thesis research focuses on the concepts, functions, role and structure of statebudget management; find understand, analyze the current status of state budgetmanagement present; Research ERP model and Oracle's eBS product to find out the

“to be process at level 1” for the future ERP system

However, the study of state budget management, ERP and product models eEBSvery large and complex in terms of management, accounting and business knowledge,structure of state budget, include knowledge of software technology, so the thesis willfocused research concepts, functions, roles, the basic structure of state budget Find outthe current status of the current budget management, to answer the question why toreform the system of budget management information Besides thesis study processmanagement, process of implementation of budget management is now, focused onexpenditure state budget Thesis researches model of ERP products and the OracleeBS, ERP's Product of Oracle cooperation Through studies about, thesis looks out to

be process for state budget expenditures This is a base to be process for budgetexpenditure management of the state budget expenditure

To use method logic system approach to problem solving with informationsystem Thesis also use modeling processes method to abstract objects and anoverview about the processes and management systems in general state budget andmanagement of state budget expenditures particular The management and operatingbudget needs to be supplemented and improved in line with the ERP model Thefindings and proposed solution was culled from the gathering, survey and synthesis ofinformation and data, which compare with theoretical basis to clarify the content ofresearch Research process be objective, comprehensive, systematic and integrated

ERP model applied to the state budget management in a Treasury requirements setout for Vietnam to improve budget management system, with the study of state budgetexpenditure provides the following benefits:

 Staff (accounting and finance professionals) of the Treasury accurateaccounting entries arising on transactions involving funds from Treasury

 Support for creating financial reports of state budget and management reports in

a variety of criteria

 Provide information quickly and accurately on the situation of the state budget

at all times and at all different budget levels

 Ensure data synchronization - between the state treasury budget and financeagencies tax and customs administration

 Reduce duplication in the payment information on the state treasury and financeagencies

 Ensure solvency at all times, forecasting cash flows

Oracle-Chapter II: Actual situation of budget management in Vietnam

This chapter describes actual situation of budget management and informationsystem for budget management in Vietnam Based on those, we define the resolution Chapter III: An ERP for budget management improvement in Vietnam

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This chapter states application ERP through eBS product into public financemanagement in Vietnam

CHAPTER I: THEORY OF STATE BUDGET MANAGEMENT, ERP MODEL I.1 General theory of State Budget Management

I.1.1 State budget Overview

I.1.1.1 Concept of State Budget

When State is established and operated, to maintain and survive, the Governmentuses political power to compel organizations and people to contribute a part of theirrevenues and income for fund This fund is used for Government consumptions insocial, education, national defense, culture… and maintenance of power system.Establishing State helps to develop economic relations together with taking form,distribution and using monetary and serve State’s functions, roles and operation andtake form operation of National Finance Appearance of monetization leads allactivities and expenditure of Government to implement through money The nature ofnational finance is classified by nature of State National State effects to whole ofsocial economic development, showed through distribution and redistribution ofwealth National Finance is formed before forming of National Budget In NationalFinance, State Budget take play the most important because of the biggest fund.Though receipts channel, Budget mobilizes and gathers financial sources of wholesociety such as: tax, fee, debt from domestic and abroad and international aid Throughexpenses channel, Government uses Budget for distribution of capital to economicorganizations to develop economy at given period So Budget operates together withState operation, and be one of the most important tools for the operation of State The establishment of State is objective so Budget is also objective If the Statedoes not exist, Budget is disappearing Nature of State classifies nature of Budget, butBudget is managed by specific organizations and persons so management of Budget issubjective There are many concepts of Budget and in Budget Law, it is said that:

“Budget is whole of estimated incomes and expenditures that are approved by

authorities and implemented in 1 year”.1

I.1.1.2 Nature of State Budget

In the term of performance, we can understand that Budget is whole of estimatedexpenditures that is decided by authority Government agencies and implemented for 1year to carry out the functions, tasks of Government The appearance of Budget isdiversified and abundant but desultory It is Table of receipts and expenditures ofGovernment, including contribution of organizations and people and distribution ofGovernment to members Although Budget performed desultory, all activities areunder control of Government The items in Budget connect closely each other Almost

of receipts are compulsory and expenditures are almost of unreturned allocation Thoseitems take a deciding role on survival of Budget Subject of Budget is Government However, nature of Budget is formed from internal relations during operation.Activity of Budget is distribution of finance resources, including 2 parts: one is deposit

1 State Budget Law of Vietnam in 2002

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to Budget and one allocates to society The deposit to Budget continues to distribute toconsumption and investment of social economic development It is the same withanother one Hence, activities of Budget are really resolution economic interestbetween Government and other stakeholders, linking with collection and usingBudget Then in society, there are many relations between Government and othersocial stakeholders that are showed through receipts and expenditures of Budget Themain relations are: economic relation between Budget and enterprise areas, economicrelation between Budget and Government Agencies, economic relation betweenBudget and people, economic relation between Budget and financial market BudgetManagement is really impacts to relations to get the fix goals The main contents ofBudget:

The first: Budget is objectively economic category but is usedsubjectively by Government

The second: in term of physical sector, Budget is the biggest fund andused and managed by State

The third: In term of management sector, Budget is basically financialplan of Government and implemented in fix duration (normally 1 year) and has 3specific characteristics: estimativeness, balance and limited time

