OpenWorld 2018 Banking on the Cloud Mahesh Vallampati Cloud ERP Consulting Manager North America Consulting North America Applications October 25, 2018.

OpenWorld 2018 Banking on the Cloud Mahesh Vallampati Cloud ERP Consulting Manager North America Consulting North America Applications October 25, 2018

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. |4/30/2019Confidential – Oracle Restricted2 Program Agenda Team Dynamics Bank Accounts Check Stock Address Format MICR and Fonts Bank Check Verification 1 2 3 4 Printers and Check Printing Positive Pay ACH File ISO 20022 XML V3 Format File Transmission to and from the bank Bank Statement Bank Reconciliation Considerations Foreign Currency Payments Timeline 5 6 7 8 9 10 11 12 13 14 15

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. |4/30/2019Confidential – Oracle Restricted4 Team Dynamics Bank TeamPayables TeamImplementation Team Each payment method has different systems and different resources on the bank side The Bank Project Manager and Coordinator is the facilitator for different resources across different payment platform The Customer Payables team has change management considerations The Customer Payables team will also own the solution after the implementation team and Bank Team have rolled off The nuances of the check document, the bank specific formatting considerations for ACH and Positive Pay, The Oracle specific considerations Skill levels of the team for BI Publisher tool and the flexibility of the Oracle Payment Process

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. |4/30/2019Confidential – Oracle Restricted7 Bank Account and Natural Accounts Assign a unique general ledger cash account to each bank account, and use it to record all cash transactions for the account. This facilitates book to bank reconciliation. Natural Accounts Cash AccountCash Clearing Account BOA Check Disbursement Bank ACCT #1 10501051 BOA ACH Disbursement Bank ACCT #2 10521053 BOA Wire Disbursement Bank ACCT #3 10541055 We also recommend a separate bank account for each type of disbursement to facilitate faster and better reconciliation. An example is given below:

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Check Stock 2 Section 3 Section Fold/Seal Z-Fold Tri-Fold Envelope Type Seal Confidential – Oracle Restricted Key Decisions for Check and Mail 4/30/201910

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | 2 Section Address Remittance [More commonly Used] [Remittance with Address Box] [More space for Remittances] [Minimize Fraud as check will not be visible] Check Stub [Measure from bottom of Stub] 3 Section Remittance with Headers Check Stub [Measure from bottom of Stub] Address Sample Check Stock layouts – 2 and 3 Section 4/30/2019Confidential – Oracle Restricted11

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | In AP Departments, where large number of checks are printed, they may have check stock that can be sealed, folded, postal stamped and mailed by a seal/fold machine The fold and seal machine cannot handle overflow checks as it can fold and seal one page only In that case, it is possible to set up the payment process to pay up to the number of invoices that can be printed on sheet of the check stock The downside is that we will have to make multiple payments The fold and seal machine also has some constraints on how the document/stock is laid out Fold and Seal Consideration 4/30/2019Confidential – Oracle Restricted12

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | In general, we do not recommend using the address on the check to be displayed in the address window of the envelope The check is scanned by the bank for supplier information and if the address has multiple lines, it can throw off the bank scan and also make the formatting of the check section harder On the check, we just recommend Supplier Name, Address Line 1, City-State-Zip on 3 lines to keep the formatting simple. On the address part of the remittance section, you can print the additional Address Lines using the post office standards. The formatting of the second, third and fourth lines add complexity to the check format report and testing should be done for all address line cases We recommend using the Remittance section for the address window on the mailing envelope to print the address line Address Section 4/30/2019Confidential – Oracle Restricted14

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | The US Post Office has guidelines for how to print addresses http://about.usps.com/publications/pub177/welcome.htm The link explains the approach The “Attn: John Doe” should be the first line The Business (Supplier) Name or the person name should be the next line The Address Line 1 should be the next line The City, State and Postal Zip code with the optional 4 zip should be on the next line Printing Address on Remittance 4/30/2019Confidential – Oracle Restricted15

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | All Caps Size 12 font OCR friendly font – Arial Black, Courier, Courier New, Tahoma Sample Address Format 4/30/2019Confidential – Oracle Restricted16 ATTN: POSTAL CUSTOMER ABC COMPANY 123 MAIN STREET ANYTOWN US 98765-4321

