Netting Accounts Receivable and Accounts Payable

This chapter provides overviews of AR/AP netting, lists prerequisites and discusses how to:

• Net accounts receivable and accounts payable.

• Work with AR/AP netting transactions.

Understanding AR/AP Netting

When you do a large volume of business with an organization as both a customer and a supplier, you can perform accounts receivable netting and accounts payable netting (AR/AP netting) to increase efficiency and reduce operational costs by consolidating transactions in the JD Edwards EnterpriseOne Accounts Receivable and Accounts Payable systems.

When you perform AR/AP netting in JD Edwards EnterpriseOne, you reclassify transactions in Accounts Payable to Accounts Receivable and vice versa. For example, you can reclassify debit memos in Accounts Payable to invoices in Accounts Receivable, and credit memos in Accounts Receivable to vouchers in Accounts Payable.

Depending to which system you reclassify transactions, you either perform AR netting or AP netting:

• When you perform AR netting, you reclassify transactions in Accounts Payable to Accounts Receivable.

• When you perform AP netting, you reclassify transactions in Accounts Receivable to Accounts Payable.

AR/AP netting is similar to the credit reimbursement process in JD Edwards EnterpriseOne; however, AR/AP netting is a manual process and includes these additional features:

• Enables you to net unapplied cash (RU).

• Enables a bilateral reclassification of transactions in Accounts Receivable and Accounts Payable.

• Provides an audit trail of netting transactions.

Common Fields Used in This Chapter

Prerequisites

Before you complete the tasks in this section:

• Set up AAI item NC for the suspense (clearing) account between the JD Edwards EnterpriseOne Accounts Receivable and Accounts Payable systems.

• Ensure that the AR/AP Netting field in the Address Book record of the organization with which you do business as a customer and supplier is set to Y (Yes).

Netting Accounts Receivable and Accounts Payable

This section provides an overview of the AR/AP netting process and discusses how to:

• Set processing options for Manual Netting (P03B455).

• Enter AR netting transactions.

• Enter AP netting transactions.

Understanding the AR/AP Netting Process

There are three types of documents with which you work when you perform AR/AP netting:

• Source documents are documents that you reclassify to the JD Edwards EnterpriseOne Accounts Receivable or Accounts Payable systems.

• Transfer documents are documents that the system creates to close source documents.

• Result documents are documents that the system creates to offset source documents.

For example, if you reclassify a credit memo in Accounts Receivable, the system creates a negative receipt and a voucher. The credit memo is the source document, the negative receipt is the transfer document, and the voucher is the result document.

This table lists examples of source documents and the corresponding transfer and result documents that the system creates when you reclassify the source document:

Note. You can specify unique document types in the Voucher Entry MBF Processing Options (P0400047) and Invoice Entry MBF Processing Options (P03B0011) programs that the system assigns to result documents. Therefore, the document types that the system assigns to the result documents might differ from the document types that are listed in the preceding table.

Note. You cannot perform AR/AP netting for these documents:

Drafts (R1, P1)

Chargebacks (RB)

Deductions (R5)

Partially paid transactions

To perform AR/AP netting, use the Manual Netting program (P03B455) to create netting transactions. To create netting transactions, select transactions in either Accounts Receivable or Accounts Payable for which you want to reclassify and then post the transfer and result documents. You can specify whether posted or posted and unposted transactions are eligible for netting using the Posted Documents processing option.

When you create netting transactions, the system:

• Creates transfer documents in a transfer batch to close the source documents.

  When you post the transfer document batch, the system offsets the entry to the A/P or A/R trade account using the account specified by AAI item NC.

• Updates the source document pay status to P (paid) and the open amount to zero.

• Creates result documents in a result batch to offset the source documents.

  When you post the result document batch, the system offsets the entry to the A/P or A/R trade account using the account specified by AAI item NC.

• Assigns values to the Netting Transaction ID, Netting Doc Number (netting document number) and Netting Line ID fields on source, transfer and result documents.

• Updates the result document Netting Status field to 0 (Ineligible for Netting) to specify that the transaction is ineligible for AR/AP netting.

• Updates the Originating System field (OMOD) on Accounts Receivable result documents with a value of 5 (AR/AP Netting) to indicate that the document was created by the AR/AP netting process.

Note. If source documents contain tax and discount amounts, the system does not transfer these amounts to result documents. Taxes and discounts are processed in the source system.

Regardless of whether you perform AR netting or AP netting, you can select transactions from both systems to display a net total of the selected transactions. However, the system reclassifies only those transactions that apply to the method of netting that you perform.

For example, when you perform AR netting, you can select transactions in both Accounts Payable and Accounts Receivable. When you complete the netting entry, the system reclassifies the selected Accounts Payable transactions to Accounts Receivable, but the system does not reclassify or otherwise close or revise the transactions that you select in Accounts Receivable. If you perform AP netting, the system reclassifies the selected Accounts Receivable transactions to Accounts Payable but does not reclassify the selected Accounts Payable transactions. By selecting transactions in both systems, you can determine on which side the liability exists (for example, if the balance of the selected Accounts Receivable transactions is greater than the balance of the selected Accounts Payable transactions and vice versa). This can assist you in determining whether to perform AR/AP netting.

