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
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 Options
Check the “Allow payment of unrelated transactions”check box under the Receivables system options, if you
want 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 trading
partner (Customer / Supplier). The contact must be setup with an email address.
• Chargeable Subcontracting
Navigation: System administrator --> Profile --> Systems
When the Profile option “Chargeable Subcontracting Enabled” is set to:
Yes – This will select invoices that were matched to purchase orders with outsourced assemblies by the
netting process.
No – This will select invoices that were matched to purchase orders without outsourced assemblies by the
netting process.
D (disregard) – This means all eligible invoices will be selected for netting irrespective of whether or not they
are matched to purchase orders.
• Netting Agreement
Create netting agreement to setup the rules that will decide which transactions are selected for netting and
how 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 Column
for the selected invoices
o 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 to
status ‘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 Netting
batch process is initiated.
How Netting Batches are settled?
• Validation
o 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 batch
o 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 batch
settlement date. If not, then the batch is set to status ‘ERROR’ and an error message is displayed in the
Report log.
• Derive Netting Bank Details
o Netting bank details like bank account name, bank account owner and number are derived based on the
FUN_AGREEMENTS.bank_account_id for the given batch.
Settle AP invoices
o 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 is
updated in FUN_NET_AP_INVS_ALL.Check_ID
• Settle AR transactions
o AR receipt APIs are called to create and apply the receipts. These APIs return the receipt id which is
updated in FUN_NET_AR_TXNS.RECEIPT_ID
o If all processing goes through successfully then the batch is set to COMPLETE and the AP invoices and
netting agreements are unlocked.
What are various Netting Batch Statuses?
Netting Batch Status Event
RUNNING User creates the netting batch
SELECTED Review Batch option is set to YES
ERROR Error encountered while validating or selecting transactions
SUSPENDED Current date has gone passed the batch settlement date
CLEARING 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 reversed
APPROVED User approves batch requiring approval
COMPLETE Netting process completed for transactions
REVERSING User chooses to reverse the batch
REVERSED 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 following
tables:
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 invoices
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 Options
Check the “Allow payment of unrelated transactions”check box under the Receivables system options, if you
want 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 trading
partner (Customer / Supplier). The contact must be setup with an email address.
• Chargeable Subcontracting
Navigation: System administrator --> Profile --> Systems
When the Profile option “Chargeable Subcontracting Enabled” is set to:
Yes – This will select invoices that were matched to purchase orders with outsourced assemblies by the
netting process.
No – This will select invoices that were matched to purchase orders without outsourced assemblies by the
netting process.
D (disregard) – This means all eligible invoices will be selected for netting irrespective of whether or not they
are matched to purchase orders.
• Netting Agreement
Create netting agreement to setup the rules that will decide which transactions are selected for netting and
how 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
Define and Assign Document Sequential Numbering.
Define Sequential Numbering:
Navigation: System Administrator --> Application --> Sequential Numbering --> Define.
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 Column
for the selected invoices
o 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 to
status ‘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 Netting
batch process is initiated.
How Netting Batches are settled?
• Validation
o 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 batch
o 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 batch
settlement date. If not, then the batch is set to status ‘ERROR’ and an error message is displayed in the
Report log.
• Derive Netting Bank Details
o Netting bank details like bank account name, bank account owner and number are derived based on the
FUN_AGREEMENTS.bank_account_id for the given batch.
Settle AP invoices
o 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 is
updated in FUN_NET_AP_INVS_ALL.Check_ID
• Settle AR transactions
o AR receipt APIs are called to create and apply the receipts. These APIs return the receipt id which is
updated in FUN_NET_AR_TXNS.RECEIPT_ID
o If all processing goes through successfully then the batch is set to COMPLETE and the AP invoices and
netting agreements are unlocked.
What are various Netting Batch Statuses?
Netting Batch Status Event
RUNNING User creates the netting batch
SELECTED Review Batch option is set to YES
ERROR Error encountered while validating or selecting transactions
SUSPENDED Current date has gone passed the batch settlement date
CLEARING 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 reversed
APPROVED User approves batch requiring approval
COMPLETE Netting process completed for transactions
REVERSING User chooses to reverse the batch
REVERSED 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 following
tables:
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 invoices
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