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White Paper

The objective of this white paper is to outline some of the key considerations businesses should be aware of when thinking of upgrading or implementing Oracle R12 in regards to the E-Business Tax module.

E-Business Tax: Strategic Drivers for an Oracle R12 Upgrade


Introduction
Enterprise applications are quite complex by design. This complexity is increased by the enlarged global footprint of todays business entities, and the need to meet a variety of compliance and tax requirements. As the worlds economies and supply chains become increasingly interconnected, businesses must work across multiple geographies, systems and rules, and adhere to local standards and rules. These businesses require processes and work flows that can span applications, divisions and regions. This need is particularly evident in the area of global financial management. With increased compliance and governance mandates, organizations are centralizing critical finance operations to enhance control and visibility. Oracle E-Business Suite (EBS) Release 12 (R12) provides businesses with the ability to operate globally while meeting local compliance requirements. Oracle R12 centralizes tax functionality within the Oracle EBusiness Tax module. The objective of the centralization is to reduce the cost and complexity of complying with multiple tax authorities. This centralized tax engine delivers consistent tax services to all EBS business flows through one application interface, simplifying tax configuration. It also integrates with external tax vendors for maintaining country-specific tax content, such as Vertex and Taxware in the United States. Businesses that are considering an upgrade to Oracle R12 realize that their key enterprise applications must be upgraded regularly to benefit from the latest application and technical stack enhancements and to maintain basic supportability. Also, there are significant productivity benefits and improvements in functionality that can be realized from R12. As part of this upgrade many companies need to consider whether to use the upgraded version of E-Business Tax or to implement a new installation of the module. There are trade-offs with each approach. Analysis should be done to consider the business and upgrade objectives and timeline.

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A Knowledge-Driven Consulting White Paper 2011 Hitachi Consulting Corporation

Contents
Introduction .................................................................................................. 1 Highlights of E-Business Tax ..................................................................... 3 Considering an Upgrade or New Implementation? .................................. 3 New Features and Benefits of E-Business Tax ........................................ 6 Hitachi Consulting Solutions ..................................................................... 7 Summary ...................................................................................................... 8 About Hitachi Consulting Corporation ...................................................... 8 About Hitachi ............................................................................................... 8

Highlights of E-Business Tax


The new E-Business Tax module provides users with a single point of management for tax with the EBS. The new self-service user interface extends control for products-based tax. It further provides country-specific tax content and simple to complex country-specific legislations. It supports cross-border transactions, as well as local compliance requirements. E-Business Tax users can easily modify tax content to keep up with constant tax changes by local jurisdictions, legislation, rates and exceptions. The tax configurations have also been simplified to ease manageability. The E-Business Tax System supports integration with third-party tax software systems. Support structures for both Vertex and Taxware are pre-bundled with R12. Separate licensing is required to use this functionality, which supports only U.S. State and local taxes within the Order-to-Cash cycle. The systems are certified prepackaged in R12. If a server-side version already exists, auto upgrade is available, and certification, if necessary, is performed on the more recent versions. Some of the major benefits of EBusiness Tax include: A mandatory module in R12 E-Business Tax is a new, mandatory module introduced in R12. You can use a bare-bones setup or take full advantage of it, but you cannot ignore it. Enhancing accuracy and efficiency As part of the upgrade, all Trading Community Architecture (TCA) geographies must be validated. Validating the TCA geographies helps ensure all the information will be accurate, thus preventing incorrect tax calculation. Facilitating more accurate tax calculation As incorrect tax calculation can result in potential audits and penalties, utilizing the E-Business Tax module will save money in the long-run by fixing problems up front. New features Several new features are available through E-Business Tax that improve functionality including tax repository guided configuration, tax rules, and fiscal classification.

Considering an Upgrade or New Implementation?


There are two options for tax configuration when upgrading from Oracle 11i to Oracle R12: 1. Use upgraded E-Business Tax 2. Configure new implementation of E-Business Tax

Option 1: Upgraded E-Business Tax Choosing to use the Oracle E-Business Tax upgrade configuration offers Oracle customers the ability to continue to use the current business tax calculation design and configuration methodology post upgrade. The concept of using tax codes assigned to customers, suppliers, or inventory items will remain the same post upgrade. Previously, tax configurations were housed in the Oracle Receivables or Oracle Payables modules. After upgrading to R12, all tax configurations are migrated to Oracle E-Business Tax in a central location. From an implementation perspective, this option involves the following: Assess impact to existing customizations and reporting Review master data and Oracle E-Business Tax configuration post upgrade Identify modifications or new setups in addition to the upgrade configuration Example of the Oracle E-Business Tax setup that results as a part of the R12 upgrade from 11i:

Option 2: New Implementation of E-Business Tax Configuring Oracle R12 E-Business Tax as a fresh installation offers the ability to utilize new functionality introduced as a part of R12. Where the automation of tax calculation was limited in prior Oracle versions, R12 offers the ability to create multiple tax rules and reduces the amount of ongoing setups required to calculate taxes. From an implementation perspective, this option involves the following: Gap analysis of E-Business Tax functionality to current and future business requirements Solution design and E-Business Tax module configuration Assess impact to existing customizations and reporting Considerations for Each Approach The decision to upgrade should be based upon the following key factors: Project implementation timeline Business and system needs to scale with tax law changes or expansions into new regions covered by different tax laws Need for automatic tax calculation

Pros

Option 1: Upgrade EBusiness Tax Configuration Faster implementation time Minimal work to maintain current tax calculation requirements Fewer changes to end user and low impact for training Restrictions on creating new tax rules and modifying existing tax rules Restrictions for tax partner integrations such as Vertex or Taxware

Option 2: Reconfigure EBusiness Tax Automation of tax decisions through creation of tax rules Flexibility to create conditional tax rules based upon party product, process, or place

Cons

Full implementation of Oracle TCA geography hierarchy and E-Business Tax Longer implementation time frame Required data clean up on master data

Hitachi Consulting helps guide clients through the upgrade process by assessing current and future business requirements and reviewing the state of pre-upgrade Oracle environment.

