Internal Trade

Internal trade is the buying and selling of goods or services between departments of the University (including St Cross and Kellogg colleges). Where the most appropriate supplier of ad-hoc goods/services is identified as another University department, the internal trade process should be followed, unless there is a specific alternative system in place (e.g. Planon).
There are two main methods of processing transactions:

internal trade process diagram

Internal trade via the purchase to pay process (Overview)

Internal trade purchasing is managed through Oracle. The buying department raises a purchase order as it would when purchasing from outside the University. The selling department raises an Accounts Payable invoice instead of an Accounts Receivable one.

Expand All

1.  Agree details
If the selling department does not have a catalogue listing, it is important to agree the following between both departments before raising the requisition (if there is a catalogue, this will contain all relevant details):

  • Quantity and unit of measure required
  • Availability
  • Price

2.  Create requisition and submit for approval

Internal trade purchases should be made by creating a requisition or blanket PO in iProcurement following the normal P2P process. The internal supplier can be selected from the list of values displayed in Oracle Financials; alternatively, the Internal Trade Suppliers   (XLS) report can be used.

The approved Purchase Order will automatically be submitted electronically (by email) to the selling department.

3.  Receive, check & receipt goods or services

As with external purchases, it is important to check the item/service(s) is exactly as ordered and as shown on the Purchase Order.  The quality and quantity of physical items should be checked, and any items to be returned managed appropriately - see Managing Issues (below) for details.

Receipting in Oracle for an internal requisition is the same as for an external requisition. Refer to Receive/Reject Goods or Services  in the P2P process for further details.

4.  Manage purchases

Open Purchase Orders must be managed by the buying department (as with external trade). Information is available via the Open POs report. This can be used to track open POs, and identify whether the goods have not yet been received or if the invoice is outstanding. 

Invoices on hold are managed by the buying department (as with external trade). The Invoices on Hold report can be used to track invoices on hold and identify reasons why the invoice is on hold.
 

1.  Agree details
If you do not have a catalogue listing, it is important to agree the following between both departments before the buying department raises the requisition (if there is a catalogue, this will contain all relevant details):

  • Quantity and unit of measure required
  • Availability
  • Price

Note: The price may include un-reclaimed VAT, but MUST NOT include a profit element for the selling department. 

2.  Check purchase order
When a purchase order is received, check that it includes:

  • Clear buying department contact details
  • Agreed quantity, unit of measure and price

If the item(s) is/are no longer available, it is important to contact the buying department so that they can cancel the Purchase Order.  If any details are missing, or the details are not as agreed with the buying department, you should return the Purchase Order to the buyer with an explanation.

Note: If your department does not currently receive email notifications for internal trade orders, this option should be set up via the Helpdesk. The notifications should be sent to a generic email address, which can be accessed by an individual or group of users e.g. orders@dept.ox.ac.uk.

3.  Provide goods/service
It is important that the goods/services are supplied exactly as per the Purchase Order.  If there are any differences, these should be investigated before delivery.

4.  Generate & match Payables invoice

Departments Raising Invoices: the invoice is raised within the internal trade responsibility in Oracle. An invoice header should be created, and matched to the purchase order. Then an additional revenue line must be added.  This will code the selling departments' revenue. Refer to the 'Add the Revenue Line to an Internal Trade Invoice' helpsheet in the Internal Trade section of the online 'How to' portal. Any invoices raised must equate to zero and be properly validated to prevent future open invoice issues.

Centrally raised invoices: for departments who do not enter Payables invoices and have an agreement with the Finance Division Payments Team to do this on their behalf, an Internal Trade Invoice Request Form   (XLS) should be completed and submitted it to the Payments team

Please refer to Accounting principles for recharges for information on coding.

 

Where goods/services are not acceptable, the buying department should segregate the rejected items, contact the selling department and, in the case of goods, arrange their collection/return.  

Depending on the situation, the selling department may or may not need to raise a credit note:

1. Unacceptable goods/services are going to be replaced like for like:

  • There is no need for a credit note to be raised.
  • Replace the goods/services as agreed.

2. Unacceptable goods/services are not going to be replaced, but the Payables invoice has not yet been raised:

  • Notify the buying department that there is no invoice to be credited.
  • The buying department should amend/cancel requisition lines as appropriate. The requisition may also need to be re-approved.

3. Unacceptable goods/services are not going to be replaced, and the Payables invoice has already been raised:

  • If the invoice and quantity of acceptable goods match, notify the buying department that the requisition will need to be amended.
  • If they do not match, raise a credit note for the unacceptable goods/service and notify the buying department to amend/cancel requisition lines as appropriate.

Regular recharges for goods/services can be dealt with via journals.  Where the quantity and price is the same, or is non-negotiable (i.e. due to external recharging for e.g. telecoms, utilities) each month for at least 3 months, internal trade should be managed via journals which can be initiated by either the selling or buying department depending on the nature of the transaction.

Examples of regular trading or recharges are:

  • Rental of office space
  • Recharging of utilities’ costs and rental
  • Security and maintenance services
  • Annual software licenses or computing services

1.  Agree details

To initiate the transaction, the cost and volume should be agreed in advance.  Where the cost or volume is an estimate or is likely to vary, it should be within a pre-agreed tolerance level, to ensure department budgets are controlled.

An Internal Trade Recharge Form   (XLS) must be competed (by either the buying or selling department as agreed).

The form must be authorised by an appropriate delegated authority (Head of Administration or their agreed senior officer) within the department and a copy of the form retained for future reference.  

The approved recharge form should be submitted to the other trading department and authorised.

 

2.  Journal submission

Generally, each month the selling department completes the relevant journal spreadsheet with the month’s transaction(s) and submits it to their Divisional Office who will upload and post the journals as required. Estates Services is the exception and posts journals to departments directly (eg utilities recharges).

The choice of journal spreadsheet depends on whether the expenditure is coded to a project or general ledger cost centre.

Please refer to Accounting principles for recharges for information on coding.

The Divisional Office will check the spreadsheets for the following:

  • Activity 33 used in both debits and credits for all lines.
  • The agreement number from the internal trade recharge form or appropriate contract and a short description are included in the journal line description or comment field.
  • Journal name is consistent to University naming convention.
  • Expenditure Type is correct (for Project journals).
  • Organisation and Account codes are correct.

All journals will be automatically validated before uploading to ensure the project or General Ledger code combination is valid.  If there are any errors, the spreadsheet will be returned to the department to correct and must be returned in time to post before the month-end closure.
 

Heads of Administration for both buying and selling departments have overall responsibility for ensuring that goods and services purchased and sold internally are properly controlled and that all internal trades are reconcilable.

Identified below are the key financial controls that must be complied with.

  1. The key controls from the Purchase To Pay process must be assessed as a whole in respect of the purchase of internal trades.
  2. If purchasing internal trades, clear and specific Oracle purchase orders must be raised and sent to the selling department before the goods are received or services provided.
  3. If supplying internal trades, details of the goods/services must be confirmed and acknowledged to the buying department, and input into Oracle Financials Payables.

Contact us


 : Purchasing Department
       Finance Division
       University of Oxford
       23-38 Hythe Bridge Street
       Oxford OX1 2ET

 purchasing@admin.ox.ac.uk
 :  01865 (6) 16022

 : For further information
      please contact the
      Purchasing Department  
 
1 Start 2 Complete
List of site pages