The forth: In term of legal sector, Budget is financial law

The fifth: Budget size is decided by result of national economic activities Hence, nature of Budget is total of economic relations arising in distributionproceed and equal to total of price, total of social product and national incomes toform fund serving social, economic tasks of Government in the limited time,normally 1 year Understanding Budget obviously to know relations, impacts andgive resolutions effectively

I.1.1.3 State Budget Structure

State Budget includes receipt and expenditure items arranged in fixed structure.Structural State Budget is relation between receipt and expenditure in the limited time

to implement functions and tasks of State Through structure of State Budget, we canknow about social economic development level, economic capability and management

of State

The first: Relation between Total of Revenue and Total of Expenditure, relationbetween Total of Revenue, Total of Expenditure and Gross Domestic Product (GDP),relation between rate of revenue increase and expenditure increase and growing rate The relations show social economic development level at national or local level, sothey need to be defined for a period, normally 5 years Rate of revenue andexpenditure need to be proposed suitably and scientifically during developing plan toimplement the goals of State

The second: Structure of the State budget to be considered in relation to thecontents inside of it is basic income and expenses.

I.1.1.4 Function of State Budget

Function of Sate Budget proceeds from its nature and from political nature ofState If State wants to survive and develop, it has to have money for activities andinvestment for social economic development Financial source comes from revenuesand State has to balance revenues and expenditures, so Sate Budget has two mainfunctions:

The first: Mobilize money from many financial sources and ensure expenditure ofState

The second: Balance revenues and expenditure of State Sate Budget is in StateFinance so it has functions distribution, director and adjustment of macro economicsitself through its tools

I.1.1.5 Roles of State Budget

Roles of Sate Budget is defined for each period and based on nature, functionsand tasks Roles of Sate Budget are performed through its function in actions

Views of economists:

Almost of theories agree that it need to maintain budget for regular consumption,but there are many points of view that all SB is for consumption budget orconsumption budget is a part of SB? Economist often defines roles of SB based onfunction of State

From the beginning of market economy of capitalism to the twenty century,classical economics school (Adam Smith, 1723-1790) based on function of State and

“invisible hand” theory to define the limited roles of SB to economy It was supposed that market competed freely and perfectly, objectivelyeconomic laws would impact to adjust economy If State used tools to adjust economymeans to interfere rudely economy, it had caused negative consequence

After that from 1940s to 1970s, Demand theory of England economist JohnMaynard Keyner (1883-1946) was born to meet economic development According tothis theory, State had to interfere to balance economy The State had to adjustmacroeconomic by suitable policies to encourage and maintain stable growing rate fortotal demand, using interest rate, adjusted inflation policy … to stabilize economy After theory of Keynes, many economists believe that during market economystage, State must impact to economy and reality proves that points of view is true.However, methodology, measure and scale of each State are different

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Nowadays, with globalization, science and technology impact strongly to social,economic life, State the more has to interfere to economy, in which SB is the besttools Roles of SB in current market economy as following:

Develop and mobilize financial sources for expenditure demand:

Operation of State always requires money for expenditure to archive proposedgoals Revenue resources come from tax and untaxed This is historic role of SB thatall social and economic mechanisms require Mobilizing financial sources for SB needconsider 3 things:

The first: Mobilizing money from society through taxes, fees, charges and otherreceipt has to be reasonable, if it is too high or too low, there will be negative impacts The second: Contribution rate from GDP has to base on social economic masterplan in fixed period, the rate is both suitable with economic growing rate and ensuringproduction agencies can save capital for reproduction

The third: policies, tools applied to revenue and expenditure of Sate Budget have

to be suitable and reasonable with each economic development stage, economic area

or beneficiary that feasible and uniform in Sate Budget system

The forth: resource for Sate Budget need to be used effectively, including visiblyand invisibly financial resources

Adjust macroeconomics:

Encourage growing rate: To stabilize and improve economic growing rate, Stateuses many tools, in which Sate Budget is a tool with tax collection and investment Taxpolicy forces related subjects to obey and it is legal Tax policy encourages and attractsinvestment, creates condition for investors to expand production, shifts economicstructure, creates environment for free competition Other hand, through expenditure,

SB helps to shift social, economic structure, implements industrialization,modernization, improves social equal, creates motivation for development, such asinvests in key economic sectors, key areas, and extremely disadvantage areas;improves infrastructure; increases cultural level of people, trains human resources Adjust market, price and inflation: Two main items of market: supply-demand andprice, often influent each other and control market activities Unbalance betweensupply and demand will effects to price, cause increase or reduce price out of control

To ensure benefit of producer and consumer, State use Sate Budget to interfere tomarket through expenditure as capital investment, subsidy, and good and fund reserve.Flexible and effective adjustment of State through reserve fund depends on capacity offorming fund Multi-sector commodity economy oriented market is a active economy,under impacts of economic rule it can be changed flexibly to social life Hence, it isnecessary to increase national reserve or increase annual revenue for budget Thereserve is collected from expenditure of Sate Budget or increase of revenue or fromsurplus Sate Budget During adjusting market, Sate Budget also impacts to operation

of monetary market, capital market, and then carries out deflation and controlsinflation State can control by using methodologies: balancing Sate Budget,developing loans from domestic and abroad by publishing Government bond,attracting international aid, participating capital market as buyer and seller stocks Compensate for shortcoming of market, ensure social equality, protectenvironment: With “two hands” theory, Samuelson, American economist, believed that

