AP/AR Netting

Setting Up Contra Charging Feature in

Oracle Payables and Oracle Receivables

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 TABLE OF CONTENTS

1. EXECUTIVE OVERVIEW.........................................................................................3
2. REFERENCE..............................................................................................................3
3. SCOPE.........................................................................................................................3
4. SETUP.........................................................................................................................3
a) Setup in System administrator:................................................................................3
i. Define Document sequence.................................................................................3
ii. Define Document Category.................................................................................4
iii. Define Assignment for Contra.........................................................................4
b) Setup in AP..............................................................................................................5
i. Create Supplier and Supplier Site........................................................................5
ii. Create New Payables lookup for contra charging...............................................5
c) Setup in AR..............................................................................................................5
i. Create Customer..................................................................................................5
ii. Define Credit Memo Transaction type................................................................6
iii. Define Transcation Source..............................................................................6
iv. Define Auto Accounting......................................................................................6
d) Attaching Contra Charging Form............................................................................7
5. NETTING AP AND AR BALANCES FOR A PARTICULAR SUPPLIER AND
CUSTOMER........................................................................................................................8
Simulation steps...............................................................................................................8

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1. EXECUTIVE OVERVIEW
When you do business with a company that is both your supplier and your customer, you
can apply your accounts payable to your accounts receivable for that company to
determine the net balance that is owed. The Suppliers balances and the Customers
balances cannot be set-off in the normal applications. Contra charging feature allows for
credit memos to be created in AP and AR, based on the amount you mention after having
a look at the balances of the organization on the Supplier Side and the Customer Side.
This paper describes how, within the Oracle e-Business Suite, you can use the Contra
Charging Feature between Oracle Payables and Oracle Receivables to offset your
supplier balance against your customer balance

2. REFERENCE

This paper is intended to supplement the following reference materials, which should also
be studied for a full understanding of the topic.
Oracle Payables User Guide
Oracle Recevables User Guide
Oracle Financials Common Country Features User Guide.

3. SCOPE

The scope of this document is to walk through the basic setup of Contra charging feature
in Oracle Payables and Oracle Receivables.

4. SETUP

a) Setup in System administrator:

i. Define Document sequence

You can assign a unique document sequence to each invoice and payment
document in your Payables system so you have a unique identifier for each
document. For example, you may get two invoices with identical invoice numbers
from two different suppliers. If you assign a document sequence to each, you can
locate each invoice based on its unique document sequence number/ Voucher
Number.

Voucher numbers provide proof of completeness. If you use sequential voucher

numbers, you can confirm that no document has been lost. Even if invoices or
payments are deleted, each voucher number retains audit records. You can also

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 maintain an audit trail because you can trace a journal entry back to the original
document in Payables.

When setting up document sequencing, you select a set of numbers, called a

sequence, which you will assign to a type of document. The type of document is
called a document category. For example, you may decide to assign the sequence
of numbers to a document category of Credit Memo Invoices. Then, each Credit
Memo you create will have a unique voucher number. Specifying the sequence
that will be assigned to a category is called assignment.

You have to define two document sequences. One for AP and other for AR as the
Contra source Credit memos will have a unique Document sequence to identify
them based on this document sequence.

When creating the document sequence set the automatic document sequence
method.

ii. Define Document Category

A document category is a set of documents (invoices or payments) that share

similar characteristics. You can assign a single document sequence to one or more
document categories

Use the Document Categories window to set up document categories for your
contra invoices in both Oracle Payables and Receivables. You can use document
sequence numbering with the invoices that are created through the Contra
Charging Invoice Interface.

While Creating Document Category for Payables, Use the AP_INVOICES_ALL

in the Table Name Field. Similarly, Create document category for Receivables
using RA_CUSTOMER_TRX_ALL table name field

iii. Define Assignment for Contra

Use assignment window in System administartor responsbility to attach the

document category with the document sequence created for contra charging
invoices.

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b) Setup in AP

i. Create Supplier and Supplier Site

Set up suppliers in the Suppliers window to record information about individuals

and companies from whom you purchase goods and services. You can also enter
employees whom you reimburse for expense reports. When you enter a supplier
that does business from multiple locations, you store supplier information only
once, and enter supplier sites for each location. You can designate supplier sites
as pay sites, purchasing sites, RFQ only sites, or procurement card sites. Most
supplier information automatically defaults to all supplier sites to facilitate
supplier site entry. However, you can override these defaults and have unique
information for each site.

The system uses information you enter for suppliers and supplier sites to enter
default values when you later enter transactions for a supplier site. Most
information you enter in the Suppliers window is used only to enter defaults in the
Supplier Sites window. When the system enters that information in a later
transaction, it only uses supplier site information as a default, even if the supplier
site value is null and the supplier has a value. If you update information at the
supplier level, existing supplier sites are not updated.

