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Do you need to know about EMD – Earnest Money Deposit in Oracle Sourcing

Posted on August 6th, 2015 by Sanjit Anand ||Email This Post Email This Post

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Do you know , Earnest Money Deposit (EMD) is a payment/deposit that suppliers are required to make to a buying organization in order to be eligible to participate in a Sourcing negotiation.

EMD is very common in Public Sector companies and Government organizations and in certain global markets, particularly in APAC and EMEA.

The EMD amount is decided by the buying organization and all suppliers (except those who are exempted based on organization specific business rules) are required to pay the EMD amount in order to participate in the negotiation process (RFQ, Auction).

The EMD amount is retained by the buying company untill the negotiation is closed. After the negotiation is closed (or awarded), the EMD amount is refunded to the suppliers, except in a case where the supplier has not conformed to the rules of the negotiation, the EMD amount can be forfeited, that is, the buying organization does not return the amount to the supplier and keeps it as a penalty charge.

Oracle Sourcing provides a complete end-to-end EMD functionality, which contains an automated EMD flow: the flow captures the process of receiving, refunding/forfeiting and updating the journal entries.

Oracle Sourcing supports the following EMD types that a supplier can pay to the buying organization:

  • Direct Payment: The supplier can pay the EMD amount using Cash, Check, or Demand Draft payment types.
  • Corporate EMD: The supplier can deposit a large amount with the buying company and the EMD is adjusted against this amount.
  • Bank Guarantee: The supplier’s bank creates a bank guarantee document that is used to inform the buying organization that the supplier can make the EMD payment if required to do so.

An out-of-the-box integration is available with Oracle Financials, so that the receipt, forfeit, and refund of EMD can leverage Oracle Receivables and Oracle Payables. For customers, not using Oracle Financials, there is a non-integrated EMD deployment process where the company can still use the EMD feature in Oracle Sourcing.


The Earnest Money Deposit solution for Oracle Sourcing has a number of advantages

  • The requirement of deposit ensures that all the suppliers participating in the negotiation are very serious about their participation. This acts as a process of supplier qualification and filtering and makes sure that there are no suppliers who are not very keen or interested in the contract
  • The option of forfeiting the EMD amount compels the suppliers to completely adhere to the negotiation rules and process and substantially reduces the occurrences of misleading response information
  • Meets the regulatory requirements of Government organization
  • The system will have an automatic integration with Oracle Financials for receiving, refunding and forfeiting the EMD amount
  • EMD information is captured and stored for future audit and references purposes


To integrate with Accounts Receivables and Accounts Payables, set up the following in Oracle Financials:

  • Profile Option: Using the System Administrator responsibility set the value of the profile option AR: Deposit Offset Account Source as Transaction Type at the site and responsibility level.
  • Flexfield Segments: Using the Receivables responsibility, navigate to (N) Setup >Financials > Flexfields > Descriptive > Segments. Click the Find icon to search for and display the Receivables Line Transaction Flexfield. The Context Field Values region will display EMD Transactions in the Code column.
  • Transaction Types: Using the Receivables responsibility, navigate to Receivables > Setup > Transactions > Transaction Types. Enter information to setup the following transaction types: EMD Deposit, EMD Credit Memo and EMD Invoice.
  • AutoAccounting: Navigate to Receivables > Setup > Transactions > AutoAccounting and select the operating unit. Search for the Type with a value of Revenue. In the Segment column, the Accounts row should have a value in the Table Name column.
  • Sequential Numbering: Using the System Administrator responsibility, navigate to Application > Sequential Numbering > Assign > (T) Document.Assign sequential numbering to the EMD entities.
  • Batch Source: Using the Receivables responsibility, navigate to Setup > Transactions > Sources > (T) Batch Source to set up a batch source.
  • Payment Terms: Navigate to (N) Receivables > Setup > Transactions > Payment Terms. Create a new payment term.
  • Receipt Class: Using the Receivables responsibility, enter the Receipt Class. Navigate to (N)
    • Receivables > Receipts > Receipts Classes.
  • Receivable Activity: Using the Receivables responsibility, navigate to (N) Receivables > Setup > Receipts. > Receivable Activities. Enter the Receivable Activity information.

If you are not integrating the EMD functionality with Oracle Financials, navigate to the Administration page and specify an operating unit that will not be used with Financials.

Ensure that the Enable Integration with Oracle Financials checkbox is not selected.

However, you must enter the Receivables Payment Type region. Currently the Payment Types of Cash, Check and Demand Draft are supported.


You can refer to Oracle Sourcing – Implementation and Administration Guide and Check the section Set Up Earnest Money Deposit

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