R12 AP/AR Netting Part1

AP/AR Netting solution is a standard feature delivered in R12 Payables and Receivables.The netting process is a new feature offering companies an increase level of visibility across Trading partners and control over cash flow. AP/AR Netting solution allows you to net your Payables 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 a supplier for you company, then AP/AR netting allows you to pay the net difference between how much you owe the supplier and how much he owes company rather than him paying you and then company paying him.

Prior to Release12 this process was mainly used to address the needs of US Federal Financials which has now become available to everybody. This solution provides the following benefits.

Netting allows companies to see their complete trade balance with trading partners both suppliers and customers. It also provides complete control over cash flow and collection process.Netting allows customers to define a netting agreement, incorporate the business rules and transaction criteria allowing them to run netting process with limited intervention. It improves efficiency and reduce costs by eliminating unnecessary payments, simplifies reconciliation, reduces bank charges and eases collection activities.

The new features for AP/AR Netting are the netting business rules that may be enforced on a global bases where regional administrators have the ability to tailor their standards to accommodate the local and country specific regulations.The netting agreement controls how a group of trading partners net payables and receivable transactions.The business rules include the netting agreement details such as name and effective dates and rules, based on which the transactions are selected, and how they are ordered and prioritized once selected.Trading partners have an option to net transaction for a single trading partner, one supplier and one customer or for multiple trading partners, multiple supplier or customers.

Based on the netting agreement and user criteria companies can execute an uninterrupted netting process which results in a netting batch. The netting batch compares AR and AP balances, allows users to optionally add or remove transactions and create a AP payment in payables and an offsetting receipt in AR. AP/AR netting provides easy to use enquiry screens to view netting batch details online including which transactions were netted and corresponding payment and receipt information. Two new reports available now are, One Proposed Netting report contains the transactions selected for netting which is created during the create netting batch process.This report is also sent to trading partner where approval is required. Second Final netting report which is created at the end of the netting process when the transaction have been created. This report shows the final netting details i.e the payment and receipt number and netted amount.