R12 AP/AR Netting Technical Information and Notes

Here are some of the important notes on the Netting Process.

The most important columns for joining the FUN tables are Agreement_id and Batch_id.

AP/AR netting process cannot be used cross the operating units. The process is restricted to the customers and suppliers of one operating unit.

R12 AP/AR Netting Slides II

In this posting lets see the steps involved in Netting Process:

1. Create a Netting Agreement
2. Create a Netting Batch



The last couple of slides walks us thru the netting receipt and the payment created automatically
by the netting process.

R12 AP/AR Netting Slides I

In this posting lets see the basic Netting Setups:


Steps involved in processing the Netting Setups are:

1. Create a customer in AR
2. Create a Supplier in AP
3. Define a Netting Bank Account
4. Enter Customer Invoice
    The invoice must be in status "Complete"
5. Enter Suppliers Invoice
    The invoice must be validated and have terms as Immediate.

The above slides show us until the invoices are created in both AP and AR. The Netting Agreement and Batch details slides will be posted i next session.

R12 AP/AR Netting Technical Info

Lets see some of the netting tables involved in the process. All the tables related to netting are stored under "FUN" module.

Here are the tables:

FUN_NET_SUPPLIERS_ALL – Stores Supplier Details
FUN_NET_CUSTOMERS_ALL – Stores Customer Details
FUN_NET_AR_TXNS_ALL – Stores Details of AR transactions
FUN_NET_AP_INVS_AL – Stores Details of AP invoices
FUN_NET_BATCHES_ALL – Stores Batch Details
FUN_NET_AR_TRX_TYPES_ALL – Stores Transaction types of AR
FUN_NET_AP_INV_TYPES_ALL – Stores Transaction types of AP
FUN_NET_AGREEMENTS_ALL – Stores Agreement Details

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.

R12 AP/AR Netting Part2

Let us now go thru the setup steps for netting process.The steps involved in setup are

• Netting Bank Account
• Receivables System Options
• Netting batch approver
• Chargeable Subcontracting
• Netting Agreement

The first step in setting up a netting agreement is to create a bank account using cash management responsibility.Since the netting process works similar to the application of receipts and payments, the companies will have to setup a cash account specifically for netting, to be used as a clearing account. Note that the balance with in the cash account will always be zero.Also this account has to be associated with AP/AR netting receipt class using the Receivables responsibility.

In Receivables System Options we have to check the “Allow payment of unrelated transactions” check box to create netting agreements across multiple
unrelated customers.

Next step in the setup process is to select the trading partners. Users can select one or multiple supplier and customers to net.You can also select the site or leave the site blank, if you leave it blank all sites for selected trading partner will be included in the netting process.If netting process requires approval then the approver must be set up as a contact for the trading partner(Customer / Supplier). The contact must be setup with an email address. The two options available for approver are APPROVE and REJECT. If APPROVE is selected the administrator can submit the batch for netting process even if the trading partner does not approve the batch by the response date mentioned on the netting agreement page.If selection is REJECT then the administrator can resubmit the batch or cancel the batch and release all the transactions selected for netting.

If the user would like to use OSA(outsourced assembly processing), two profile options must be enabled.One "Chargeable Subcontracting Enabled" and second "JMF:Enable chargeable subcontracting". Both the profile options should be enabled at site level.The first one enables users to include OSA items in netting process.The second one allows items in purchasing to be marked as OSA.

Create a netting agreement in order to setup the rules that will decide which transactions can be selected for netting and how they are ordered and processed once selected.

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.