AP/AR Netting Setups In Oracle R12
What is AP/AR Netting?Oracle AP/AR Netting allows you to net
your Payable invoice balances against your Receivables invoice
balances for those Customers who are also your Suppliers.For
example, If you have a customer who is also your supplier, then
rather than him paying you and then you paying him, AP/AR netting
allows you to pay the net difference between how much you owe the
supplier and how much he owes you.After establishing a netting
agreement with such trading partners, 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.
Setups for AP/AR Netting:In Brief
Netting Bank Account Receivables System Options Netting batch
Approver Chargeable Subcontracting Netting Agreement Define and
Assign Document sequences
In Detail
Netting Bank Account
Navigation: Payable Manager --> Setup --> Payments -->
Bank Accounts
Click on Create button.
Create a Bank Account, which can be used by the netting process.
Set the Netting Account flag to yes.
Enable Default Settlement Account
Assign this bank account to the seeded Receivables receipt class
AP/AR Netting
Navigation: Receivable Manager --> Setup --> Receipts
--> Receipts Class.
Query AP/AR Netting and then click on Bank Accounts and assign
the Netting bank account.
Receivables System OptionsCheck the Allow payment of unrelated
transactionscheck box under the Receivables system options, if
youwant to create netting agreements across multiple unrelated
customers.
Navigation: Receivable Manager --> Setup --> System -->
System Options.
Netting batch approver
If approval is required for a netting agreement, the approver
must be set up as a contact for the tradingpartner (Customer /
Supplier). The contact must be setup with an email address.
Chargeable Subcontracting
Navigation: System administrator --> Profile -->
SystemsWhen the Profile option Chargeable Subcontracting Enabled is
set to:
Yes This will select invoices that were matched to purchase
orders with outsourced assemblies by thenetting process.No This
will select invoices that were matched to purchase orders without
outsourced assemblies by thenetting process.D (disregard) This
means all eligible invoices will be selected for netting
irrespective of whether or not theyare matched to purchase
orders.
Netting AgreementCreate netting agreement to setup the rules
that will decide which transactions are selected for netting andhow
they are ordered and processed once selected.
Navigation: Receivable Manager --> Receipts --> Netting
--> Netting Agreement.
Click on Create Agreement.
Enter the information
click on Next.
Enter Supplier Name and Customer Name
Click on Next and then Finsh.
Define and Assign Document Sequential Numbering.Define
Sequential Numbering:
Navigation: System Administrator --> Application -->
Sequential Numbering --> Define.
Assign Document Sequential to categories:
Navigation: System Administrator --> Application -->
Sequential Numbering -->Assign
Document Tab:
Assignment Tab:
Criteria used for Selecting AP Invoices: Transaction due date
must be less than or equal to AP scheduled payment due date. AP
scheduled payment due date must be between the Netting Agreement
Start Date and End Date. Only invoices for the Supplier and
supplier sites (if specified) in the agreement are selected. Only
invoices with the selected invoice types in the agreement are
included. Operating unit of the invoices must be the same as the
operating unit of the batch. 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. Locking
AP invoices:o Selected AP invoices are locked by populating
AP_PAYMENT_SCHEDULES.Checkrun_id Columnfor the selected invoiceso
The same Checkrun_id value is populated in
FUN_NET_BATCHES.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. AR payment schedule date
should be between the Agreement Start Date and end date.
Transactions must be complete Only Transactions for customer and
customer 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.
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.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. The priority is important as this
determines which transaction/invoice will be netted first.
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. It is also possible that
the batch may have been modified.
If the current date has passed the batch settlement date, then
the batch is set to status SUSPENDED and the AP invoices are
unlocked. AP and AR balances for transactions are validated again.
If the validation fails then the batch is set tostatus ERROR and
the AP invoices are unlocked. If the batch has passed all
validations, it is sent for approval, if approval is required, else
the settle Nettingbatch process is initiated.