it is necessary to use two hands (Government and market) to arrange and developeconomics because of shortcoming of both Government and market and they have toassist each other Nowadays, almost Governments agree with macroeconomicmanagement role of Government, as well as appreciate objectively economic rule.Government will limit impacts to market if market can control by itself and interferereasonably to compensate for shortcoming of market In the terms of communitybenefits, social equality and ecological environment, competitive market will not careabout poor people neither protect environment but race for benefits only? According tosocial view, these distribution systems are not equal, unsustainable because of not care

to social, environmental benefits of community The shortcomings are onlycompensated by Government, based on using legal power to compel (or encourage) touse (or not use) public goods/services Budget is one of the most effective tools toadjust incomes of people Budget effects to income distribution on the whole society

by apply direct tax, indirect tax, expenses for social, public welfare of people undersocial beneficiary groups

I.1.1.6 Budget organization

Process of forming the state budget system:

Budget system is overall budget levels that relate each other on social, economic,political mechanize as well as administrative organization principle Budget system isformed based on administrative system Such as, in the countries that administrativesystem is under federation institution (America, Germany, Canada, Malaysia…) thereare 3 budget levels: federation level, state level and local level In the countries thatadministrative system is under unify institution (English, French, Italia…), there are 2levels: Central level and local level …)

In Vietnam, budget is established for a long time, along with Governmentestablishment Before 1945, budget was used for kings and army After the AugustRevolution in 1945, Government published many new policies that are self-control,independent, democracy such as abrogated poll-tax, developed new tax system toreduce tax for poor people, published coin (1-12-1946), established “independentfund” to collect money for budget During Resistance stage (1946 -1954), revenue andexpenses of budget was only served for war with French In 1972, Governmentpublished “commune budget regulation”, commune budget was not in budget system

In 1978, Government published Decision No 108/CP, local budget was divided into 2levels: provincial/city level and district level In Decision 138/HĐBT dated19/11/1983, commune budget was been to budget system and budget system included

4 levels: central budget, provincial/city budget, district budget, communal budget To

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meet new condition of the country, on 20 March 1996, National Assembly publishedBudget Law, validity from 1/1/1997 Since then, budget system of Vietnam includes 4levels: central budget, provincial budget, district budget and commune budget.

I.1.1.7 Contents of budget management:

Budget revenue:

Nature of budget revenue is relation between Government and society that formedfrom finance collection of Government for budget to serve expenditure Budgetrevenue is compulsory and unify all over the country, except some fees determined byProvincial People’s Council, such as boat fee, market fee Establishment competence

of receipts, rate, and subject is defined in Budget Law and only authority agencies canestablish or adjust receipts into budget, and prohibit Government at various levelsfrom illegal receipts Budget revenue classify means arranging receipts sources intocategories, according to proposed criteria’s to meet requirement on economics researchand budget management So, based on economic contents of revenue, we can classifyreceipts sources into two types: domestic and abroad receipts; based on economiccharacter, we can classify receipts into receipts from tax and others related tax (tax,fee, charge) and not taxed receipts (out of tax); based on mobilization form, we canclassify into three types: receipts under duty, receipts under contribution voluntary, andborrow receipts

Budget expenses:

In term of nature, budget expenses means relation of income distribution andredistribution that formed by using fund of Government to implement roles of socialeconomic development management Budget expenses includes expenditure forinvestment for development, regular expenditure, investment for national defense,security, and operation of State machine; pay country’s debt, expenditure for aid andother expenditure as regulation

Some attentions in budget management

The first, regular expenditure is rather complex, related to many sectors, so it need

to be used save according to regulation and distribution reasonably as scientific, equalcriteria, use effectively, based on annual budget plan and suitable with fact condition

of local and agencies to implement finance self-control mechanism Ensure unity ofexpenditure norm and increase self-control of local This issue is being researched Itrelates to process of preparing and implementing budget balance, prepare budgetaccording to cost items or out put that are researched to carry out next time

The second, expenditure for development investment includes construction,assistance for enterprises, pay loan, or sponsor that have significant meanings forpriority social, economic development, that defined by percentage of GDP andpercentage of total of budget expenses In total of expenses for in construction

investment, it need define suitable rate of technical infrastructure building and socialinfrastructure This is the first principle to arrange investment list and structure.Besides, it need avoid from dispersed investment and ensure develop equal betweensectors and economic areas

The third, Implement monitor and overview budget expenses regularly implementperiodic finance inspection and regular audit procedure This action need pay attentionmore to increase financial discipline, practice save, avoid waste and avoid fromcorruption Our country is in integration stage, besides of mobilizing and usinginternal resources, investment, aid from external financial agencies have been attracted

by ensuring obviousness and discipline in budget management to improve capitalusing effect

The fourth, Budget revenue and expenses relate closely each other Revenueensures for expenders, otherwise, spending budget for economic development cancreate condition to increase revenue Budget expenses connect closely to implementsocial, economic, political policies of Government at limited time It effectssignificantly to social, economic and political life of Nation However, in developingcountry, it requires big capital for investment but still ensure overspending rate ofcentral budget and loan at budget balance rate, and ensure payment ability Somelocals have this problem because debt is too large and effect to budget balance andfinancial situation

I.1.1.8 Factors those effects to budget size:

Budget size means total of money in economic relation that decide total ofrevenue and expenditure of budget Some important factors can effect to budget size asfollow:

1 Position of Nation, natural resources, geography location, education level,human resources, culture-nation

2 Political stability, security and social order not only help enterprises to developproduction but also attract external investors, develop strongly position intourism industry Government has not to increase cost for assuring social order

3 Policies, strategies, mechanism of Government on social, economicdevelopment have to be consistent, opening, stable, equal, public Nationalfinance policies in given period effect extremely to social economicdevelopment, effect directly to budget size

4 One of the most important is State organization machine and people thatimplement, manage and use effectively budget revenue and expenses.Expenditure size also depends on natural condition to arrange contingencysuitably

Factors effect to budget revenue

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Budget revenue comes from tax, economic activities of Government, collection tosupplement budget deficit and other revenue Because of compulsion of budget, by itspower, Government publishes budget revenue policies High or low rates depend oneconomic situation of each sector, field, area, product and financial demand, linkingwith price, income, interest rate

Revenue from tax and fee is important and significant for production and trade.Defining revenue policies is difficult and requires scientific thought, experiences andeconomic strategy Besides, it is necessary to mobilize fund from enterprises and othersources We also define suitable policies to make new revenue source, so that budgetsize can increase and stabilize Beside revenue policy, revenue management is veryimportant and need to have Tax Management Law Right now, we need speed upadministrative reform in tax collection and make condition for enterprises

Factors effect to budget expenses:

Budget expenses include regular expenditure, investment for development andpay loan Investment is the main of infrastructure, sectors that hardly refund Regularexpenditure is social consumptions and administrative activities of Government.Paying loan depends on overspending and demand of loan for development investment(do not borrow for regular expenditure)

In addition, budget expenditure has to base on tasks of social, economic developmentand national defense and security to propose suitable expenditure estimates.Expenditure estimates depend on demand of each sector, detail objective, and bearranged in order of priority and period Nowadays, a socialization cultural, socialsector helps to mobilize community in caring society

In summary, research basic arguments of National budget and budget managementare basis for policy definition as well as implementation budget management atvarious levels National finance policy has to connect to social economic developmentobjectives in given period The important content of National Finance is policies oncreating capital, distribution and using effectively capital, monetary, incomeadjustment, and international integration Understanding budget arguments thoroughlyhave important meaning to manage local budget Budget management has to connect

to social economic management

I.1.2 Budget Management

I.1.2.1 Budget Management is indispensable.

Budget Management is process that Government interfere budget relation to effectsocial, economic activities to reach goals of objectives, strategies and social, economicdevelopment master plan in limited time Besides, budget is used as a tool to manageand operate economy, orient economic relations according to proposed objectives.Budget management orients activities of budget according to law, encourageseconomic development, and use budget effectively and saving, ensure balance between

revenue and expenditure, reduce overspending General objectives of budgetmanagement are achieving positive balance for budget, stabilizing budget to makeadvantage for financial environment for stabilization and development, improvingbudget effectiveness for goals of social economic development strategy in limitedtime Government is management subject; budget relation, items is managed objects.Budget management is indispensable:

Budget management principle:

The first: Principle Of Single Document country only has one budget system,decision making concentrate on National Assembly and Government as well asheightens responsibility of local Government Unity in budget management isimplemented by law, policies, regulations and annual budget plan

The second: Assure sufficiently and entire of budget Revenues and expenses ofbudget have to collect sufficiently and entire into budget This principle ensures budget

is implemented strictly, helps Government control whole the budget, avoid fromlosses, waste and corruption

The third: Ensure to implement according to social, economic objectives; saving

is national policy, encourage economic development and ensure budget balance The fourth: Ensure financial reserve This one is the strategic principle, ensure touse budget stably and actively The reserve does not appear but increase every year(from surplus of budget, increasing revenue every year and arranging expenditure) The fifth: Ensure obviousness, public Expenditures have to record truly.Estimates, balance-sheet have to revise, appraise strictly according to procedure.Approved revenues, expenditure estimates have to be public

The sixth: Comply with law Execute seriously Budget Law, Tax Laws, andregulations, ensure rules in financial management

Relation between levels is implemented according to following principles:

- Receipt resources and expenditure is defined detailed at central and local Budget andshowed detailed in Budget Law and adjusted, added suitable with social, economicenvironment For example, Budget Law in 1996 recorded detail receipt resources andexpenditure for 4 budget levels However, in 1992, law adjusted expenditure of localbudget would concentrate strongly to local

- Central budget is a tool of Government, keep an important role to manage bigrevenue with high rate in total of revenues; takes an important role for organizedorientation and defines direction for local budget’s activities

- Local budgets often take form from revenue at local, implement social economictasks that is assigned Roles of local budget are: ensure finance for expenditures atlocal; ensure to mobilize, manage, monitor a part of central budget implementing atarea and adjust capital into central budget in necessary cases to balance budget system

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Moving fund from senior budget level to lower level to ensure equality, balanceddevelopment between areas, locals The supplementary is revenue of lower level Incase of lower management agencies is act as a proxy for higher agencies and underresponsibility of the higher agencies, the higher agencies have to transfer fund fromtheir budget to lower budget level to do; do not use budget of this level to do for tasks

of other level

I.1.2.2 Budget divides:

The neccessity to divide budget:

Together with divide of administration system, financial sources need to betransfer from central level to local levels to serve tasks at correlative level Budgetdivide is necessary to resolve relations between levels Equal management systemrequires a reasonable divide between authority and competence of divided level.Budget management divide means definite scope, authority, responsibility of budgetlevel in revenue and expenditure management at each budget level, to implementaccording to function, roles in term of management level Budget management dividebased on laws, policies, social economic development plan, in order to: ensure to applyrevenue-expenses policy consistently; use resources effectively and heightenresponsibility, encourage creativeness and initiative of local Government

Management of divide process is difficult and complex Dividing budget to locallevel has opportunity for: local Government can collect and distribute financial sourcesmore effectively, supply services is more suitable with local, meet demands and desire

of local people better and reasonable to local reality However, if divide is not good, itcauses risks such as creating overlapping, reducing connection and managementbetween central and local, increasing inequality and upgrading important services Sothat, divide have to ensure some principles:

Budget divide principle:

- Ensure budget concentration, promote ability and exploit all potentiality of local.Budget divide has to be consistent with social economic management divide Forexample, management divide has to be consistent with budget divide in education, thelevel managed by centre, the level managed by local connect with distribution budgetrevenue and expenditure In fact, budget divide in some sectors still is overlap,unobvious, because using resources is not effective

- Budget divide and classification of revenue-expenditure authority and divide ratebetween central and local budget are usually associated Management divide is suitablewith administrative management function of each Government level

- Budget divide have to be suitable with Constitution and Law about definitionfunctions, tasks, authorities and responsibilities of Government levels, ensure eachbudget level has receipt resources, expenditure, authority and responsibilitycorrelative

- Besides, ensure some principles such as: ensuring receipt sources for some years toimprove active right of local Government; having equality between locals; havingability on control, monitoring budget all over the country.

Contents of budget divide:

The first, define detail competency of developing revenue, expenses based onBudget Law The second define detail revenue, expenses management for each budgetlevel For example, classify obviously which revenue allow to collect 100% and whichone is adjusted between receipts sources; define detail contents, scope of each expensefor each budget level The third, stipulate authority and responsibility of Governmentlevel for implementing budget (budget preparation, implementation and balance);stipulate right to borrow from people, control rate, supplementary expenses, and dividescale between provincial and district budget, dateline of preparing, reporting budget toPeople’s Council and higher level

I.2 Introduction to ERP model

I.2.1 ERP Model

ERP- Enterprise Resource Planning is a terminology, which relates to all activities

of enterprises and supported by computer and all processes are done automatically tohelp enterprises manage their key operations, including accounting, financial analysis,procurement management, stock management, planning and manufacturingmanagement, customer relationship management, human resource management,purchase order tracking, sales management, etc This system ensures integratedresources of enterprise such as human resources, materials, machines and cash byusing planning tools

ERP software allows enterprises to provide and consolidate information relating

to various and separate activities ERP is a system of software’s, which can beextended and developed by time, and by different types of enterprises, such extensionand development do not affect core ERP ERP help to integrate separate computersystems and remove separate ones: Financials, Human Resource, Sales,Manufacturing, and Inventory ERP will replace such separate component byintegrated software, which is divided by module and correlated ERP system is flexibleand can be installed by module as per different demand by enterprise ERP softwarecan be installed with some modules as per demand by enterprise; remaining modulescan be installed later but not affecting the system ERP also has flexible grant-user-access right from the administrator’s interface ERP is also more secure by securitypolicy In conclusion, ERP is a system used to manage and integrate all resources,information and functionalities of an enterprise

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I.2.1 ERP Components

ERP model is divided into five main parts:

SCM – Supply chain manager: SCM is the oversight of materials, information,and finances as they move in a process from supplier to manufacturer to wholesaler toretailer to consumer SCM involves coordinating and integrating these flows bothwithin and between companies The goal of any SCM system is to reduce inventory.SCM of all the processes in order to cash, inventory, order entry, procurement, productconfiguration, supply chain planning, supplier scheduling, inspection of goods, loveclaim processing, commission included in the ERP system

HRM- Human Resource Management: HRM is the organizational function thatdeals with issues related to people such as compensation, hiring, performancemanagement, organization development, safety, wellness, benefits, employeemotivation, communication, administration, and training In context of ERP system,HRM include Human resources, payroll, training, time and attendance, roistering,benefits sides

Picture 1: ERP model

CRM- Customer relationship management – CRM is the common terminologyused to describe the managing of prospects all the way through the entire salesprocess CRM is often an entire data system that can either be manipulated manually,such as an index card system or a computer automated system CRM systems areuseful in that they enable the management of the entire prospect/customer details such

as the names, addresses, phone numbers, call records and purchase history and more.Other uses include planning of appointments, schedule of call back times and othersales related activities Automated CRM, depending on the system, can be for only oneuser, or for several users to have access to customer accounts

