White Paper on R12 AP AR Netting[1]

White Paper on AP/AR Netting Page 1

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


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


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. 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. Organization B provides consultancy services. 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 Organization A is supplier to organization B to the extent of $ 100000 and is a Customer of Organization B to the extent of $ 60000. Now instead of paying a $ 100000 and getting back $ 60000 from the same person, 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. One may access this feature from either payables or receivables module.

http://www.oracleappshub.com/account-payable/r12-setting-up-for-apar-netting/


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): Setup > Financials > Flexfields > Key > Values

Define Netting Bank and Branch:


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. (N): Cash Management > Setup > Banks > Banks (N): Payables > Setup > Payment > Banks and Bank Branches (N): Receivables > Setup > Receipts > Banks

Defining Bank


Defining Bank Branch


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. Please note that unless the access is given to cash management in User Management responsibility, the legal entity could not be selected here while defining the bank account.


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.

Give the netting control account defined earlier as the cash account while defining account controls. It is important to choose yes from the list of values for the option Netting Account. When we choose yes the system would understand that this particular bank would be used for performing AP AR netting transactions.


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.

Specify a contact for this bank account and complete the creation of 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


Define Receivables System Options:

(N): Setup > System > System Options We need to enable the check box, “Allow Payment of Unrelated Transactions” as we are trying to net off unrelated transactions in payables and receivables module.


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

- 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. Netting agreements include the business rules that define the types of transactions that may be selected for netting, 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.


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.

Specify the netting bank account that you have defined earlier. 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. C. Networks (Customer)

Between the invoice types “Invoice” and “Standard” types respectively. 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, 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.

If all customers have a priority of 1, then there is no priority for selecting transactions and they are ordered based on the Netting Order rule.


Enter the trading partner names that you want to perform netting


Review the information entered till now and complete the creation of the agreement:

Now we are ready to perform the AP AR netting process, before we create a netting batch lets create AP Invoices and AR transactions that can be picked by the netting batch. While creating netting batch we specify the netting agreement name. 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.


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”


Enter receivables transactions:

Create AR transactions against the customer A. C. Networks


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, the request “Create Netting Batch” request gets submitted once you click on submit the batch.


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.” Click on “Update” and this would pick all the AP and AR invoices which match the criteria specified in netting agreement and netting batch


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”


Once the request “Settle netting batch” is completed with normal status the status of the batch would be complete. Now we would be able to view the final netting report. To view the final netting report click on the view report icon.

Click on run after specifying the template, language and Format, this would submit a concurrent request “Final Netting Report” whose output would look like the attached object below.

Click Here


Output of the “Final Netting Report”

final netting report.htm

- The netting process automatically creates the Payables payments and Receivables receipts required to clear a selected number of Payables and Receivables transactions.

- The Payables and Receivables transactions are selected and locked. 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. These transactions can only be locked after receiving the trading partner's approval.

Verify receivable payment

Receipt that got created against the netted invoices:


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. 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. Only the netting batches with a status of Complete can be reversed.

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. - 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.



Netting Batch Statuses:

Netting Batch Status

Event

RUNNING User creates the netting batch

SELECTED “Review Batch” Option is set to Yes

SUBMITTED “Review Batch” option is set to “No” and approval is required

SUSPENDED Current date has gone past batch settlement date

REJECTED User rejects batch requiring approval

CLEARING “Review Batch” options is set to “No” but no approval is required

COMPLETE Netting Process completed for transactions

ERROR Error encountered while validating, selecting transactions


APPROVED User approves batch reqioring approval

REVERSING User chooses to reverse the batch which is in complete status

REVERSED 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. You can view this report when the netting batch status is Selected, Submitted, Approved, Suspended, Rejected, or Cancelled. This report is also sent to the trading partner if the Trading Partner Approval required check box is selected when creating the netting agreement.

Final Netting Report:

The Final Netting Report is created at the end of the netting process after the transactions have

cleared. You can only view this report when the netting batch status is Completed. This report

shows the final netting details, such as the values for Payment, Receipt Number, and Netted

Amount.

FAQs on AP/AR Netting:

1) Can netting be done across operating units? - One cannot net transactions pertaining to separate operating units as we mention the

operating unit while defining the netting agreement.

2) What if I want to net the transactions in currencies other than functional currency? - I can perform netting between same currency transactions.

3) Can you update the netted receipts in the receipts work bench?

- No, Netted receipts cannot be update once the netting process is complete

4) Any profile options relating to AP/AR Netting?? - Not in general but for Japan installations JMF: Enable Chargeable Subcontracting

profile option.

5) Any approvals for netting batch from trading partner required - Trading Partner Approval Required - If you want to require approval by the trading

partner, check the check box. Checking the check box displays the required Approver Name list of values and the No Response Action dropdown list.

6) Do AP/AR transactions get locked while Netting is in process?


- Yes, the Payables and Receivables transactions are selected and locked. 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. These transactions can only be locked after receiving the trading partner's approval.

7) Can different suppliers and customers be selected for netting purposs?

- Yes this can be achieved

8) Payables invoice types that can be chosen for netting? - Standard - Credit Memo - Debit Memo - Mixed

9) Receivables invoice types that can be chosen for netting?

- Invoice - Credit Memo - Debit Memo - Chargeback


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

Documents

White Paper on R12 AP AR Netting[1]