R12 AP/AR Netting Part3

Lets have a look at the AP/AR Netting process and features.

The create and settle netting batch is the first step of netting process between the your company and the trading partners.Information from the netting setup is used to select transactions along with the criteria entered at the time of the netting batch submission, which includes netting reconciliation date and transaction due dates. The selected transactions are then reviewed and can be individually removed by the user before submitting for netting.Once the user submits the transactions for netting
and are approved by the trading partner, the netting process kicks off and reconciles and clears the selected transactions in AP and AR.

We will now discuss the criteria used for selecting AP Invoices and AR Transactions, and how they are ordered for netting.

AP Invoices selection criteria are:
• 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 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 and not be on Hold
• Invoices that have already been selected in a batch which is not yet in
‘Complete’ status are not included.
• Selected AP invoices are locked by populating AP_PAYMENT_SCHEDULES.Checkrun_id
Column for the selected invoices.The same Checkrun_id value is populated in
FUN_NET_BATCHES.Checkrun_Id for the given batch.

AR Transactions selection criteria are:
• 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 status "complete".
• Only Transactions for customer and customer sites in the agreement
are selected.
• Only transactions with the selected transaction types in the agreement are
included.
• Operating unit of the transactions and the batch must be same.
• Transactions that have already been selected in a batch which is not 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’
• Payment schedule status must be open
• Transaction must not be a prepayment (RA_CUSTOMER_TRX.PREPAYMENT_FLAG = ‘N’)

The netting priority plays important role because it determines which transactions and invoices will be netted first.The Invoices and transactions are ordered by Supplier and Customer priority and by netting order rule selected in the agreement.

Once the batch is submitted AP and AR balances for transactions are validated.If the validation fails then the batch status is set to ‘ERROR’ and the AP invoices are unlocked.If all the validations are successful, then it is sent for approval, if approval is required, else the settle Netting batch process gets initiated.The process initiates with the validation of AR transactions because these records are not locked and they might have been modified since it got selected for the batch.If the validations fail, the batch is set to status "Cancelled". The process also validates the GL, AR, and AP periods are open for the batch settlement date. If any of the periods are not open, then the batch is set to status ‘ERROR’.

All the netting bank details like bank name,owner and number are derived based on the
FUN_AGREEMENTS.bank_account_id for the given batch.AP invoices in the batch are grouped by vendor,vendor site and invoice currency code.AP payments are processed using APIs and update the FUN_NET_AP_INVS_ALL table with Check_ID.AR receipt APIs are called to create and apply the receipts. The receipt id gets updated in FUN_NET_AR_TXNS.RECEIPT_ID. If all the processing completes successfully then the
batch is set to status "COMPLETE" and unlocks the AP invoices and netting agreements.