In this post we will have overview on the transfer pricing is applicable on the inter company transactions
A single physical movement of goods may involve multiple transfers of ownership
example : to achieve post tax revenues, lower cost and customer responsiveness
if we have sales order is created in US Business unit and Singapore as Sales office and manufacturing unit as China BU.
goods physical movement from china BU to customer in USA
Sales invoice by US BU, Inter company invoice by China BU to Singapore BU, Singapore BU to USA BU
4 ways of doing business
1. Global Procurement
Supplier send goods to ORG B
Sold BU as ORG A
Receiving BU as ORG B
internal invoice between ORG A and ORG B
2. Internal Material Transfer
Material Movement from ORG A to ORG C
Inter company invoice from ORG A to ORG B
Inter company invoice from ORG B to ORG C
3. Internal Drop Shipment
Shipping BU Org A
Selling BU Org B
Ship goods from ORG A to Customer
Invoice to Customer from org B
Inter company invoice between Org A and Org B
4. Drop shipment with shipment and procurement
Supplier ship goods to Customer
Sold BU Org A ( makes supplier payment )
Receiving and shipping BU as Org B
Selling BU Org C Invoice to Customer
Inter company invoice between Org A and Org B , Org B and Org C
Transfer pricing configuration
1. Static mark up percentage based on transaction cost or source document price
--- Use the task : manage Transfer Pricing
Markup percentage : numeric value
--Accounting transfer price - Transaction cost basis, Source document price
Select the rule in the the supply chain financial orchestration Flow
Functional orchestration Qualifier
usage is based on the parameter we can set the markup percent
parameters
Item
Ship from org
Ship to Org
User item type
item class
destination type etc.
based on the qualifier we can have the Transfer pricing rule
2. Pricing Strategy -- using Price list , using tier based discount, transaction Attribute of item, Source document price markup or discount
Create Pricing strategy with any user defined name
using the pricing strategy assignment
select as below
Assignment level : Line
Context - Material Transfer
Pricing Strategy - for a set of condition
Select Pricing Strategy option in the transfer pricing rule, Aggrement type : internal Material for the financial orchestration flow.
While defining the price of the item in the price list we can select the calculation method
Source document Cost : and we can add the markup or the discount to be applied
Cost -- then we need to upload the cost price in the pricing strategy for all the items
Note : we can not copy cost of the item to the price list may be used for Standard item and not supported for actual cost / average cost
Price -- then taken as the cost for the transfer price in the price list
using the manage pricing algorithm
name : Price material transfer -- we can achieve the below quantity based / attribute based etc.
we can use qty based tierd based discount
or item based attribute for the transnational attributes enabled ex: color of the shirt
3. Third party Pricing Service - Derive transfer price using the external service by using custom web service using client security policy
Task: Register Financial Orchestration Third Party Transfer Pricing Service using URL and the Security Policy
Transfer Pricing Currency
Create Document and accounting rule
Currency Option : Selling node, Buying node, Source Document
A single physical movement of goods may involve multiple transfers of ownership
example : to achieve post tax revenues, lower cost and customer responsiveness
if we have sales order is created in US Business unit and Singapore as Sales office and manufacturing unit as China BU.
goods physical movement from china BU to customer in USA
Sales invoice by US BU, Inter company invoice by China BU to Singapore BU, Singapore BU to USA BU
4 ways of doing business
1. Global Procurement
Supplier send goods to ORG B
Sold BU as ORG A
Receiving BU as ORG B
internal invoice between ORG A and ORG B
Material Movement from ORG A to ORG C
Inter company invoice from ORG A to ORG B
Inter company invoice from ORG B to ORG C
3. Internal Drop Shipment
Shipping BU Org A
Selling BU Org B
Ship goods from ORG A to Customer
Invoice to Customer from org B
Inter company invoice between Org A and Org B
4. Drop shipment with shipment and procurement
Supplier ship goods to Customer
Sold BU Org A ( makes supplier payment )
Receiving and shipping BU as Org B
Selling BU Org C Invoice to Customer
Inter company invoice between Org A and Org B , Org B and Org C
Transfer pricing configuration
1. Static mark up percentage based on transaction cost or source document price
--- Use the task : manage Transfer Pricing
Markup percentage : numeric value
--Accounting transfer price - Transaction cost basis, Source document price
Select the rule in the the supply chain financial orchestration Flow
Functional orchestration Qualifier
usage is based on the parameter we can set the markup percent
parameters
Item
Ship from org
Ship to Org
User item type
item class
destination type etc.
based on the qualifier we can have the Transfer pricing rule
2. Pricing Strategy -- using Price list , using tier based discount, transaction Attribute of item, Source document price markup or discount
Create Pricing strategy with any user defined name
using the pricing strategy assignment
select as below
Assignment level : Line
Context - Material Transfer
Pricing Strategy - for a set of condition
Select Pricing Strategy option in the transfer pricing rule, Aggrement type : internal Material for the financial orchestration flow.
While defining the price of the item in the price list we can select the calculation method
Source document Cost : and we can add the markup or the discount to be applied
Cost -- then we need to upload the cost price in the pricing strategy for all the items
Note : we can not copy cost of the item to the price list may be used for Standard item and not supported for actual cost / average cost
Price -- then taken as the cost for the transfer price in the price list
using the manage pricing algorithm
name : Price material transfer -- we can achieve the below quantity based / attribute based etc.
we can use qty based tierd based discount
or item based attribute for the transnational attributes enabled ex: color of the shirt
3. Third party Pricing Service - Derive transfer price using the external service by using custom web service using client security policy
Task: Register Financial Orchestration Third Party Transfer Pricing Service using URL and the Security Policy
Transfer Pricing Currency
Create Document and accounting rule
Currency Option : Selling node, Buying node, Source Document