How Netting Batches are settled? Validationo The process starts
off with the validation of AR transactions. 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 batcho If any validations fail, the batch is set to
Cancelled Status.o Validations are also performed to check whether
the GL, AR, and AP periods are open for the batchsettlement date.
If not, then the batch is set to status ERROR and an error message
is displayed in theReport log.
Derive Netting Bank Details
o Netting bank details like bank account name, bank account
owner and number are derived based on
theFUN_AGREEMENTS.bank_account_id for the given batch.
Settle AP invoiceso Invoices in each batch are grouped by
vendor, vendor site and invoice currency code.o AP payment APIs are
called to process the payments. These APIs return the check id
which isupdated in FUN_NET_AP_INVS_ALL.Check_ID
Settle AR transactionso AR receipt APIs are called to create and
apply the receipts. These APIs return the receipt id which
isupdated in FUN_NET_AR_TXNS.RECEIPT_IDo If all processing goes
through successfully then the batch is set to COMPLETE and the AP
invoices andnetting agreements are unlocked.
What are various Netting Batch Statuses?
Netting Batch Status EventRUNNING User creates the netting
batchSELECTED Review Batch option is set to YESERROR Error
encountered while validating or selecting transactionsSUSPENDED
Current date has gone passed the batch settlement dateCLEARING
Review batch option is set to NO but no approval is
required.SUBMITTED Review batch option is set to NO and approval is
required.REJECTED Batch has been reversedAPPROVED User approves
batch requiring approvalCOMPLETE Netting process completed for
transactionsREVERSING User chooses to reverse the batchREVERSED
Batch has been reversed
What tables are involved?
AP/AR Netting engine is owned by Oracle Financials Common
Modules (FUN) Product. All tables behind the scene will be stored
under the FUN schema. Information related to Netting is stored in
the followingtables:
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 invoicesAP/AR
Netting automatically compares Payables to Receivables and creates
the appropriate transaction in each system to net supplier invoices
and customer invoices. With this functionality, A receivables user
can View netted receipt details directly from the receipt Create
Netting Agreements and Netting BatchesWith this functionality,
there is significant increase in user productivity and
effectiveness because of tight integration and automation.You can
access the process via: Navigation: Receipts > Netting >
Netting Batch Navigation: Receipts > Netting > Netting
Agreement Receipts > Receipts > Action Menu : AP/AR
NettingAfter Querying a netted receipt, the user can see more
details about the batch by selecting AP/AR Netting from the Action
menu. This launches the AP/AR Netting batch window. Netted Receipts
are created automatically by the AP/AR Netting process and cannot
be updated by the user from the Receipts WorkbenchAs we have seen
Contra charging has been replaced by AP/AR Netting, lets take a
setup walk though to use this functionality.1.Define netting
control accountSetup>Financials>Flex
field>key>values2.Create bankSetup>payment>Bank and
Bank BranchesYou should note ,Payment document is not required for
netting bank account.3.Go to receivables responsibility, receipt
class definition formSetup>Receipts>Receipt classQuery the
'AP/AR Netting' receipt class which is a seeded one.
