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ORACLE APPLICATIONS WHITE PAPER AP/AR NETTING – A TECHNICAL INSIGHT AUGUST 2008
Contributor: Shanmuga Senapathy, AP Support
AP/AR Netting – A Technical Insight Contents Introduction Objective Scope Background What is AP/AR Netting? How it worked before R12? How does it work in R12? What are the Setup Steps involved? How Netting batches are created? What happens when we submit a Netting Batch? How Netting Batches are settled? What are various Netting Batch Statuses? What are the tables involved? How these tables are linked? Summary Information Source 3 3 3 2 4 5 6 7 9 12 13 15 16 17 18 18 2 .
3 .AP/AR Netting – A Technical Insight Introduction Objective To provide a technical insight into Oracle AP/AR Netting with hopes of giving the reader a good understanding of the different setups involved. it will also provide a functional insight of this functionality. Background The Oracle AP/AR Netting is a feature that provides a foundation to create netting agreements with flexible definition of business rules and association of trading partners. It executes an automated netting process so that customers can reduce their debt obligations without incurring bank charges by creating unnecessary payments and receipts. This paper is written with the intention of helping implementers and those supporting the application to under how Netting works. Scope Even though this paper is written to cover the technical aspects of Netting.
After establishing a netting agreement with such trading partners. Below is a conceptual diagram of how this works. then rather than him paying you and then you paying him. For example. AP/AR netting allows you to pay the net difference between how much you owe the supplier and how much he owes you. 4 . If you have a customer who is also your supplier. you set up the agreement and the rules associated with it in eBusiness Suite and you can then start to net AP and AR transactions.AP/AR Netting – A Technical Insight What is AP/AR Netting? Oracle AP/AR Netting allows you to net your Payables invoice balances against your Receivables invoice balances for those Customers who are also your Suppliers.
5 . US Federal Financials Netting This solution specifically addresses the needs of US requirements. but then it became a Regional Globalization feature in Release 11i. Each of those features has a migration path to the Release 12 Netting feature. which means Contra-Charging and US Federal Financials Netting are all replaced by this solution. there were several netting solutions in the eBusiness Suite: Contra-Charging This Globalization feature was originally a solution for Germany in Release 11.AP/AR Netting – A Technical Insight How it worked before R12? Prior to Release 12. AP/AP Netting has become "core" functionality and is the only netting solution available. In Release 12.
6 . which is attached to this white paper. We will be discussing in depth as you scroll down. I also recommend that you walk through the additional simulation sheet.AP/AR Netting – A Technical Insight How does it work in R12? Here is the conceptual diagram behind the Netting Engine.
the approver must be set up as a contact for the trading partner (Customer / Supplier). • Netting batch approver If approval is required for a netting agreement. if you want to create netting agreements across multiple unrelated customers. 7 . The contact must be setup with an email address. Assign this bank account to the seeded Receivables receipt class “AP/AR Netting” • Receivables System Options Check the “Allow payment of unrelated transactions” checkbox under the Receivables system options. which can be used by the netting process. Set the Netting Account flag to yes.AP/AR Netting – A Technical Insight What are the Setup Steps involved? In Brief • • • • • Netting Bank Account Receivables System Options Netting batch approver Chargeable Subcontracting Netting Agreement In Detail • Netting Bank Account Create a Bank Account.
8 . Note: The complete setup steps. No – This will select invoices that were matched to purchase orders without outsourced assemblies by the netting process.AP/AR Netting – A Technical Insight • Chargeable Subcontracting When the Profile option “Chargeable Subcontracting Enabled” is set to: Yes – This will select invoices that were matched to purchase orders with outsourced assemblies by the netting process. including screenshots can be found in the attached simulation sheet. • Netting Agreement Create netting agreement to setup the rules that will decide which transactions are selected for netting and how they are ordered and processed once selected. D (disregard) – This means all eligible invoices will be selected for netting irrespective of whether or not they are matched to purchase orders.
9 . and how they are ordered for netting. The following diagram will depict how invoices are ordered and selected for creating a netting batch.AP/AR Netting – A Technical Insight How Netting batches are created? Let’s have a look at how Netting batches are created. In the following sections. we will discuss what criteria are used for selecting AP Invoices and AR Transactions.
Checkrun_Id for the given batch Criteria used for Selecting AR Transactions: • AR Payment Schedule due date must be less than or equal to transaction date mentioned in Netting.AP/AR Netting – A Technical Insight Criteria used for Selecting AP Invoices: • Transaction due date must be less than or equal to AP scheduled payment due date. • AR payment schedule date should be between the Agreement Start Date and end date. • Invoices must be approved • Invoices must not be on Hold • Invoices that have already been included in a batch that is not yet in status ‘Complete’ are not included. • Only invoices for the Supplier and supplier sites (if specified) in the agreement are selected. • Only transactions with the selected transaction types in the agreement are included. • Operating unit of the transactions must be the same as the operating unit of the batch. • Transactions must be complete • Only Transactions for customer and customer sites (if specified) in the agreement are selected.Checkrun_id Column for the selected invoices o The same Checkrun_id value is populated in FUN_NET_BATCHES. • Only invoices with the selected invoice types in the agreement are included. • Locking AP invoices: o Selected AP invoices are locked by populating AP_PAYMENT_SCHEDULES. • Operating unit of the invoices must be the same as the operating unit of the batch. • AP scheduled payment due date must be between the Netting Agreement Start Date and End Date. 10 .
