Setup, Transaction Processing and FAQ’s on AP/AR Netting Release 12

White Paper on AP/AR Netting

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Table of Contents
Implementing AP/AR Netting: ...................................................................................................................... 4 Setups Required for AP/AR Netting: ......................................................................................................... 4 Define Netting Control account: ........................................................................................................... 4 Defining Bank ........................................................................................................................................ 5 Defining Bank Branch ............................................................................................................................ 6 Defining Bank Accounts: ....................................................................................................................... 7 Define a Netting Receipt Class: ........................................................................................................... 10 Define Receivables System Options:................................................................................................... 11 Transactions to be performed to Process AP/AR Netting: ..................................................................... 12 Create a netting agreement: ............................................................................................................... 12 Trading Partner Priorities: ................................................................................................................... 13 Enter payables invoice: ....................................................................................................................... 16 Enter receivables transactions: ........................................................................................................... 17 Create Netting Batch:.......................................................................................................................... 18 Output of the “Final Netting Report” ................................................................................................. 22 Verify receivable payment .................................................................................................................. 22 Verify payables payment .................................................................................................................... 23 Reversing the Netting Batch: .............................................................................................................. 23 Steps to “Reverse” the netting batch: ................................................................................................ 23 Netting Batch Statuses: ....................................................................................................................... 25 Standard Reports – AP/AR Netting: ........................................................................................................ 26 Proposed Netting Report: ................................................................................................................... 26 Final Netting Report: ........................................................................................................................... 26 FAQs on AP/AR Netting:.......................................................................................................................... 26

White Paper on AP/AR Netting

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In the current example organization A sold goods to organization B for a $ 100000 on credit and subsequently utilized organization B’s services to the extent of 60000 dollars. Now instead of paying a $ 100000 and getting back $ 60000 from the same person. Organization B provides consultancy services.R12: Setting up for AP/AR Netting What is AP/AR Netting? AP AR Netting Feature enables the automatic netting of Payable and Receivable transactions within a business enterprise. White Paper on AP/AR Netting Page 3 . Organization A can net-off to the extent of $ 60000 and only settle the balance $ 40000(receive) Now this process of settling the transaction is called as AP/AR Netting in Release 12. The netting process automatically creates the Payables payments and Receivables receipts required to clear a selected number of Payables and Receivables transactions. Example: Let’s say organization A deals in trading some items. One may access this feature from either payables or receivables module. Now Organization A is supplier to organization B to the extent of $ 100000 and is a Customer of Organization B to the extent of $ 60000.

(N): Setup > Financials > Flexfields > Key > Values Define Netting Bank and Branch: White Paper on AP/AR Netting Page 4 .Implementing AP/AR Netting:          Setups required for AP/AR Netting Transactions to be performed to execute AP/AR Netting Standard Reports relating to AP/AR Netting FAQs relating to AP/AR Netting Setups Required for AP/AR Netting: Netting Control Account (General Ledger) Netting Bank/Branch/Bank Account (Cash Management) AP/AR Netting Receipt Class (Accounts Receivable) System Options (Accounts Receivable) Netting Agreement(Accounts Payable or Accounts Receivable) Define Netting Control account: We need to define netting control account to use it as cash account while defining netting bank account in cash management. We don’t use the regular cash account because we are neither paying nor receiving the actual cash in reality. Only the balance amount would be settled in real cash. Netting control account is defined in General Ledger module.

(N): Cash Management > Setup > Banks > Banks (N): Payables > Setup > Payment > Banks and Bank Branches (N): Receivables > Setup > Receipts > Banks Defining Bank White Paper on AP/AR Netting Page 5 .Define a netting bank account in Cash management/Payables/Receivables to be used to settle the AP Invoices and AR Transactions that needs to be netted off.

Defining Bank Branch White Paper on AP/AR Netting Page 6 .

Please note that unless the access is given to cash management in User Management responsibility.Defining Bank Accounts: (N): Cash Management > Setup > Banks > Bank Accounts (N): Payables > Setup > Payments > Bank Accounts (N): Receivables >Setup > Receipts > Bank Accounts Specify the bank account owner (Legal entity) and the sources which would be eligible to use this bank account. White Paper on AP/AR Netting Page 7 . the legal entity could not be selected here while defining the bank account.

It is important to choose yes from the list of values for the option Netting Account. White Paper on AP/AR Netting Page 8 . Give the netting control account defined earlier as the cash account while defining account controls.Specify the details of the bank account also mention if this bank would be able to do transactions in multi currencies by checking the check box multiple currencies allowed. When we choose yes the system would understand that this particular bank would be used for performing AP AR netting transactions.

