AP_AR Netting_ R12 Overview

<Insert Ricture Here>

Release 12 AP / AR Netting : Overview

Product Manager

Agenda

• Concept

• 11i equivalent

• Features

• Benefits

• Pre requisites & Set Up

• Process flow


Netting as a Concept

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


11i Equivalent

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 limitations to Salient Features in R12

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


Netting Benefits

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

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”


Netting set up and process flow

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

Creating Netting Agreement

Creating Netting Agreement …… Step 1



Netting Batch

Creating a Netting Batch

Netting Batch Receivables transaction review

Netting Batch Payables transaction review

Proposed Netting Report

Netting Batch Payables transaction review

Netting Batch: Reverse

Final Netting Report

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

Payment details in Payables

Receipt details in Receivables

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

Q U E S T I O N SQ U E S T I O N SQ U E S T I O N SQ U E S T I O N SQ U E S T I O N SQ U E S T I O N SQ U E S T I O N SQ U E S T I O N SA N S W E R SA N S W E R SA N S W E R SA N S W E R SA N S W E R SA N S W E R SA N S W E R SA N S W E R S

Thank You.

Documents

AP_AR Netting_ R12 Overview