For Contra example, you can create a Supplier and Supplier Site with Pay Site
Enabled. This Supplier Pay Site will be used to raise the Supplier Invoices.

ii. Create New Payables lookup for contra charging

A lookup is any predefined value that was not defined in a setup window. Use the
Oracle Payables Lookups window to review and maintain sets of values, or
lookups, that you use in Payables. Use the Oracle Payables Lookups window to
create a new Payables lookup for contra charging.

This New Contra Lookup Code will be used as a source when the Contra
Charging Credit memos are created.

c) Setup in AR

i. Create Customer

A customer is an organization or person with whom you have a selling

relationship. This selling relationship can result from the purchase of products and
services or from the negotiation of terms and conditions that provide the basis for
future purchases. For example, a division of Vision Distribution could become
one of your customers.

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 A customer account represents the business relationship that a party can enter in
to with another party. The account has information about the terms and conditions
of doing business with the party.

ii. Define Credit Memo Transaction type

Use transaction types to define the accounting for the debit memos, credit and
bills receivable you create in Receivables. Transaction types also determine
whether your transaction entries update your customers’ balances and whether
Receivables posts these transactions to your general ledger.

If AutoAccounting depends on transaction type, Receivables uses the general

ledger accounts that you enter here, along with your AutoAccounting rules, to
determine the default revenue, receivable, freight, tax, unearned revenue, unbilled
receivable, finance charges, and AutoInvoice clearing accounts for transactions
you create using this type. For bills receivable, the accounts that you enter here
determine the bills receivable, unpaid bills receivable, remitted bills receivable,
and factored bills receivable accounts for a bill receivable.

iii. Define Transaction Source

Define the transaction sources that you assign to invoices, debit memos,
commitments, credit memos, on-account credits, and bills receivable. Receivables
uses transaction sources to control your transaction and transaction batch
numbering, provide default transaction types for transactions in batch, and to
select validation options for imported transactions. Receivables provide the
following predefined transaction sources: MANUAL-OTHER, DM Reversal, and
Chargeback.

iv. Define Auto Accounting

Define AutoAccounting to specify how you want Receivables to determine the

general ledger accounts for transactions that you enter manually or import using
AutoInvoice. Receivables creates default accounts for revenue, receivable, freight,
tax, unearned revenue, unbilled receivable, finance charges, bills receivables
accounts, and Auto Invoice clearing (suspense) accounts using this information.
You can control the value that Auto Accounting assigns to each segment of your
Accounting Flex field, such as Company, Division, or Account. You must define
AutoAccounting before you can enter transactions in Receivables. When you
enter transactions in Receivables, you can override the default general ledger
accounts that Auto Accounting creates.

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d) Attaching Contra Charging Form

To attach the Contra Charging Form to the Existing Payables Responsibility, attach
JG_CONTRA_CHARGE_GUI Sub Menu to AP_NAVIGATE_GUI12 Main Menu.

Navigation Path: System Administrator responsibility: Application: Menu Form

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5. NETTING AP AND AR BALANCES FOR A PARTICULAR
SUPPLIER AND CUSTOMER

Simulation steps

Please note that screen shot below are taken with 11i.AP.N and 11i.AR.N patchset level.
If you are using a Higher or Lower patchset version than this, Form appearance may
change slightly. Wherever applicable we have mentioned the changes from the older
version to newer version, which affects the Contra Charging Setup.

1. Create a New Supplier called ‘Tester’. Screen Shot below shows creation of New
Supplier. Enter Tax Registration Number and other basic details.

Navigation: Oracle Payables Responsibility: Suppliers: Entry Screen.

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 2. Create a new Supplier Site called ‘CONTRA’. Make sure that the Pay Site is
enabled for this new Site. Screen Shot below show the creation of new Supplier

Site Navigation: Oracle Payables Responsibility: Suppliers: Entry: Sites Button

Screen

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 3. Create a new Payables lookup Code for Contra Source. This is required because
the Credit memos created by the Contra Charging Form will have source as
‘CONTRA’ to differentiate from other types of Invoice sources.

Navigation: Oracle Payables Responsibility: Setup: Lookups: Payables Screen:

Find Type ‘SOURCE’ and add new Lookup Code as ‘CONTRA’

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 4. Create new document sequences for AP and AR called ‘ContraAP’ and ‘Contra
AR’ respectively. Screen Shot below shows Document Sequence Setup for
ContraAP and ContraAR.

Navigation: System Administrator Responsibility: Application: Document: Define

Form.

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 5. Create a new Document Category called ‘Contra’ on AP_INVOICES_ALL Table
and RA_CUSTOMER_TRX_ALL Table for Payables and Receivables
Application respectively. Screen shot below shows the Document Category Setup.