4. Attach your bank account in this receipt class.5.Go to system
options, transaction and customer tabbed region, there enable
'Allow payment of Unrelated Transactions'check box
6. Create netting agreementReceipts>Netting>Netting
Agreement
7. Enter an Invoice in Payables, validate and run create
accounting.8. Enter a transaction in receivables.9. Create Netting
BatchReceipts >Netting >Netting Batch
10. Query your netting batch and see the status as Complete.
also click on view report icon on right side.click on run push
button, you can see the final netting report.11.Go to
view>request>findYou can see 3 concurrent request programs
Create Netting batch Settle netting batch Netting Data
Extract12.Now go to receipts and query the AP/AR netting
receipt.13.Now Go to Tools >view Accounting, you can see Netting
control account (defined in first step a) debited and receivable
account credited.14. Now go to payables and query your invoice
number and click the tab view payments. You can see the payment
details and copy the document number.15.Query your copied payment
document number.What you can see the payment type as Netting
.16.Click actions button and enable the check box create accounting
.17.Go to tools>view accounting .You can see the accounting
entry 1. AP/AR Netting 2. Netting When a trading partner is both a
customer and a supplier, you may choose to offset open
receivablesagainst open payables items. Netting Agreements add
trading partner terms as well as deploying company controls. A
selection program automatically pulls information from Oracle
Receivables and Oracle Payables taking into consideration
discounts, late fees, and withholding taxes prior to determining
the final netting amount. A review process and trading partner
approval afford further verification to support the netting event.
3. Per-Requisites Setups Required for AP/AR Netting - Define
netting control account Receivables System Options Create bank-
Netting Account flag to Yes Receipt class -AP/AR Netting Attach
your bank account in this receipt class Netting Batch Approver
Profile: Chargeable Subcontracting Enabled Document sequencing for
AP & AR Netting Agreement 4. Receivables System Options-Enable
check box Allow Payment of Unrelated Transactions 5. Netting Bank
Account 6. Receipt Class Creation Method AP/AR Netting 7. Attach
Bank Account to Receipt Class 8. Profile Option: Chargeable
Subcontracting EnabledYes- Only invoices that were matched to
purchase orders with outsourced assemblies would be selected by the
netting process.No- Only invoices that were matched to purchase
orders without outsourced assemblies would be selected by the
netting process.D- All eligible invoices will be selected for
netting irrespective of whether or not they are matched to purchase
orders. 9. Document Sequencing Category Receivables- AP/AR Netting
Payables- Netting payments 10. Netting Agreement Payables ->
Payment -> Netting Receivables -> Receipt -> Netting 11.
Entering Netting Batch 12. Request Create Netting Batch Settle
Netting Batch Netting Data Extract 13. Query Receipt 14. Query
Payments Note- No Payment Document is to be AttachedAfter a R12
upgrade, you will notice a new feature in Payables AP/AR Netting.
You can use the feature when a vendor is also a customer and you
wish to offset their AP invoices with your AR invoices. This new
netting feature replaces contra-charging and Federal Financials
netting in 11i. The 10 steps to setup AP/AR Netting are:1. Create a
Netting Bank2. Create a Netting Bank Branch3. Create a Bank Branch
Contact (optional)4. Create Receipt Class5. Associate netting bank
with the new receipt class6. Add receipt method (define in the
receipt class) to the customers you wish to net.7. Create a Netting
Agreement8. Add suppliers and customers to the netting agreement.9.
Create Document Sequences of type Automatic, one for Payables and
one for Receivables10. Assign defined sequencesAREnd to End
Configuration of AR in R12There are few key steps that are to be
configured outside of AR1. Define Ledger with LE 2. Define
Operating Unit and link to Ledger and LE3. Define atleast one
Inventory Item Organization 4. Define Item Validation Organization
in Order Management We can share this menu, if we dont implement
OM5. Define Tax in EB Tax.6. Define banks, branches and accounts
Possible to configure through AR, if security is enabled through
UMX security wizard7. Define or Assign key profile option values to
AR responsibilitiesDefine all the following setup using Receivables
Manager responsibility:Define System OptionDefine system options to
customize your Receivables environment. During Receivables setup,
you specify your accounts, customer and invoice parameters, and how
the Auto Invoice and Automatic Receipts programs will
run.Setup>System>System Option
Define system option for each Operating Unit.Define Payment
TermsReceivables lets you define standard payment terms for your
customers to specify the due date and discount date for their open
items. Payment terms can include a discount percent for early
payment and you can assign multiple discounts to each payment term
line. For example, the payment term '2% 10, Net 30' indicates that
a customer is allowed a two percent discount if payment is received
within 10 days; after 10 days, the entire balance is due within 30
days of the transaction date with no applicable
discount.Setup>Transaction>Payment Term
Define Transaction TypeUse transaction types to define the
accounting for the debit memos, credit memos, on-account credits,
chargebacks, commitments, invoices, 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.Setup>Transaction>Transaction TypeDefine this for each
operating unit. Define transaction type for atleast Invoice,
Deposit, Credit Memo and Debit Memo transaction classes.