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | MICR is Magnetic Ink Character Recognition Elfring MICR Gauge can be procured to check the alignment of the MICR (https://www.elfring.com/MICR-gauge.htm)https://www.elfring.com/MICR-gauge.htm The MICR line has three elements – Check Number – Bank 9 digit routing number – Customer Disbursement Account Number in the routing bank The MICR has to align in the MICR gauge The MICR gauge can be procured on any of the e-commerce web sites Oracle Supplies a MICR font in the BI publisher that is accepted by banks that can be used MICR Gauge 4/30/2019Confidential – Oracle Restricted18

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | BI Publisher supports most of the standard fonts https://docs.oracle.com/middleware/12211/bip/BIPAD/GUID-1EBF6921-41D4-4DB7-90A3- BB0EF1FD534C.htm#BIPAD337 lists the fonts provided by BI publisher https://docs.oracle.com/middleware/12211/bip/BIPAD/GUID-1EBF6921-41D4-4DB7-90A3- BB0EF1FD534C.htm#BIPAD337 Out of the box, Oracle supports the MICR font, MICR MT (MICR____.ttf). MICR MT supports the E13B MICR font too. Customers can use the Oracle supported MICR MT font for printing checks in E13B font. Check Printing with MICR Fonts and Configuring Printer (Doc ID 1681859.1) is the support document that needs to be reviewed BI Publisher fonts and MICR 4/30/2019Confidential – Oracle Restricted20

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Banks have specific requirements on the format of the check document It is related to the scanning technology used at the banks using OCR So the check spec should be OCR friendly WHAT IS CAR/LAR/MCAR AND GETTING 100% ACCURACY? CAR/LAR/MCAR (Courtesy Amount Recognition, Legal Amount Recognition, Machine CAR) is the process by which recognition engines read the numeric and written values on a check or other payment document automatically so that operators do not have to key in most of the data. Since recognition is never 100% accurate, validation processes such as balancing must be used to supplement these engines to get to this goal. Bank Check Verification—Specs 4/30/2019Confidential – Oracle Restricted22

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | It is important to use the seeded BI Publisher format for the check format as a starting point and the MICR gauge to send the first draft to the bank for feedback The bank will provide feedback on specific layout areas like signature placement, amount placement box, name of supplier etc. It is important to understand that the test checks are sent to a scanner and an OCR Check is done and the better the OCR the better the success rate The OCR scanners at the bank are very powerful and intelligent but have some constraints on placement of various check elements Bank Check Verification 4/30/2019Confidential – Oracle Restricted23

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | We recommend at least 2 iterations with the bank – Use different amounts 0.01 to 0.99 1.0 to 9.99 10.00 to 99.99 And so on till the largest number for the check – Use Supplier names of different length The bank requires 25 checks for each verification So it is recommended to buy enough check stock samples and ensure the same check stock is procured for go live without any layout changes of any kind The banks have a lead time of 3-5 business days A lead time of at least 90-120 days before go live is recommended Your check should be approved by the bank 30 days before go live (at least) Bank Check Verification 4/30/2019Confidential – Oracle Restricted24

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | We recommend procuring two printers at the check printing location The printer should be of the same model and type The printer should be a network enabled printer The Printer should be a color printer The printer should be able to support a MICR ink cartridge We recommend a heavy duty printer We also recommend a high speed printer (20+pages a minute) We also recommend spread the printing load across the printers and do proactive maintenance of the printers Replace the cartridge at the first sign of the diagnosis sign on the printer dashboard These printers should be in a secure area with limited access other than trusted and vetted resources Printer Procurement 4/30/2019Confidential – Oracle Restricted26

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Configuring Printer in Cloud Document IDSupport Document Title 1964157.1Setup Instructions for Printing from Oracle Cloud 2140116.1Troubleshooting Guide For Cloud Printer 2120300.1How To Install End Point URL SSL Certificates In Default Fusion Truststore 2121015.1SRDC - Data Collection Request for Fusion Payments - Cloud Printing 551270.1Linux OS Service 'cups' 1903739.1IP Whitelist for Web Service Calls Initiated by Oracle Sales Cloud 4/30/2019Confidential – Oracle Restricted27

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Following the steps in the documents listed above and the supporting documents should let you print There are several steps to perform Some of the steps require SR’s and working with support and cloud Ops The network team, the IT support team need to work with the Oracle team to perform the steps A head start will go a long way in getting the task done on time Configuring Printer 4/30/2019Confidential – Oracle Restricted28