MRP-Manufacturing resource planning

a/ Computerized ordering and scheduling system for manufacturing and

fabrication industries, it uses bill of materials data, inventory data, and master

production schedule to project what material is required, when, and in what

quantity MRP phases orders for dependent-demand items (such as rawmaterials, components, parts) over a period to synchronize flow of materials and

in in-process inventories with production schedules It also computes and trackseffect of hundreds of variables such as new orders, changes in various capacities,overloaded production centers, shortages, and delays by suppliers, and feeds

financial data into the accounting system In contrast to just in time inventory (ademand-pull production system), MRP is a plan-push system, and in contrast toadvanced planning system (a forward scheduling system) it is a backward-schedulingsystem

b/ Successor to the material requirements planning (MRP), it integratesplanning of all aspects (not just production) of a manufacturing firm MRP-IIincludes functions such as business planning, production planning and scheduling,

capacity requirement planning, job costing, financial management and

forecasting, order processing, shop floor control, time and attendance,

performance measurement, and sales and operations planning See also

optimized production technology

I.3 EBS-Overview

eBS is an EPR application software which be made by Oracle Co-operation EBSincludes all components and functions of ERP software It was built on a relationaldatabase management powerful Oracle Database

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I.3.1 Technical architecture

The main value of this architecture is that accomplishes all of its tasks withoutdesktop software Because it uses a browser as its client, it greatly reduces itscomplexity and associated cost The forms-based architecture delivers its functionalityacross internal networks or the external web Users get a full-featured user interfacecommon to installed software But with EBS, the user interface is delivered via Java.The self-service architecture is delivered through standard HTML and Javascriptusing the Servlet Engine and Java Server Pages (JSPs) for business logic The interfacemay be less full-featured, but the functionality is equally represented This is abrilliance of the EBS architecture, in any mode The business logic (or processing) isdone on the Applications-tier As such, the client tier is only responsible for userinterface elements all the logic resides and is executed on the Applications-tier, or insome cases for performance reasons resides and is executed on the Database-tier Thebusiness intelligence architecture uses an interface familiar to self-service users,HTML and Javascript It delivers its business logic through the use of the Discovererand Reports Servers We have products that use PDAs and other wireless devices.Using mobile and wireless standards, it can deliver both offline and online processing.These processes use architecture identical to the self-service architecture differing only

in the end content shipped to/from the display device (i.e., PDA or wireless device).Examples include cell phone or PDA access to calendars for sales people, andinventory control and management through wireless bar code scanners This is thebasic architectural diagram for eBS You will see it in numerous documents

The desktop tier is only responsible for displaying the form The form can bedisplayed using Java (forms-based access) or HTML/Javascript (self-service, businessintelligence or mobile access) There are two pieces of software that are needed for thedesktop tier in forms-based mode to operate One, the browser needs a Java VirtualMachine (JVM) This JVM is installed as either a plug-in (in Netscape) or an ActiveXcontrol (in IE) The JVM we provide is called jInitiator JInitiator can be downloaded

and installed on demand, and is a one-time process Since this is a simple add-on toyour browser and is only done one time, we do not consider it to be a softwareinstallation Two, the web listener will download numerous Java archive files (.jarfiles) to your computer These JARs are cached on your computer The first timethese files are needed, it will take longer to start your session because these files need

to be downloaded After that, the cache will greatly speed the start-up JARs will onlyneed to be re-downloaded when they have been updated, and the copy in cache is nolonger valid For any of the additional modes, the browser is inherently capable ofhandling HTML and Javascript No additional downloads are needed The applicationstier is responsible for storing and executing most of the business logic associated withEBS It also provides all the non-database services required in an EBS instance (e.g.,web listeners, forms servers, reports servers, concurrent processing, etc.)

The applications tier is responsible for storing and executing most of the businesslogic associated with eBS It also provides all the non-database services required in aneBS instance (e.g., web listeners, forms servers, reports servers, concurrent processing,etc.) The applications tier is the biggest catch-all of services within the EBSarchitecture It is easier to state that anything that isn't the desktop tier (i.e., formsdisplay) and isn't the database, belongs to the applications tier The applications tier is

a elegant solution In our discussion of the architecture, we've carefully avoided thediscussion of servers Why? Because, the eBS system can run on a single server orspread across multiple servers The architectural diagram simply shows the roles thatmust be played, not the server(s) who will play those roles The architecture allowsmultiple machines to be clustered together to cover any role

The database tier is responsible for the storage, retrieval and management of all ofthe data associated with your eBS instance This means that any SQL or PL/SQL willultimately be executed on this machine Regardless of the mode, all data queried,inserted, updated or deleted is done on the database tier It therefore means that thedatabase tier is involved in almost everything, because almost everything involves thedata The database tier can now significantly benefit from Oracle's clusteringtechnology, by spreading the database chores across a cluster of machines

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I.3.2 Business architecture

Oracle E-Business Suite is a product ERP of Oracle It is an ERP system leadingwhich is integrated many processes of the organization may have eBS is divided intothe following categories: Manufacturing resource planning, Materials management,Financial management, Supply Chain Management, Customer RelationshipManagement according to 5 parts of standard ERP model and project manager addmore in this system for manager project which is owned by organization

I.3.2.1 Oracle Financials

Oracle Financials consists of an integrated suite of applications designed tomanage and record the financial impact of transactions occurring in a businessenvironment and to use the information to produce financial statements OracleFinancial Applications products include 7 main responsibilities: 1 Oracle GeneralLedger; 2 Oracle Purchasing; 3 Oracle Payables; 4 Oracle Assets; 5 OracleInventory; 6 Oracle Order Management; 7.Oracle Receivables

1 Oracle General Ledger: is the central repository for all of your financialinformation All of the other applications feed data to Oracle General Ledger,and your financial reports, such as your income statement and balance sheet, aregenerated out of General Ledger The primary General Ledger functionsdiscussed focus in Journal Entries, Budget Information, and Account Balances

2 Purchasing: The primary Purchasing functions are Supplier definition, Purchaserequisition processing, Purchase order processing, Receipt of purchasedmaterial, Transfer of material receipt information to the General Ledger

3 Oracle Payables: is fully integrated with Oracle Purchasing and Oracle GeneralLedger The primary Accounts Payable functions are processing of supplier

Manufacturing Financials Projects

Human Resources

Customer Relationship Management

Supply Chain Management

invoices/matching, Payment of supplier invoices, Accounting of invoice andpayment information, Transfer of accounting entries from Payables to GeneralLedger.

