Oracle eBusiness Financials R12 AP/AR Netting-Functional Overview TCS Oracle Practice Hello and thanks for joining us today for this presentation on AP/AR Netting. This session will focus on 2 areas, AP/AR Netting Setup and Processing. This presentation will address Part 2 – AP/AR Netting Processing.

Objective This training will help Associates in understanding AP/AR Netting concepts in Oracle eBusiness R12i Financials

AP/AR Netting Agenda Release Overview Benefits AP/AR Netting Features AP/AR Netting Setup AP/AR Netting Processing Summary The objective of these presentations is to describe each feature from a functional perspective for AP/AR Netting: The agenda is as follows: Release Overview Benefits of AP/AR Netting solution The new features that will be addressed include the following: AP/AR Netting Setup (this was covered in Part I of this series) AP/AR Netting Processing (which I will cover in this presentation) Summary of AP/AR Netting

AP/AR Netting Release Overview The AP/AR Netting solution is a standard feature delivered in Release 12 Receivables and Payables.

AP/AR Netting Benefits Improve efficiencies and reduce data entry Easy Setup and Maintenance Simplify Accounting Cost Savings Flexibility Introduction: The Oracle AP/AR Netting is a new feature offering companies an increased level of visibility across trading partners and control over cash flow. Oracle AP/AR Netting provides a foundation to create netting agreements with flexible definition of business rules and association of trading partners, and executes an automated netting process so that customers can reduce their debt obligations without incurring bank charges by creating unnecessary payments and receipts. This solution provides the following benefits: Improve efficiencies and reduce data entry AP/AR Netting will automatically create AP Payment(s) and AR Receipt to clear a selected number of AP and AR transactions netted instead of settling each netted transaction one by one. 2. Easy setup and maintenance Allows customers the ability to define a netting agreement incorporating their netting business rules and transaction criteria to run their netting process with minimal user intervention. Simplify Accounting – The implementation of a netting control account will allow AP and AR balances to remain balanced and correct after netting occurs. Cost Savings – Netting allows for time saved by not relating transactions to a financial institution. For example, no EFT files sent, no acknowledgement files received, no clearing files to upload and reconcile, transactions do not appear on bank statement, which in effect drives decreased bank charges, and savings on collection activities (dunning and late payment interest invoicing). 5. Flexibility. Optional features are available so that companies can tailor their netting process to meet their business needs.

AP/AR Netting Features Establish and Maintain Netting Agreements - Business Rules - Trading Partner Run Automated Netting Process Request Trading Partner Approval Inquiry and Reporting - Proposed Netting Report - Final Netting Report The New Features for AP/AR Netting are: Establish and Maintain Netting Agreements The netting business rules may be enforced on a global basis where regional administrators have the ability to tailor their standards to accommodate local or country specific regulations. The Netting agreement controls how a group of trading partners net Payables and Receivables transactions: Business Rules – Includes the Netting Agreement details, such as name and effective dates, as well as the rules for which transactions are selected and how they are ordered and prioritized once selected. Trading Partner – Includes an option to net transactions for a single trading partner (one supplier and one customer) or for multiple trading partners (multiple customers and/or suppliers). Run Automated Netting process Based on netting agreement and user-defined criteria, companies can execute a seamless uninterrupted netting process which results in a netting batch. The netting batch compares the Oracle Payables and Oracle Receivables balances, allows users to optionally add or remove transactions, and creates an AP payment in Oracle Payables and an offsetting AR Receipt in Oracle Receivables. Request Trading Partner Approval AP/AR Netting optionally allows users to alert trading partners of the netting details using workflow for approval or notification purposes. Inquiry and Reporting AP/AR Netting provides easy to use inquiry screens to view netting batch details on line – including which transactions were netted, and corresponding payment and receipt information. AP/AR Netting also provides two new reports: Proposed Netting Report – contains the transactions selected for netting, which is created during the Create Netting Batch process. This report will also be sent to the trading partner where trading approval is required. Final Netting Report – created at the end of the netting process when the transactions have been created. This report shows the final netting details (i.e. Payment and Receipt Number, Netted Amount).