• The priority is important as this determines which transaction/invoice will be netted first.PREPAYMENT_FLAG = ‘N’) Criteria used for ordering the transactions: • Invoices and transactions are first ordered by Supplier and Customer priority associated in the agreement. • They are then ordered by Netting order rule selected in the agreement.AP/AR Netting – A Technical Insight • Transactions that have already been included in a batch that is not yet in status complete will not be included in the new batch. • The Receipt method associated with the transaction should not have a Payment_type_code = ‘CREDIT_CARD’ • Transaction must not be in dispute • Payment schedule status must be open • Transaction must not be a prepayment (RA_CUSTOMER_TRX. 11 .
it is sent for approval. if approval is required. • If the batch has passed all validations. • AP and AR balances for transactions are validated again. It is also possible that the batch may have been modified. • If the current date has passed the batch settlement date.AP/AR Netting – A Technical Insight What happens when we submit a Netting Batch? The following validations are performed when a netting batch is submitted. as there might be a time lag between when the batch is created and when the batch is submitted. If the validation fails then the batch is set to status ‘ERROR’ and the AP invoices are unlocked. else the settle Netting batch process is initiated. then the batch is set to status ‘SUSPENDED’ and the AP invoices are unlocked. 12 .
o Validations are also performed to check whether the GL. If not.bank_account_id for the given batch. the batch is set to Cancelled Status.AP/AR Netting – A Technical Insight How Netting Batches are settled? • Validation o The process starts off with the validation of AR transactions. 13 . then the batch is set to status ‘ERROR’ and an error message is displayed in the Report log. and AP periods are open for the batch settlement date. bank account owner and number are derived based on the FUN_AGREEMENTS. • Derive Netting Bank Details o Netting bank details like bank account name. AR. This is necessary as the AR transactions are not locked when the netting batch is created and therefore there is a possibility that the AR transaction may have been modified since it was included in the netting batch o If any validations fail.
14 .RECEIPT_ID o If all processing goes through successfully then the batch is set to COMPLETE and the AP invoices and netting agreements are unlocked.AP/AR Netting – A Technical Insight • Settle AP invoices o Invoices in each batch are grouped by vendor.Check_ID • Settle AR transactions o AR receipt APIs are called to create and apply the receipts. These APIs return the receipt id which is updated in FUN_NET_AR_TXNS. These APIs return the check id which is updated in FUN_NET_AP_INVS_ALL. o AP payment APIs are called to process the payments. vendor site and invoice currency code.
Batch has been reversed User approves batch requiring approval Netting process completed for transactions User chooses to reverse the batch Batch has been reversed 15 . Review batch option is set to NO and approval is required.AP/AR Netting – A Technical Insight What are various Netting Batch Statuses? Netting Batch Status RUNNING SELECTED ERROR SUSPENDED CLEARING SUBMITTED REJECTED APPROVED COMPLETE REVERSING REVERSED Event User creates the netting batch Review Batch option is set to YES Error encountered while validating or selecting transactions Current date has gone passed the batch settlement date Review batch option is set to NO but no approval is required.
AP/AR Netting – A Technical Insight What tables are involved? AP/AR Netting engine is owned by ‘Oracle Financials Common Modules’ (FUN) Product. Information related to Netting is stored in the following tables: Table Name Table Purpose FUN_NET_AR_TRX_TYPES_ALL Netting Agreement – Transaction types of AR FUN_NET_AP_INV_TYPES_ALL Netting Agreement – Transaction types of AP FUN_NET_AGREEMENTS_ALL Netting Agreement – Details FUN_NET_SUPPLIERS_ALL Netting Agreement – Supplier Details FUN_NET_CUSTOMERS_ALL Netting Agreement – Customer Details FUN_NET_BATCHES_ALL Netting Batch – Details FUN_NET_AR_TXNS_ALL Netting Batch – Details of AR transactions FUN_NET_AP_INVS_AL Netting Batch – Details of AP invoices 16 . All tables behind the scene will be stored under the FUN schema.
AP/AR Netting – A Technical Insight How these tables are linked? Here is the Entity Relationship Diagram (ERD) for AP/AR Netting. 17 ..
7200 www.oracle.S. Information Source Oracle® Payables User's Guide Release 12 Part No. without our prior written permission.650. This document may not be reproduced or transmitted in any form or by any means. Oracle. nor subject to any other warranties or conditions. whether expressed orally or implied in law. including implied warranties and conditions of merchantability or fitness for a particular purpose. It executes an automated netting process so that customers can reduce their debt obligations without incurring bank charges by creating unnecessary payments and receipts.7000 Fax: +1. B25454-03 AP/AR Netting – A Technical Insight August 2008 Contributor: Shanmuga Senapathy Oracle Corporation World Headquarters 500 Oracle Parkway Redwood Shores. This document is provided for information purposes only and the contents hereof are subject to change without notice. Oracle is a registered trademark of Oracle Corporation and/or its affiliates.A.506. for any purpose. We specifically disclaim any liability with respect to this document and no contractual obligations are formed either directly or indirectly by this document.506. electronic or mechanical.com Copyright © 2008. This document is not warranted to be error-free. Worldwide Inquiries: Phone: +1. CA 94065 U.AP/AR Netting – A Technical Insight Summary The Oracle AP/AR Netting feature provides a foundation to create netting agreements with flexible definition of business rules and association of trading partners. 18 . Other names may be trademarks of their respective owners. All rights reserved.650.