4 The Oracle Assets: module enables you to manage tracking and financialinformation about both expensed and depreciable assets Oracle Fixed Assets isfully integrated with Oracle Payables The primary Oracle Assets functionsdiscussed are Asset Additions, Depreciation, and Transfer of asset addition anddepreciation information from Fixed Assets to General Ledger

5 The Oracle Inventory module: enables you to define your parts, including itemattributes and cost information The primary Oracle Inventory functionsinclude: Item definition, Item costing, Processing of material transactions:receipts and shipments, Transfer of material transaction information fromInventory to General Ledger

6 The Order Management module: is fully integrated with Oracle Inventory toprocess material shipments and with Oracle Receivables for creation ofcustomer invoices The primary Oracle Order Management functions which areCustomer definition, Order processing, Transfer of shipment information toOracle Inventory, Transfer of order information to Oracle Receivables for thepurpose of creating customer invoices

7 The Receivables module is fully integrated with Oracle Order Management sothat customer invoices can be created automatically from sales orderinformation The primary Oracle Receivables functions that are includedProcessing of customer invoices, Processing of cash receipts, Transfer ofcustomer invoice and cash receipt information from Oracle Receivables toGeneral Ledger

I.3.2.2 Integration of Oracle Financial Applications

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A general overview of the data flow between the various Oracle Financial modules

is shown in the diagram above A brief discussion of the shared entities, functions, andwhat data is passed by each module to the General Ledger is included here for thepurpose of better understanding how data flows through the application tables Whereappropriate in the sections on individual applications, a brief description is providedregarding how that module passes data to the General Ledger

Shared Entities: Suppliers: Suppliers are defined and vendor’s information isstored in purchasing responsibility, which is shared by Purchasing, Payables, andAssets

Account Numbers: Account numbers are defined in general ledger schema.Account numbers are referenced by all applications

Items: Items are defined in material schema and their information is stored inthere, which is shared by Purchasing, Inventory, Order Management, and AccountsReceivable Customers are defined and be stored in the customers, which is shared

by Order Management, Receivables, and some CRM applications

Functions: In order to automate the process of generating account numbers infeeder systems, Oracle Financial applications provide functions that can be set up

Order Management

Shared items

Auto accounting Receivables interface Auto invoices

A/R Assets Sales revenue Cash receipts

Payables

Accrued Receipts

Material receipts Material shipments COGs

Std cost adjustments Physical inventory Adjustments

Expense Liabilities Cash outFixed

Assets

during your implementation to generate account numbers based on information entered

in a screen There are two of these functions:

Account Generator: The Account Generator can be used by the purchasingmodule to generate purchase order distribution accounts, by Fixed Assets to generatevarious asset accounts, and by the Shipment interface between order management andinventory to generate the cost of goods sold account The Account Generator functiontakes parameters from the purchase order or whatever as inputs and uses these todetermine the appropriate account number

Auto-Accounting: The Auto Accounting function is used by the Receivablesmodule to determine the appropriate account numbers for sales revenue, accountsreceivable, freight and taxes, based on inputs such as the salesperson, the item beinginvoiced, and the type of invoice

I.3.2.3 Data Flow among Applications

Purchasing to Accounts Payable: Data is copied out of purchasing schema intoAccounts Payable schema when invoices are received and matched against purchaseorder shipments or receipts

Accounts Payable to Fixed Assets: When invoice information is entered in thePayables module for an item which will become a fixed asset, such as a vehicle or abuilding, the MassAdditions process can be used to create asset records from

Oracle

Oracle Fixed Assets

Oracle Inventory

Oracle Accounts Receivable

Oracle

Purchasing

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information entered on the Payables invoice The MassAdditions process may use theAccount Generator function to determine the appropriate asset accounts.

Order Management to Inventory: When material is shipped, the InventoryInterface process passes shipment information from Oracle Order Management toOracle Inventory to decrement inventory item quantities and to record cost of goodssold and a decrease in inventory asset value This process may use the AccountGenerator function to determine the appropriate cost of goods sold account

Order Management to Accounts Receivable: Once orders have been shipped, theReceivables interface and AutoInvoice processes may be run to generate customerinvoice records automatically from Sales order information The AutoInvoice processmay use the AutoAccounting function described above to determine the appropriatesales revenue, freight revenue, tax revenue, accounts receivable, and account numbers

I.3.2.4 Data Flow to General Ledger

Oracle General Ledger is the central repository for accounting information,receiving transactions from other Oracle applications

Purchasing: The only information passed to General Ledger by the purchasingmodule is accrued receipt information (asset information for material received but notyet delivered, and liability information for material received but not yet billed)

General Ledger Accrued receipts

Expense , liability,

cash out Asset additions, adjustments,

transfers, retirements, depreciation

Assets

Inventory Order Management

Material receipts ,

shipments , COGS

Sales revenue, accounts receivable,

cash in Material shipping

Purchasing

Accounts Payable: The Accounts Payable module passes expense and liabilityinformation from invoices and cash and liability information from payments to theGeneral Ledger.