AP/AR Netting Process Agenda Feature Introduction Description Process How the process works Dependencies and Interactions Feature Summary The objective of this presentation is to describe each feature from a functional perspective for AP/AR Netting Processing. The agenda is as follows: Feature Introduction Description Process How the process works Dependencies and Interactions Feature Summary

Netting Process Description Create and Settle Netting Batch Initiate Netting process between the deploying companies. Optionally review the AP/AR transactions selected for netting. Creation of Payments and Receipts The “Create and Settle Netting Batch” is the initiation of the netting process between the deploying company and the Trading Partner(s). Information from Netting Setup is used to select transactions along with information entered at the time of netting batch submission. This includes netting reconciliation date, transaction due dates, etc. 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 these are approved by the trading partner (if approval is required), the Netting process kicks off and then reconciles and clears the selected transactions in AP and AR.

Netting Example Find and order AP and AR Transactions (Order Rule: Amount Descending) Enter Netting Parameters Netting Batch: Net_ABC Netting Agreement: ABC Settlement Date: 30-Jul-06 Transaction Due date: 20-Jul-06 AR Transactions Inv Amount Due Date AR01 100 8-Jul-06 AR02 50 10-Jul-06 AP03 50 12-Jul-06 AP Transactions Inv Amount Due Date AP01 200 10-Jul-06 AP03 100 20-Jul-06 AP02 50 15-Jul-06 Compare AP and AR Balances AP Balance = 350, AR Balance = 200 So the Netting Amount = 200 Transactions Selected For Netting Let’s go through a simple Netting example. The first step is the netting parameters: Netting Batch name is NET_ABC, Netting Agreement name is ABC, Settlement Date is Jul 30, 2006 and Transaction Due Date is Jul 20, 2006. There are 3 AP invoices and 3 AR transactions with the details shown on the slide. These are ordered by amount as that is the “Order Rule” selected by the user. Since the AP balance of $350 is greater than the AR balance of $200, $200 will be the netting amount. Only one AP invoice – AP01 is selected for netting as the amount of that invoice is $200 which is what we are netting. All three AR transactions are selected for netting. After the process completes, a corresponding payment and receipt will be created for these transactions. AR Transactions Inv Amount Due Date AR01 100 8-Jul-06 AR02 50 10-Jul-06 AP03 50 12-Jul-06 AP Transactions Inv Amount Due Date AP01 200 10-Jul-06

Setup and Process Now let’s discuss the Setup and Process for initiating Netting.

Automated Netting Process to Create a Batch You can access the Netting Batch UI via the Payables or Receivables responsibility. The Navigation path using Payables responsibility is: Payments->Entry->Netting->Netting Batch The Navigation path using Receivables responsibility is: Receipts->Netting->Netting Batch The simple search page is the first page you will see. From this page you can query on existing batches. To create a netting batch, click on the “Create Batch” button.

Automated Netting Process to Create a Batch The “Create Netting Batch” page allows a netting analyst to select a specific netting agreement and enter date specific criteria for netting. Operating Unit and Batch Name are required fields. Netting Agreement: If this field is left blank then all netting agreements will be selected based on other criteria as well such as transaction due date, operating unit, etc. Transaction Due Date: When transactions are selected for netting, the system will choose transactions that are due on or before this date based on the invoice’s payment terms. Settlement date is a required field: This is the date that the netting settlement will occur on. This date should be greater than or equal to the sysdate. GL Date: The user may enter a different GL date than the one defined on the transaction. Response Date: This is an optional field. This is the date by which the trading partner must respond to workflow approval. The date must be on or before the netting settlement date. Exchange Rate Type: The default value is the exchange rate type defined in AP Options Setup. Users can select other rate types depending on the netting currency rule setting for the agreement. Submit Batch Without Review: Default value is ‘No’ which indicates that the user will manually need to submit the netting batch for settlement after they review it. If they set it to ‘Yes’, then the system will skip the review. The Submit button submits this batch for netting.