White Paper on AP/AR Netting Page 9 . Specify a contact for this bank account and complete the creation of bank account.Specify the operating units that would be using this bank account as well in each operating unit which source would be using this bank account.

Define a Netting Receipt Class: Defining a netting receipt class would allow the system to create a receipt for a netted AR transaction which is now recorded as received but where in no cash has actually been received or paid. While defining the netting receipt class specify the bank account defined in the earlier step. (N): Setup>Receipts>Receipt Classes White Paper on AP/AR Netting Page 10 .

White Paper on AP/AR Netting Page 11 . “Allow Payment of Unrelated Transactions” as we are trying to net off unrelated transactions in payables and receivables module.Define Receivables System Options: (N): Setup > System > System Options We need to enable the check box.

Netting agreements include the business rules that define the types of transactions that may be selected for netting.Proposed Netting Report .Final Netting Report  Verify payables payments  Verify receivables receipts Create a netting agreement: A netting agreement controls how a group of trading partners net Payables and Receivables transactions. You can create a netting agreement for each group of trading partners that agrees to net transactions. White Paper on AP/AR Netting Page 12 . and which suppliers and customers can be netted. Navigation to create a netting agreement: (N): Receivables > Receipts > Netting > Netting Agreement (N): Payables > Payments > Entry > Netting > Netting Agreement Click on “Create Agreement”  Specify to which operating unit does this netting agreement relates.Transactions to be performed to Process AP/AR Netting:      Create a netting agreement Enter payable invoices Enter receivable transactions Create and submit a netting batch Once the requests get completed view the .

Networks (Customer) Between the invoice types “Invoice” and “Standard” types respectively. White Paper on AP/AR Netting Page 13 .  Specify the netting bank account that you have defined earlier. C. then there is no priority for selecting transactions and they are ordered based on the Netting Order rule.  Choose “yes” if you want the system to select only past due receivable transactions  Choose one of the netting order rules:  Choose the required Netting balance rule  Choose the required Netting Currency Rule  Enter the Payable invoice types and Receivable transaction types:  In the example taken here we are trying to create the netting between 2 trading partners:  Advanced Network Devices(Supplier)  A. If all customers have a priority of 1. We can specify the sites among which the netting takes place and also we can also specify multiple suppliers or multiple customers in one netting agreement. One can enter any desired trading partner reference and if trading partner approval is required then check the check box “Trading Partner Approval Required” Once this is checked the system would ask us to input trading partner name and the response action if the approver has not responded within specific time. the priority for netting would be determined as below: Trading Partner Priorities: The priority value determines the order in netting transactions the customer transaction with the highest rank is netted first.

 Enter the trading partner names that you want to perform netting White Paper on AP/AR Netting Page 14 .

So only those transactions with the type specified in the netting agreement and which relate to the customer or supplier as mentioned while defining netting agreement would be picked by the netting batch when submitted for processing. Review the information entered till now and complete the creation of the agreement: Now we are ready to perform the AP AR netting process. While creating netting batch we specify the netting agreement name. before we create a netting batch lets create AP Invoices and AR transactions that can be picked by the netting batch. White Paper on AP/AR Netting Page 15 .

Enter payables invoice: Create supplier Invoices against Advanced Networks supplier. Here we are creating a supplier invoice for the trading partner “Advanced Network Devices.” The invoice number is “17-APR-2010” White Paper on AP/AR Netting Page 16 .

C. Networks White Paper on AP/AR Netting Page 17 .Enter receivables transactions: Create AR transactions against the customer A.

White Paper on AP/AR Netting Page 18 . the request “Create Netting Batch” request gets submitted once you click on submit the batch. To run the netting process create a netting batch: (N): Receivables > Receipts > Netting > Netting Batch (N): Payables > Payments > Netting > Netting Batch Create Netting Batch:  Once the Oracle Netting webpage opens. click on “Create Batch”  Specify  Netting Agreement name defined earlier  Settlement date batch name  Transaction date  GL date  Exchange rate type for other currency netting transactions and Submit the batch.

” Click on “Update” and this would pick all the AP and AR invoices which match the criteria specified in netting agreement and netting batch White Paper on AP/AR Netting Page 19 . After the request gets completed go back Netting Batch Webpage and query the netting batch created: Query for “demo_APARN” the batch status is “Selected.

