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Oracle Apps R12 AP/AR Netting- Brief synopsis For the Layman

Discussion in 'General' started by Ramji, Apr 12, 2012.

  1. Ramji

    Ramji Forum Guru

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    What is Netting

    A business sells goods and services to a party ( customer). They need to collect money for the same. The business may also buy goods and services from the same Party. If they were to pay for each transaction separately.....

    a) The Transaction cost would flare up (bank charges, credit card fees, commissions etc would go up)
    b) The cash flow position would be adversely affected on a day to day basis. Say if a customer owes you 100 and you buy for 125 and have to pay in full for the purchase without setting of what is due from the same party.

    Background-11i and R12

    In R11i netting was there albeit in the background. A special global patch was needed to use the Contra charging feature.
    In R12 this has now become a full fledged out of the box feature that helps businesses to Pay the net amounts to parties and enjoy efficiencies as discussed above.

    Simple setups

    First a netting payment goes out from a dummy cash account not the real cash account. This Netting account needs to be set up first in GL.

    Then a Netting bank account is setup And the above cash account is pulled up into the same. There is no need for any payable documents for this bank account.

    The next thing that needs to be done is to configure the AP/AR Netting Receipt Class/Payment method in AR. This is a straightforward set up.

    Finally the Netting Agreement which links the customer and supplier (Parties) and opens a wide range of possibilities

    a) You can net between specific sites.
    b) You can choose to net by currency or a specific currency.
    c) You can specify the rules on how netting should take place in what order.
    d) You can choose to net according to rules or bypass the netting agreement and invoice selection after running a netting batch to add or remove invoices selected.

    Finally the net amount that remains is settled using an actual cash account (bank account) paying only for the net due or receiving the balance.
     
  2. dave9

    dave9 Guest

    This is a great site for all oracle freshers
    :cool:
     
  3. money3388

    money3388 Active Member

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    Hi

    Thank you for you explanation , I have 2 questions
    (1) Do we need to create Supplier and Customer
    (2) Do we need to create supplier and customer relationship
     
  4. Ramji

    Ramji Forum Guru

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    Dear Money3388,

    You need a father and a mother to produce a baby isnt it? so yes
    Yes if you go through the setups you will see how the link between the two is established. Infact the new functionality is so versatile that you can establish currency to currency, document type, site to site and so on.
    cheers
    Ramji
     
  5. jholmes

    jholmes Guest

    Ramji, I'm confused on why you need to create a customer and a supplier. If it's the same party, why do you need to create it twice?
     
  6. Ramji

    Ramji Forum Guru

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    Jholmes,

    In countries like India there is a practise of marrying within the family. Quite often you find the sister's daughter being married off to her brother. The daughter being his niece.

    So you are asking the question if the daughter is both his niece and wife, where is the need to marry? LOL

    She does not become his wife until he formally marries her!

    Like wise in Oracle Party falls under the trading community architecture which is a central repository of all trading partners and their relationships which is stored in a single place in R12. Each Party has a unique party ID. But the Relationship which the enterprise has with this party can be different. If the party supplies them goods or services then that instance of the relationship is of a supplier. If the business sells goods or services then that instance of the relationship is that of a customer.
    Note these transactions can be with organizations or persons(Individuals). In the case of Individuals another dimension in the relationship is also possible. The individual may also be an employee of the company to whom the company needs to pay salary and statutory dues.

    Now go back to the example above. If the guy thinks he has a wife without marrying his niece and touches her, he will be docked for rape! :) He needs to marry her first. Likewise in Oracle you need to define a supplier and a customer and an employee in order to be able to capture the business transactions for each type of relationship.

    In the case of netting what identifies the supplier and customer association is the creation of the netting agreement wherein you select the supplier and customer.This can be done within Operating Unit at the moment.

    So my friend if you are dating your niece you need to marry her first. Remember this!
    cheers
    ramji:rolleyes:;)