Define Transaction SourceBatch sources control the standard
transaction type assigned to a transaction and determine whether
Receivables automatically numbers your transactions and transaction
batches. Active transaction batch sources appear as list of values
choices in the Transactions, Transactions Summary, and Credit
Transactions windows, and for bills receivable in the Bills
Receivable and Bills Receivable Transaction Batches
windows.Setup>Transaction>Source
Define this for each operating unit. Select Type as Imported, if
invoice is to be imported into AR from third party/legacy/external
systems.Define Memo LinesStandard memo lines are lines that you
assign to a transaction when the item is not an inventory item (for
example, 'Consulting Services'). You can assign memo lines to debit
memos, on-account credits, debit memo reversals, chargebacks,
commitments, and invoices. Receivables display your standard memo
lines as list of values choices during credit memo entry in the
Credit Transactions window and during invoice entry in the Lines
window. When you create chargebacks and debit memo reversals, you
can either use the standard line that Receivables provides or enter
your own. You can create an unlimited number of standard memo
lines.Setup>Transaction>Memo Lines
Define this for each operating unit. This is particularly
important, if we implement AGIS.Define Accounting RulesDefine
accounting rules to create revenue recognition schedules for your
invoices. Accounting rules determine the number of periods and
percentage of total revenue to record in each accounting period.
You can use accounting rules with transactions that you import into
Receivables using Auto Invoice and with invoices that you create
manually in the Transaction windows. You can define an unlimited
number of accounting rules.This is generally applicable to project
based invoices, property invoices
etc.Setup>Transaction>Accounting Rules
Define Auto AccountingDefine Auto Accounting to specify how you
want Receivables to determine the default general ledger accounts
for transactions that you enter manually or import using Auto
Invoice. Receivables creates default accounts for revenue,
receivable, freight, tax, unearned revenue, unbilled receivable,
late charges, bills receivables accounts, and Auto Invoice clearing
(suspense) accounts using this
information.Setup>Transaction>Auto Accounting
Define this for each operating Unit. Define this atleast for
revenue, receivable, freight, tax, unearned revenue, unbilled
receivable, bills receivables accounts, and Auto Invoice
clearing.Tax code will default from EB Tax, which can be
updated/modified here in this auto accounting window.Define
Approval LimitUse the Approval Limits window to define approval
limits for Adjustments, Receipt Written off, Credit memo refund and
Credit memoSetup>Transaction>Approval Limit
Define this for each user.Define Receivables ActivitiesDefine
receivables activities to default accounting information for
certain activities, such as miscellaneous cash, discounts, late
charges, adjustments, and receipt write-off applications.