Navigation: System Administrator Responsibility: Application: Document:

Categories Form.

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 6. Assign the newly Created document sequence and Document Category for the Set
of Books used. Screen Shot below shows the Setup for the same.

Navigation: System Administrator Responsibility: Application: Document:

Assign Form.

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 7. Create a new Transaction Type called ‘Contra’ for the Credit Memo Transaction
Type. The Revenue account defined in for this Contra Credit Memo Transaction
Type should be AP clearing account and it should be the same in AP Credit
Memo /Debit Memo. Screen Shot below shows the Transaction type setup.

Navigation: Receivables Responsibility: Setup: Transactions: Transaction Type

Form

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 8. Create a New Transaction Source Called ‘Contra’. Make Sure the Type of the
Transaction Source is set to Imported. Screen Shot below shows the setup for the
same.

Navigation: Receviables Responsibility: Setup: Transactions: Sources Form

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 

9. Setup Auto Accounting Rules for Receivable Account. Based on the Setup here,
the Receivable account will be derived at runtime for accounting. In this case, the
account segment will default from the Transaction Type.

Navigation: Receivables Responsibility: Setup: Auto Accounting Window

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 10. Need to create new customer called ‘Tester’ for whom the contra charging needs
to be run.

Navigation: Receivables Responsibility: Customers: Standard Form

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 11. Create Supplier Invoice for ‘Tester’ Customer, Validate and Account it. In this
Demo, we have created supplier invoice for 1500 KES and one item line for 1500
KES Run Payables Credit balance report to find the outstanding Liability for this
Supplier. Below Screen shot shows the Invoice Workbench Form.

Navigation: Payables Responsibility: Invoices: Entry:Invoices Workbench Form

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 12. Create Customer invoice for 1000 KES. This Customer invoice will be netted
with the Supplier invoice using the Contra Charging Window and accordingly
credit memos will be created on both the AP and AR Interfaces.

Navigation: Receivables Responsibility: Transaction: Transactions Form

Review the Distribution Window

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Review the Transactions Window:

13. If any prior Records exist in the Interface Lines Form than delete those records
manually in the Receivables Module.

(N) Control> Auto invoice>Interface Lines

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 14. Manually, enter the Interface Line Id 1149 in the Interface Lines Window.

15. Submitting the Contra Request. From the Receivables Responsibility, open
the Contra Charges Form. Enter the Customer and Supplier details for which
you need to submit the contra and click on the “Calculate Balance” button.
This will show the supplier and customer balances that are available for knock
off. Two Concurrent Program will be spawned. Payables Invoice Interface and
Receivables Invoice Interface Program to populate the AP and AR interface
tables as shown below.

Navigation: Payables Responsibility: Contra Charging: Contra Charging Form

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Review the Report to be “Completed and Normal”

16. Manually enter the Payment Terms and Invoice date in the “Open Interface Invoices
Form”
(N) Invoices> Enter> Open Interface Invoices.

Enter the “Payment Terms”

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 Enter the “Date needs to be entered”

Enter the “Distribution Id” – (10049 in this case)

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 Enter the Interface Line Id – (‘1149’ in this case)

Note: - If you are running the contra program more than one time in the same day. Then
execute this query every time when you run.

UPDATE SET RA_INTERFACE_LINES_ALL

SET INTERFACE_LINE_ATTRIBUTE2=INTERFACE_LINE_ATTRIBUTE2+1
WHERE BATCH_SOURCE_NAME='Contra'
AND INTERFACE_LINE_ATTRIBUTE1= TRUNC (SYSDATE)

After the invoice interface tables are populated, import your invoices with the Payables
Open Interface program in Oracle Payables, using the Contra transaction source. In
Oracle Receivables, import your invoices with the AutoInvoice Import program, using
the Contra transaction source. Once both the Programs complete successfully, Credit
Memos will be created for netting balances between the Customer and supplier.

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 17. Run the Programme “Payables Open Interface Import” in AP module.

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18. Run the Programme “Autoinvoice Master Programme” in AR

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19. The final form can be reviewed thus,

Logic :- Take the minimum amount of AP, AR invoices and enter that amount in contra
tab amount field then click the button “submit contra” thus two credit memos will be
populated in interface tables of AP and AR. Then, Run the concurrent programs called
“Auto invoice import” in AR and “Payables open import” in AP, thus the credit memos
will be created in AP and also in AR. So the invoice which is having minimum amount
will become zero and the one, which is having maximum out of two that invoice amount,
will be finally max-min amount.

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Also, the “Credit Memo” so created can be queried and reviewed in the Invoices Form.

20. Thus, we can take the “Supplier Customer Netting Report”

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Review the Report:

Thus, the report shows the various transactions to the Supplier/Customer with the same
name – “Tester” and the Net Balance Due and Due Dates.

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