ap_ar netting_ r12 overview
DESCRIPTION
AP_AR Netting_ R12 OverviewTRANSCRIPT
Netting Concept
• Trading Partners
• Parties with whom the organization transacts
• Suppliers as well as Customers
• If a trading partner is both Supplier and Customer
• Receivable from and payable to same trading partners
• Ideally only balance is settled
• Netting of receivable and payable a necessity
• Customers need a mechanism to automate this netting process
For Example :-
ERP Ltd. buys laptops from Laptops Ltd for $ 10,000Laptops Ltd. procures software from ERP Ltd. for $ 8,000
ERP Ltd. would pay only the balance $2,000
Automated Process
11i Contra ChargingSet up & Process flow
Create CustomerCreate Supplier
SETUP
Create payables Look up codes
Document Category
Create transaction type
Document Sequence
Assign
Create transaction source
Setup Auto AccountingRules
PROCESS
Create Payable Invoices
Create ReceivableInvoices
Submit ContraCharging request
Credit memos Created in AP & AR
11i Limitation – R 12 Feature1) Trading Partner Approval
11i Limitation
11i Limitation
• No facility for taking Trading
partner approval
for netting
• Report of all transactions
proposed to be netted can be sent
to trading partner
• He can review & reconcile
transactions with his ERP
• He can approve or reject the
netting
• “Approval required” flag to be
checked during set up
Release 12 feature
11i Limitation – R 12 Feature2) Netting with Group of Companies
11i Limitation
•Restricted to
one trading
partner
• Netting can be done with multiple
trading partners
• Prioritize parties for netting
• Mainly useful if trading partners
are related or under a single
parent company
Release 12 feature
Customer X Parent Company A
Subsidiary B Subsidiary C Subsidiary D
Purchase
Sale
Subsidiary B
Subsidiary C
Subsidiary D
Subsidiary E
Subsidiary E
11i Limitation – R 12 Feature2) Netting with Group of Companies example
Customer X Parent Company A
Subsidiary B
Purchase
Sale
Subsidiary C Subsidiary D Subsidiary E
Payable Receivable
11i Limitation – R 12 Feature3) Choosing the Netting Basis
11i Limitation
•No flexibility of
choosing the
netting basis
• Provides flexibility to select the
netting basis
• On the basis of date :-
• Oldest to most recent
• Most Recent to oldest
• On the basis of amount :-
• Amount ascending
• Amount descending
Release 12 feature
11i Limitation – R 12 Feature4) Reporting
11i Limitation
• No feature for
viewing reports
•Following 2 reports are available
• Proposed Netting Report
• Snapshot of all transactions
proposed to be netted
• Sent to the trading partner
• Final Netting Report
• Details of all netted transactions
• Documentary evidence for
Compliance & Audit Trail
Release 12 feature
11i Limitation – R 12 Feature5) Multi Currency Netting
11i Limitation
• No feature to net transactions
accounted in
multiple
currencies
• For netting transactions
accounted in different currencies
then user has three options :-
• Net Within Currency
• Use Single Currency
• Convert to Accounting
Currency
Release 12 feature
AP/AR Netting Benefits
• Creation of automatic Payments in AP and Receipts in AR
resulting in
• Enhanced operational efficiency
• Reduction in manual data entry & associated errors
• Reduction in admin cost
• Ease of Setup and reusability
• Better idea of cash flows resulting in
• Better financial planning & budgeting
• Reduction in interest on debt obligations
• Reduction in bank charges
• Audit Trail
Pre Requisites …… (1)
• Create a bank account for netting where
• Netting Account flag checked as yes
• Assign a GL account
• Multiple Currency Receipts & payments checked as Y
Netting Account
Pre Requisites …… (2)
•In Receivables module
•Specify the bank account as default netting bank account for a operating unit in receipt class
•In system options check the “Allow payment of unrelated transactions”
Initiating the netting process
On navigating to Netting functionality in AP/AR we see the following 2 tabs :-
1) Netting Agreement :- Parameters/Rules on which netting is based.
2) Netting Batch :-
• Associate Netting agreement
• List of eligible transactions
• User able to review and edit the transactions selected for netting
Example :-Laptops Ltd.
AP Transactions
Inv Amt Date
AP01 5500 05-Jul-07
AP02 2000 15-Jul-07
AP03 2500 25-Jul-07
10,000
Best Laptops Ltd
AR Transactions
Inv Amt Date
AR01 4000 04-Jul-07
AR02 3000 20-Jul-07
AR03 1000 28-Jul-07
8,000
Netting Agreement
Netting Batch
Compare AR and AR Balances
AR Balance = 10000, AR Balance = 8000
So the Netting Amount = 8000
Transactions Selected For Netting
AP Transactions
Inv Amount Due Date
AP01 5500 05-Jul-07
AP02 2000 15-Jul-07
AP03 500 25-Jul-07
AR Transactions
Inv Amount Due Date
AR01 4000 05-Jul-07
AR02 3000 15-Jul-07
AR03 1000 25-Jul-07
Status Message description
Status Message
Description
Running Netting batch is submitted for execution
Selected Netting batch is saved but yet to submit for execution
Submitted Batch is submitted for trading partner approval
Suspended Trading partner does not approve the Netting Batch by the Required Response Date
Rejected Trading Partner Rejects the batch
Approved Trading partner approves batch requiring approval
Complete The Netting has been completed and all transactions are cleared.
Error System encountered error while validating / selecting transaction.
Reverse Netted batch is reversed
R12 Netting Setup and processSummary of Setup & Process flow
SETUP
Create Netting Bank Account
ReceivablesSystem Options
Create CustomerCreate Supplier
Create Netting Agreement
Automated Process
PROCESS
Create Payable Invoices
Create ReceivableInvoices
Create Netting Batch
Listing of eligible transactionsfor netting
NeedChanges to the Transactions?
Yes
Remove, Add, PrioritizeTransactions for Netting
No
Submit Netting Batch
AR: Receipts created & applied to
Selected Invoices
AP: Payments created & applied to the
selected Invoices
Additional ResourcesFor Customers and Partners
• R 12 AP User Guide
• For More Information about our products• http://www.oracle.com/products/
• Oracle Product Documentation:• http://www.oracle.com/technology/documentation/applications.html
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