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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.
(N): Setup > Financials > Flexfields > Key > Values
Defining Bank
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.
White Paper on AP/AR Netting Page 7
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 a contact for this bank account and complete the creation of bank account.
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:
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:
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.
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.
Click Here
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.
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.
- 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.
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