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Configure a UNIX or a Windows server as a print server Expose the printer as an ipp service on the web server of the print server with port 631 Have a firewall bypass for Oracle cloud to access the printer from Oracle cloud environment. Procure a certificate for the server from a cert provider and register the cert with Oracle Support Oracle Support can provide a white list The printer should be secured using a userid and password using the Basic or Digest authentication type and encryption type is SSL Configuring Printer 4/30/2019Confidential – Oracle Restricted29

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | The positive pay is a simple spec the bank requires to clear checks for disbursement when presented At a minimum, the positive pay file contains in each line – Check Number – Check Date – Check Amount – Payee Name (Optional but stronger verification and less fraud) The bank scans the check and looks at the “Pay to” on the check and tries to match it closely to the Payee name in the Positive pay file Positive Pay 4/30/2019Confidential – Oracle Restricted33

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | The positive pay file is a position delimited format file It is possible to write a series of simple excel functions to parse the positive pay file lines to verify the formatting as required by the bank The excel functions mid, left and right can be used to parse the file This will be a good check of the formatting done by the development team This file will have to be uploaded to the bank site for validation during testing The positive pay file will have to be validated in conjunction with the printed check stock by the bank Positive Pay File Validation 4/30/2019Confidential – Oracle Restricted34

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | The ACH File is an electronic file and is a variant of the NACHA format NACHA (National Automated Clearing House Association) There are a few variants of ACH File ACH, CCD and CCD+ and CTX are variants of these files These files have other features other than the standard money transmission The CCD plus format has an additional line with the payment that can be used to send to the supplier bank account as additional information ACH File 4/30/2019Confidential – Oracle Restricted36

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Oracle provides sample rtf files for standard ACH format files These files should be used as a starting point for development ACH Payment Transmission File is Out of Balance by $0.01 (Doc ID 1968701.1) is a known issue The rtf file should be modified to handle this per the document Two payments of 400 and 276.84 tally to 676.83 and not 676.84 This should be used as a test case and verified ACH File 4/30/2019Confidential – Oracle Restricted37

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | The ACH pay file is a position delimited format file It is possible to write a series of simple excel functions to parse the ACH file lines to verify the formatting as required by the bank The excel functions mid, left and right can be used to parse the file This will be a good check of the formatting done by the development team This file will have to be uploaded to the bank site for validation during testing ACH File Validation 4/30/2019Confidential – Oracle Restricted38

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | ISO 20022 is the emerging standard for payment file transmission ISO 20022 will be a required payment format for outsourced checks where the bank prints and mails the check ISO 20022 can be used a substitute for ACH and Positive Pay file transmission Most major banks support the XML V3 variant of the ISO 20022 implementation If possible, we recommend implementing this payment format ISO 20022 4/30/2019Confidential – Oracle Restricted40

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | SFTP is a standard approach to transmit files (ACH and Positive Pay) to the bank and also receive Bank Statement files in BAI2 format from the bank AS2 is an emerging standard for file transmission with the bank How To: Fusion Payment File Transmission Using SFTP Protocol (Doc ID 1901745.1) This support note contains an embedded word document that has several details on the implementation of the tasks One of the tasks is Proxy connectivity enablement and is listed in the next slide File Transfer 4/30/2019Confidential – Oracle Restricted42

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Once the bank provides connectivity, use a standard SFTP client to connect and verify the IP and credentials Ensure the bank whitelists the Oracle Cloud IP Connections so that the bank does not deny connectivity due to spurious IP Address concerns (SR with Oracle Support) SFTP Connections 4/30/2019Confidential – Oracle Restricted44

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. |4/30/2019Confidential – Oracle Restricted46 Bank Statement Formats IBAN Support From 17855962: – ISO20022 - supported version MX CAMT053.001.01, version CAMT053.001.02 to be support at some time in the future. – SWIFT (MT940) – BAI2 – EDIFACT (FINSTA) – In Europe, all banks will change to a Single Euro Payments Area (SEPA). The International Bank Account Number (IBAN) will be mandatory for all banking transactions in countries that use the euro. – SWIFT MT940 Bank Statement Format currently does not currently support IBAN. – Therefore this is an Enhancement Request, as agreed with Fusion Cash Management Development, for SWIFT MT940 to support IBAN. What Seeded Formats Are Available For Bank Statements (Doc ID 1372887.1)