Automated Netting Process to Create a Batch – Review Transactions Using this batch review page, you can review the batch and the transactions selected for processing. The user may also remove transactions.

Netting Batch: Reverse Users can reverse a batch to return the batch to the state before the payment or receipt was created for the batch. The reverse action is only enabled for batches that have successfully been settled and have a status of ‘Complete’. Once a batch is reversed, the invoices and transactions are released to be picked up by other batches.

Inquiry and Reporting Proposed Netting Report Don’t think a visualization is necessary AP/AR Netting provides easy to use inquiry screens to view netting batch details on line – including which transactions were netted, and corresponding payment and receipt information. AP/AR Netting also provides two new reports: Proposed Netting Report Final Netting Report This slide shows the Proposed Netting report UI. It contains the transactions selected for netting which is created during the Create Netting Batch process. This report will also be sent to the trading partner where trading approval is required. The screenshot shown on the slide is a prototype and the final UI might be slightly different.

Inquiry and Reporting Final Netting Report The second report is the Final Netting Report which is created at the end of the netting process when the transactions have been cleared. This report shows the final netting details (i.e. Payment and Receipt Number, Netted Amount). The screenshot shown on the slide is a prototype and the final UI might be slightly different.

Inquiry and Reporting Third Party – Data Extract File Don’t think a visualization is necessary The Netting Data Extract for Third Parties is a process that will gather all AP and AR transactions that have been netted for a particular Netting Agreement and Netting Batch. This process will be initiated when the Netting Batch Status is changed to ‘Complete.’ This will provide customers a data extract file that can be uploaded into third party systems in order to copy the Netting Batch that has been performed by the deploying company. Third parties will need to net exactly the same as the deploying company, except the transactions will be opposite – i.e. Deploying company AP Credit, will be Third Parties AR Debit – to keep accounting in sync and in balance. The screenshot shown on the slide is a prototype and the final UI might be slightly different.

Dependencies and Interactions Let’s discuss the dependencies and interactions.

AP/AR Netting Setup Dependencies General Ledger The netting bank account is created as a generic account in General Ledger. Cash Management The control netting bank account is identified as a netting account in CE. Payables Payments are created in AP. Receivables Receipts are created in AR. General Ledger The netting bank account is created as a generic account in General Ledger. Cash Management The control netting bank account is identified as a netting account in CE. Payables Payments are created in AP. Receivables Receipts are created in AR.

Summary Let’s summarize what we have discussed regarding AP/AR Netting.

Netting Process Summary Automated Netting Process: Create Netting Batch Submit batch for Netting Review and Report Benefits Improve efficiencies and reduce data entry Easy setup and maintenance Simplify Accounting Cost Savings Flexibility To summarize, we have discussed how to setup and submit the netting batch process. This solution provides the following benefits: Improve efficiencies and reduces data entry AP/AR Netting will automatically create AP Payment(s) and AR Receipt to clear a selected number of AP and AR transactions netted instead of settling each netted transaction one by one. 2. Easy setup and maintenance - Allows customers the ability to define a netting agreement incorporating their netting business rules and transaction criteria to run their netting process with minimal user intervention. 3. Simplify Accounting – The implementation of a netting control account will allow AP and AR balances to remain balanced and correct after netting occurs. 4. Cost Savings – Netting allows for time saved by not relating transactions to a financial institution. For example, no EFT files sent, no acknowledgement files received, no clearing files to upload and reconcile, transactions do not appear on bank statement, which in effect drives decreased bank charges, and savings on collection activities (dunning and late payment interest invoicing). 5. Flexibility. Optional features are available so that companies can tailor their netting process to meet their business needs.

Additional Resources for Customers and Partners

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