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How to Calculate Freight Charges in Order Management
Posted by Sanjay / on 06/18/2009 / 5 Comments Email
Categories: OM
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Solution and Content contributed by Bill Foster. Remember Me?
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This is a workaround solution for one of the most asked question by Clients
implementing Order Management "How to Calculate Freight Charges?" Thanks
Advertisement
to Bill for sharing this wonderful solution. Oracle doesn't have solution for this
even in R12.
Problem: Add Freight Charges to a Sales Order in Order Management and have
Oracle/Vertex tell how much (if any) Taxes should be charged on the Freight
Charges.
Solution:
Use an Item called ‘FREIGHT' which is basically treated as any other Item where
you can establish the tax code on the line and charge tax on freight appropriately. Setup the Item in
Learn more
Inventory and have to pick and ship it for each order.
Use a "Promotional Modifier" which is qualified by many different pricing attributes (including Freight
Terms, Shipping Method, Order Category, etc.). So the idea is - "Buy any item and get Freight at 'X' price".
This solution works for the credit card orders, cash / check orders and advance pay. Net payment term
orders typically use actual freight cost. You may also have to setup a new defaulting rule to handle
defaulting the line type based on the item being FREIGHT. This was to ensure the correct COGS account
was used to account for the freight.
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Profile Options to Consider:
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OM: Charges for Included Item: When this profile option is set to 'Y', and the calculate price flag of
the order line with an included item is either Calculate Price (Y) or Partial Price (P), then the eligible
freight charges are applied to the order line. For backordered lines within Included Items, both the
profile options OM: Charges for backorders and OM: Charges for Included Item need to be set to Y to
view and apply any freight charges.
OM: Charges for backorders: If the profile option is set to 'Y', the system will set the calculate price
flag to 'P' and freight charges are calculated for backorder lines. If the profile option is set to 'N', the
system will set the calculated price flag to 'N' and freight charges are not calculated for backorder
lines.
QP: Selling Price Rounding Options: Determines if your freight charges are rounded. See: Oracle
Advance Pricing Implementation Guide, Profile Options.
OM: Interface Freight Tax Code From Line: The default value set at site level is 'No', so that existing
customers are not impacted due to the change. Tax_code is now interfaced to AR for freight lines
that are interfaced as revenue lines when the profile is set to 'Yes'. Tax code is populated in the
same way as the sales order line along with which this freight line is interfaced.
Tax: Inventory Item for Freight: This profile option is used only when the freight item is passed as
revenue line. If you set the value of this profile option to Inventory Item then the Invoicing module
passes this item for freight charges, which will be treated as revenue lines. This profile option can
only be set at the Application or Site level.
Tax: Invoice Freight as Revenue: If the Receivables profile option TAX: Allow Tax Code Override is
set to 'YES', and profile option TAX: Invoice Freight as Revenue is set to 'YES', then freight charges
are treated as revenue lines, and the Invoicing module will pass VAT tax and associated sales
credits for processing.
OM: Credit Salesperson for Freight on Sales: This profile option specifies whether to credit the
Salesperson on the invoicing line or order header for freight charges when the freight charges are
treated as revenue.
Debugging Freight and Special Charges - Click Here
Metalink Notes to Consider:
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8/5/2019 How to Calculate Freight Charges in Order Management | OM - Blog | Oracle ERP User Network | www.oracleerp.org
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Hope this helps anyone interested. Surely this is not the only solution, but this can be achieved with no
customizations and use seeded functionality only.
Please leave your comments.
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Comments
Devendra says:
Very good article I must say...
God bless you !!!
June 22, 2009 at 10:42 AM | Permalink
Habeeb says:
Hi Sanjay
Since I am a Apps. technical person w ith very much little know ledge about the OM fright functionality.
But usually w e capture the fright amount in the fright column in the Receivables Transactions form. Once
the Invoice is generated the Invoice is queried in the receivable transaction form w here the fright amount
is entered and saved.
July 7, 2009 at 3:36 AM | Permalink
Bill says:
There are a couple design options. You can capture freight "costs" in Shipping Execution (WSH) and
convert those to Freight Charges in OM after shipping using Advanced Pricing (QP). Or capture freight
charges directly in OM using a line item or as a freight charge w ith Advanced Pricing. When OM
interfaces the order lines and freight charges to AR, you have tw o choices. Convert freight charges to
AR as "revenue lines" or as "freight charges". By setting the "Tax: Invoice Freight as Revenue:" profile
option to YES - then freight charges are treated as revenue lines, and the Invoicing module w ill pass
VAT tax and associated sales credits for processing. With this option you "w ill not" see the freight
charge section of th AR invoice populated w ith freight charges. You'll actually see a line item for freight.
The line item for Freight uses w hat ever "inventory item" you define for profile option "Tax: Inventory Item
for Freight:". If you don't set these options...you w on't be able to calculate....more...
July 30, 2009 at 10:48 PM | Permalink
Bill says:
...continued...you w on't be able to calculate or charge tax on freight. In this design you'll see freight
charges show up in the freight charge section in the AR invoice.
Hope that helps.
July 30, 2009 at 10:49 PM | Permalink
Beth says:
How are you handling the issue that w hen you add freight as a line item it is captured and taxed as
revenue? Maybe I'm misunderstanding here but this can be a huge reconciliation issue, Freight is a pass-
thru expense not a revenue line item.
September 27, 2011 at 7:24 PM | Permalink
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