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Currently, there are only two ways of uploading bank statements – Manual – BAI2 format How To Upload Bank Statements Using Spreadsheet (Doc ID 2033808.1) indicates it is not possible to use spreadsheets to upload bank statements It is fairly easy to import bank statements from the bank to Oracle Cloud ERP if connectivity has been established for ACH and Positive Pay Automatic Bank Statement File Import for Cash Management Cloud Service (Doc ID 2109691.1) lists the steps to connect to the Bank and download bank statements Bank Statements use the SFTP get protocol to get data from the banks Bank Statements 4/30/2019Confidential – Oracle Restricted47

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Oracle Supports only one Bank Statement per bank account per day How To Load 2 BAI2 Bank Statements For Same Day? (Doc ID 2219156.1) This note clearly mentions if a bank provides different Bank Statements for ACH and Checks for the same bank account, they will have to be merged offline and imported into the system For ease of reconciliation, an account for checks and an account for ACH is recommended. A separate account for wires will facilitate wire reconciliation as well as these tend to be large amounts Bank Statements 4/30/2019Confidential – Oracle Restricted48

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | It is essential that your bank provides a BAI2 file for activity for a date range. Most commercial banks in the US provide this feature Some smaller banks and credit unions may provide a csv file which will have to be transformed to a BAI2 file A good understanding of the BAI2 file is essential for processing Bank Statements Bank Statement Files, Transaction and Balance Codes Explained (Doc ID 1407463.1) is an essential guide Bank Statements 4/30/2019Confidential – Oracle Restricted49

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | CE (the abbreviation used internally ERP Cloud Financials Cash Management) is designed to facilitate book- to-balance reconciliation, and provide accurate cash position and short-term cash forecast information – CE automatically maintains a cash sub-ledger with copies of all bank-relevant transactions from all other ERP Cloud and interfaced external system transactions (in R13 GL journals can also be used as an automated source) – Bank statements are automatically downloaded to CE and automatically reconciled against those transactions using standard bank statement download functionality and related automatic reconciliation rules – GL transactions are automatically generated to the associated GL cash account and a GL-to-CE reconciliation report confirms everything is in balance The best method that achieves book-to-balance reconciliation when a 1-to-1 relationship between GL accounts and bank accounts is maintained By maintaining a dedicated 1-to-1 relationship between GL accounts and bank accounts, a book balance by bank account is always available—this is one of the reasons we recommend a 1-to-1 relationship Bank Reconciliation Considerations 4/30/2019Confidential – Oracle Restricted51

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. |4/30/2019Confidential – Oracle Restricted53 Foreign Currency Payments Bank Exchange Rates – Every country receiving or sending payments has rules on what additional information needs to be tagged in the payment format – For e.g. sending payments from the US to Russia needs additional information that will and may have to be notified to the FBI and IRS – Payments above $10,000 trigger all kinds of red flags – Banks will charge a different rate than what is expected by the system – This impacts Realized Gains and Losses accounts in Payables and Receivables – We recommend extensive testing of the process Foreign Currency Payments add another layer of complexity

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. |4/30/2019Confidential – Oracle Restricted54 Foreign Currency Payments Bank Electronic Payment Formats – If there are only few currency payments, we recommend using the bank wire systems to make the transfers – It is faster and the bank payment system will ensure that all relevant information is collected – These wires can be then recorded in the system – This can get very complex as each from and to country combination has to be developed – The invoices then have to be separated and paid from a different paygroup Wires

Copyright © 2018, Oracle and/or its affiliates. All rights reserved. | Typically Bank Integrations tend to go to the wire We recommend starting early Use Cloud ERP Implementations to rethink your bank, bank account and bank document strategy – Changing Bank – Book to Bank Account Strategy – Outsourcing check printing or eliminating checks altogether The engagement contract with the bank takes time Plan on finishing Bank Integration by end of SIT Confidential – Oracle Restricted Timeline 4/30/201956

OpenWorld 2018 Banking on the Cloud Mahesh Vallampati Cloud ERP Consulting Manager North America Consulting North America Applications October 25, 2018.

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OpenWorld 2018 Banking on the Cloud Mahesh Vallampati Cloud ERP Consulting Manager North America Consulting North America Applications October 25, 2018.

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