After reviewing the transactions and optionally if trading partner approval is required after getting it. resubmit the batch and two requests would run”  Submit netting batch  Settle netting batch The status would change from “selected” to “clearing” White Paper on AP/AR Netting Page 20 .

language and Format. To view the final netting report click on the view report icon. Now we would be able to view the final netting report. White Paper on AP/AR Netting Page 21 . this would submit a concurrent request “Final Netting Report” whose output would look like the attached object below. Click Here Click on run after specifying the template.Once the request “Settle netting batch” is completed with normal status the status of the batch would be complete.

These transactions can only be locked after receiving the trading partner's approval. Verify receivable payment Receipt that got created against the netted invoices: White Paper on AP/AR Netting Page 22 . The Payables and Receivables transactions are selected and locked.htm - The netting process automatically creates the Payables payments and Receivables receipts required to clear a selected number of Payables and Receivables transactions.Output of the “Final Netting Report” final netting report. No updates are allowed to these transactions while netting is in process. Note: Receivables transactions cannot be locked during this step if trading partner approval is required or it is set to yes.

On reversing the netting batch it would return to the state it was in before the netting payment or the receipt was created for the batch.Verify payables payment Payments that got created against the payable invoices which got netted: Reversing the Netting Batch: - Netting batch which is with the status “Complete” can be reversed. The batch status would go from “reversing” to “reversed” And the payments and receipts gets reversed as well and the AP and AR invoices would be available for payment and collection respectively. Page 23 White Paper on AP/AR Netting . Steps to “Reverse” the netting batch: - Go to Oracle Netting Batch page from either payables or receivables Query the batch that needs to be reversed Click on the reverse icon The system would pop up a warning to confirm the reversal On confirming a concurrent request with name “Reverse Netting Batch” would get submitted. Only the netting batches with a status of Complete can be reversed.

White Paper on AP/AR Netting Page 24 .

Netting Batch Statuses: Netting Batch Status RUNNING SELECTED SUBMITTED SUSPENDED REJECTED CLEARING COMPLETE ERROR Event User creates the netting batch “Review Batch” Option is set to Yes “Review Batch” option is set to “No” and approval is required Current date has gone past batch settlement date User rejects batch requiring approval “Review Batch” options is set to “No” but no approval is required Netting Process completed for transactions Error encountered while validating. selecting transactions White Paper on AP/AR Netting Page 25 .

This report is also sent to the trading partner if the Trading Partner Approval required check box is selected when creating the netting agreement.Trading Partner Approval Required .I can perform netting between same currency transactions. Receipt Number. Rejected. You can view this report when the netting batch status is Selected. check the check box. Checking the check box displays the required Approver Name list of values and the No Response Action dropdown list.Not in general but for Japan installations JMF: Enable Chargeable Subcontracting profile option. Netted receipts cannot be update once the netting process is complete 4) Any profile options relating to AP/AR Netting?? . or Cancelled. FAQs on AP/AR Netting: 1) Can netting be done across operating units? . and Netted Amount.If you want to require approval by the trading partner. 6) Do AP/AR transactions get locked while Netting is in process? White Paper on AP/AR Netting Page 26 .One cannot net transactions pertaining to separate operating units as we mention the operating unit while defining the netting agreement. 5) Any approvals for netting batch from trading partner required . 3) Can you update the netted receipts in the receipts work bench? . Submitted.APPROVED REVERSING REVERSED User approves batch reqioring approval User chooses to reverse the batch which is in complete status Completed batch is now reversed Standard Reports – AP/AR Netting: Proposed Netting Report: The Proposed Netting Report contains the transactions selected for netting and it is created during the Create Netting Batch process.No. Approved. Suspended. 2) What if I want to net the transactions in currencies other than functional currency? . such as the values for Payment. You can only view this report when the netting batch status is Completed. Final Netting Report: The Final Netting Report is created at the end of the netting process after the transactions have cleared. This report shows the final netting details.

Invoice .Debit Memo .Standard .Yes this can be achieved 8) Payables invoice types that can be chosen for netting? . No updates are allowed to these transactions while netting is in process.Credit Memo . Note: Receivables transactions cannot be locked during this step if trading partner approval is required or it is set to yes.Mixed 9) Receivables invoice types that can be chosen for netting? .Chargeback White Paper on AP/AR Netting Page 27 .Debit Memo . the Payables and Receivables transactions are selected and locked. These transactions can only be locked after receiving the trading partner's approval. 7) Can different suppliers and customers be selected for netting purposs? .Credit Memo .- Yes.

AP/AR Netting in Release 12 (R12) Setup. Transaction Processing and FAQ’s on AP/AR Netting Release 12 April 2010 Author: Shilpa Koganti White Paper on AP/AR Netting Page 28 .

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