Setup>Receipts>Receivables Activities
Define this for each operating unit. This can be configured only
after EB Tax configuration.Define Auto Cash Rule set - Optional
configurationDefine Auto Cash Rule Sets to determine the sequence
of Auto Cash Rules that Post Quick Cash uses to update your
customer's account balances. You specify the sequence and the Auto
Cash Rules for each Auto Cash Rule Set. The Auto Cash Rule Sets you
define display as list of values choices in the Customers, Customer
Addresses, Customer Profile Classes, and the System Options
windows. Post Quick Cash first checks the customer site, then the
customer profile class, and finally at the system options level to
determine the Auto Cash Rule Set to use.Setup>Receipts>Auto
Cash Rule Set
Define Application Rule Set We can use seeded configurationUse
the Application Rules Sets window to review existing and define new
application rule sets. Application rule sets specify the default
payment steps for your receipt applications and how discounts
affect the open balance for each type of associated charges. By
defining your own application rule set, you can determine how
Receivables reduces the balance due for a transaction's line, tax,
freight, and late charges.Setup>Receipt>Application Rule
Set
Define Receipt ClassesDefine receipt classes to determine the
required processing steps for receipts to which you assign receipt
methods with this class. These steps include confirmation,
remittance, and reconciliation. You can specify any combination of
these processing steps with one exception: if you confirm and
reconcile, then you must also remit. If you enter No for all three
of these steps, Receivables automatically creates receipts assigned
to this receipt class with a status of
Cleared.Setup>Receipt>Receipt Classes
Define this for each operating unit. Only header window is not
OU based but bank accounts window are OU specific.This requires
some experience to use this configuration. Basic configuration is
simple but it is key configuration to handle various receipts like
Credit Card integration, Auto lock box, Bill of Exchange, and
Factoring. This requires very good practice and knowledge on
Function Capturing Process as well.Define Receipt SourcesDefine
receipt batch sources to provide default values for the receipt
class, receipt method, and remittance bank account fields for
receipts you add to a receipt batch. You can accept these default
values or enter new ones. Receipt batch sources can use either
automatic or manual batch numbering.Setup>Receipt>Receipt
Sources
Define this for each operating unit. This is for grouping of
receipt class, payment method and bank account.Define
CollectorReceivables let you define collectors and assign them to a
profile class, or directly to a customer account or site. When you
assign a collector to a profile class, that collector becomes the
collector for all customers assigned that profile class. You can
modify collector assignments for your customers in the Customers
pages, and for your profile classes in the Customer Profile Classes
window.Setup>Collections>Collector
Employee needs to be configured and Collector setup is to be
done in CRM.Define Aging bucketAging buckets are time periods you
can use to review and report on your open receivables. For example,
the 4-Bucket Aging bucket that Receivables provides consists of
four periods: -999 to 0 days current, 1 to 30 days past due, 31-61
days past due, and 61-91 days past due. When you create your
Collections reports, you can specify an aging bucket and 'as of
date', and Receivables will group the transactions and their
amounts in the appropriate days past due
period.Setup>Collection>Aging Buckets and Interest Tiers
Define Statement CyclesDefine statement cycles to determine when
to send statements to your customers. You enter statement cycles
when you define or modify individual customer and site profile
classes in the Customer Profile Classes
window.Setup>Print>Statement Cycles
Define this for each operating unit. Customer statement will use
this cycle.Define standard message OptionalDefine standard messages
to provide the text that Receivables prints on the bottom of your
customer's statements, debit memos, and interest invoices. You can
use messages to inform your customers of special promotions or to
make your printed documents more
personal.Setup>Print>Standard message
This message can be used in Customer Statement.Define Profile
ClassUse Customer Profiles to group customer accounts with similar
creditworthiness, business volume, payment cycles, and late charge
policies. For each profile class you can define information such as
credit limits, payment terms, statement cycles, invoicing, and
discount information. You can also define amount limits for your
late charges and statements for each currency in which you do
business.Customers>Profile Classes
This is important for consolidated billing, late charges,
profile class based strategy in collections and very important
configuration for business in real time.Define Customers Initially
customers will be migrated from external/legacy/older version of
Oracle EBS.Define Remit to addressSetup>Print>Remit to
address
Open or Close AR accounting periodOpen and close accounting
periods in your calendar to control the recording of accounting
information for these periods. Receivables lets you open future
accounting periods while your current period is still open.
Receivables also lets you reopen previously closed accounting
periods and enter receivables activities without transferring
transactions to the general ledger when you set your accounting
periods to 'Future.'Control>Accounting>Open or Close
periods
**** This is ledger based. Open / Close the period in one OU
will Open / Close the period in another OU as long as bot the OU
shares the same Ledger