New Features and Benefits of E-Business Tax


E-Business Tax is a single-point solution for managing your transaction-based tax requirements. It delivers tax content to all EBS Business flow through one application interface. It reduces the tax configuration time and resolves complex to simple adjustments needed from changes in local jurisdiction, legislation, rates, and exceptions for products and customers. This ensures a uniform tax setup across applications, with a centrally managed system of automated tax services and control over manual intervention and update. New features of E-Business Tax include: Tax Repository Is part of the single source of transactional tax information (i.e. Tax lines) for all calculated E-Business Tax Allows for calculated taxes, parties involved to be stored in location Allows for tax reporting, tax accounting, and tax reconciliation Is the underlying infrastructure for users to see and/or modify (override) tax lines Guided Configuration Provides a Home Page to guide the user through a step by step process of configuration Home Page allows access to other models to gain pre and post requisites configuration required for tax configurations Self Assessment/Reverse Charge Allows for transactions to capture Use Tax in the US or Reverse Charges in Europe Adds a tax line that will not be a part of the Payable transaction total, but will be booked in if a Use tax or Reverse Charge should be assessed on invoice that originally did not have taxes from a supplier Tax rules Allow for complex tax legislations to be met Can be derived by date effectiveness Can produce guided or expert configuration flows Include several type of rules such as Place of Supply, Tax Calculation, and Tax applicability Fiscal Classification Consists of Party, Product, Process, or Place (the 4 Ps) Party E-Business Tax allows for link in Fiscal classification types for existing parties categories in TCA

Product Allows for classification of existing inventory categories or non-inventory item classification codes In addition, defining specific intended usage Transaction (Process) Allows certain Transaction Business Categories to hold generic classification where tax can be very specific in its requirements Place This parameter is used in identifying the above focus on the shipper, receiver, from the order to cash/procure to pay process Tax Simulator E-Business Tax provides a way to test new rules out without impacting your production instance (Live Instance). Tax Jurisdiction This allows for the defining of specific geographies for tax and taxing authorities. Content and Services Subscriptions This permits third-party software and services to connect with EBusiness Tax. Events and Configuration Owner Options E-Business Tax helps control tax configure information, such as rounding and units. Multiple Tax Registrations This allows several parties to have several tax registrations.

Hitachi Consulting Solutions


Hitachi Consulting provides a range of robust Oracle E-Business Suite R12 upgrade and implementation services including: Overall Program Management Database Upgrades and Administration Application Upgrade Services Custom Components Assessment, Retrofit, and Redeployment Testing and Validation Training and User Adoption Post-Upgrade Support Hitachi Consultings flexible service execution models can offer an optimized mix of on-site, offshore, and near shore as desired.

Summary
Businesses that are considering an upgrade to Oracle R12 realize that their key enterprise applications must be upgraded regularly in order to benefit from the latest application and technical stack enhancements and to maintain basic supportability. Also, there are significant productivity benefits and improvements in functionality that can be realized from R12. As part of this upgrade many companies will need to consider their implementation approach for the E-Business Tax module. As this paper has described, there are multiple considerations for how EB-Tax is implemented during an upgrade and analysis should be done to consider the business and upgrade objectives and timeline. Changes to business critical applications like EB-Tax must be done carefully, in the interest of optimal performance and business continuity. By enlisting the help of an experienced IT services provider, enterprises can gain access to best practices for EB-Tax and make informed, forwardthinking decisions. As a Platinum Partner in the Oracle Partner Network (OPN), Hitachi Consulting has extensive experience performing successful Oracle EBS R12 upgrades for global companies. Currently, over 200 active customers address their business needs leveraging the companys methodology and global delivery capabilities for their Oracle EBS and other key enterprise business applications. To find out how Hitachi Consulting can help you leverage the many new capabilities and flexibility provided by upgrading to Oracle EBS R12, please visit www.hitachiconsulting.com or call 877.664.0010 for contact information and office locations.
About Hitachi Consulting Corporation Hitachi Consulting is the global business and IT consulting company of Hitachi Ltd. with operations throughout North America, Europe, the Middle East and Asia. The company is a recognized leader in delivering proven business and IT strategies and solutions to Global 2000 companies across many industries. With a balanced view of strategy, people, process and technology, we work with companies to understand their unique business needs, and to develop and implement practical business strategies and technology solutions. From business strategy development through application deployment and maintenance, our consultants are committed to helping clients quickly realize measurable business value and achieve sustainable ROI. Hitachi Consulting's client base includes 25 percent of the Global 100 as well as many leading mid-market companies. We offer a client-focused, collaborative approach and transfer knowledge throughout each engagement. For more information, call 1.877.664.0010 or visit www.hitachiconsulting.com. About Hitachi Hitachi, Ltd., (NYSE: HIT / TSE: 6501), headquartered in Tokyo, Japan, is a leading global electronics company with approximately 360,000 employees worldwide. Fiscal 2010 (ended March 31, 2011) consolidated revenues totaled 9,315 billion yen ($112.2 billion). Hitachi will focus more than ever on the Social Innovation Business, which includes information and telecommunication systems, power systems, environmental, industrial and transportation systems, and social and urban systems, as well as the sophisticated materials and key devices that support them. For more information on Hitachi, please visit the company's website at www.hitachi.com.

2011 Hitachi Consulting Corporation. All rights reserved.

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