Fixed Assets: The Fixed Asset module passes information about asset additions,asset adjustments, transfers, retirements, and depreciation to the General Ledger

Inventory: The Inventory module passes financial information about materialreceipts, material shipments, cost of goods sold, and changes in inventory asset valuedue to standard cost adjustments, and changes in inventory asset value due to physicalinventory adjustments to the General Ledger

Order Management: The Order Management module does not pass anyinformation directly to the General Ledger When material is shipped, ordermanagement passes information through the inventory interface to the Inventorymodule to record the shipment, and Oracle Inventory then passes that information on

to the General Ledger

Accounts Receivable: The Accounts Receivable module passes sales revenue andaccounts receivable information from customer invoices, and miscellaneous revenue,cash, and accounts receivable information from cash receipts to the General Ledger.Budget Allocation: Budget module is a component of GL It is used to manage thefinancial situation of organizations That is the comparison between expenditure andbudget of the organization over a period Creating a budget is actually setting up aspending plan in the future on an account has to be declared before Budget Allocation

is the separation of money from Parent account for a child account

I.3.3 Oracle Payable Module

I.3.3.1 Overview of Oracle Payables-AP

AP is a component of Oracle Financial AP responsible manages for managing alltransactions relation to business to pay (Payable) and pay in the EBS Import andexport data from oracle payable bound to data related to it to ensure consistency,integrity, and certainly Invoice and payments from the AP module is transferred to GLmodule Also the accounting information on purchase cost of fixed assets betransferred to the FA module and AP cash flow of information is transferred to Module

CM Commonly used with information about purchasing orders and supplier

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Procure to pay lifecycle

Sourcing

• Request for quote

• Supplier selection

• Contract negotiations and awards

• Catalog content managementOrdering

• Requisition and purchase order generation

• Purchase order management and fulfillment

• PaymentReporting and Analysis

• Supplier performance

• Commodity analysis

Requisitions

Purchase Orders

• Internal compliance

• Robust intelligence gathering

• Decision support

• Process functionality

I.3.3.2 Payable process

Demand: The procurement process generates and manages requests for thepurchase of goods The demand for purchase items may be a one-time event or mayrecur in either predictable or random time intervals

Source: The procurement sourcing process covers the business activities related tothe search, qualification, and selection of suitable suppliers for requested goods andservices

Order: The procurement ordering process includes purchase order placement bythe buying organization and purchase order execution by the supplying organization Receive: The receipt process acknowledges that a purchase order has been dulyexecuted For orders of physical goods, it will typically include the receipt, inspectionand delivery of the goods to inventory or to another designated location For orders ofservices, it will typically consist of a notification from the requester or the approvingperson that the service has been performed as agreed

Pay: The payment process consists of those activities involved in the payment forordered goods and services

RFQs and Quotations: purchasing provides you with request for quotation (RFQ), andquotation features to handle your sourcing needs You can create an RFQ from

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requisitions, match supplier quotations to your RFQ, and automatically copy quotationinformation to purchase orders Purchasing provides complete reporting to controlyour requests for quotations and evaluate supplier responses.

Requisitions: inquisitions represent demand for goods or services Whether youwant to provide online requisitions to everyone in the organization or limit the number

of users who have access to the system, Purchasing is flexible enough to meet theneeds of your organization With online requisitions, you can centralize yourpurchasing department, source your requisition with the best suppliers, and ensure thatyou obtain the appropriate management approval before creating purchase orders fromrequisitions

a Supplier

Suppliers

You must define a supplier before performing most activities within Purchasing andPayables

• You optionally enter a recommended supplier on a requisition

• You need a supplier to issue a request for quotation

• You use that same supplier when you enter a quotation

• You need supplier information for purchase orders

• You receive goods or services from suppliers

• You return goods to suppliers

• You must pay the supplier for the goods or services purchased.Set up suppliers to record information about individuals and companies youpurchase goods and services from You can also enter employees you reimburse forexpense reports You can designate supplier sites as pay sites, purchasing sites, RFQonly sites, or procurement card sites For example, for a single supplier, you can buyfrom several different sites and send payments to several different sites Most supplierinformation automatically defaults to all supplier sites to facilitate supplier site entry.However, you can override these defaults and have unique information for each site.

b Purchase order

Purchase Orders

Purchasing supports four types of purchase orders: Standard, Blanket, Contractand Planned There are several methods that can be used to create purchase orders.You can manually create purchase orders or search approved requisitions and addsthem to purchase orders Standard purchase orders can be imported through thePurchasing Documents Open Interface in a status of Incomplete or Approved You canautomate purchase document creation using the PO Create Documents workflow toautomatically create a Blanket purchase agreement release or Standard purchase orderupon approval of a requisition

Once purchase orders are created, they may be submitted for approval Theapproval process checks to see if the submitter has sufficient authority to approve thepurchase order Once the document is approved, it may be sent to your supplier using

a variety of methods including: printed document, EDI, fax, e-mail, iSupplier Portaland XML Once the purchase order or release is sent to your supplier, they areauthorized to ship goods at the times and to the locations that have been agreed upon.Purchase documents may be created:

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