Note. Only those transactions that contain a 1 in the Netting Status field are eligible for AR/AP netting. The system updates this field with a 1 if the Address Book record of the customer/supplier contains a Y in the AR/AP Netting field. If you entered transactions in Accounts Payable and Accounts Receivable with the AR/AP Netting field set to N (No), you can use the Speed Status Change program (P03B114 and P0411S) to update the Netting Status field on these transactions to 1.

See Using Speed Status Change to Review and Revise Vouchers.

See Updating an Individual Invoice Using Speed Status Change.

See Updating a Group of Invoices Using Speed Status Change.

Example of AR Netting Accounting Entries

This example describes the AR netting process and the corresponding accounting entries that the system creates for each step of AR netting.

In this example, you:

• Bill a customer for 1,500 by creating an invoice (RI 101).

• Enter a voucher (PV 001) for 1,000 after you receive an invoice from the same customer, who is also the supplier.

• Receive a payment from the customer for 500 and enter it as a cash receipt (RC 201).

Step 1

You enter invoice RI 101 for 1,500 and voucher PV 001 for 1,000. The system creates these entries when you post the transactions:

Invoice and voucher accounting entries

Step 2

The customer nets the two transactions and sends you a payment for 500. To enter the receipt, you must first perform AR netting. To perform AR netting, you select voucher PV 001 to reclassify to accounts receivable. The system creates a manual payment (PN 211) for 1,000 and updates the voucher open amount to zero and the pay status to P. When you post the manual payment, the system debits the A/P trade account and credits the netting suspense account defined by AAI item NC:

Transfer document accounting entries

Step 3

The system also creates a credit memo (RM 102) to offset the voucher. When you post the credit memo, the system credits the A/R trade account and debits the netting suspense account:

Result document accounting entries

The netting suspense account has a zero balance and the net amount due from the customer is 500, which matches the amount of the customer's payment to you:

Accounts Receivable net balance

Step 4

You enter the payment for 500 as a cash receipt, applying the receipt to transactions RI 101 and RM 102:

Cash receipt accounting entries

Forms Used to Net Accounts Receivable and Accounts Payable

Setting Processing Options for Manual Netting (P03B455)

Processing options enable you to specify the default processing for programs and reports.

Defaults

These processing options specify default processing for AR/AP netting.

Process

These processing options are used to specify how the system processes AR/AP netting transactions.

Discount

These processing options specify how the system processes discounts.

Versions

These processing options specify the version of programs that the system uses to create documents for AR/AP netting.

Entering AR Netting Transactions

Access the AR Netting Entry form.

To enter AR netting transactions:

1. Complete the Currency Code field.

2. (Optional) Complete the Netting G/L Date and Netting Due Date fields.

3. (Optional) Complete the Customer/Supplier, Company, G/L Date and Due Date fields to narrow the selection criteria that the system uses to display transactions.

4. Click Find.

   The system displays all open transactions that meet the selection criteria and that contain a 1 in the Netting Status field.

5. Select transactions on the A/P tab that you want to reclassify to Accounts Receivable and then click Select/Deselect.

   A check mark displays next to the selected transactions to indicate that the system will reclassify the transactions to Accounts Receivable. Click Select/Deselect again to toggle the selection for a transaction.

   The system also displays the amount of the selected transactions in the A/P Total column in the header area of the AR Netting Entry form and the number of documents that you select in the Number Selected field below the detail area.

6. (Optional) To verify the net result of reclassifying the selected accounts payable transactions with specific transactions in accounts receivable, click the A/R tab and select the transactions with which you want to verify the netting result, then click Select/Deselect.

   The system displays a check mark next to the selected transactions and displays the amount of transactions that you select in the A/R Total column in the header area of the AR Netting Entry form.

7. Click OK.

   The system displays the Work with Netting Inquiry form. To continue adding netting transactions to the same transfer and result document batch numbers, click Add and then follow the steps to enter AR netting transactions.

   Note. The transfer and result batches remain at an In Use status until you exit the Manual Netting program. To post transfer and result batches, you must exit the Manual Netting program so that the system updates the batch status to Approved or Pending, depending on whether you require manager approval of input in Accounts Payable and Accounts Receivable.

Entering AP Netting Transactions

Access the AP Netting Entry form.

Follow the steps to perform AR netting, except select transactions for which you want to reclassify to the JD Edwards EnterpriseOne Accounts Payable system on the A/R tab instead of the A/P tab. Select transactions on the A/P tab to verify the net result of reclassifying the selected accounts receivable transactions with specific transactions in accounts payable.

Working with AR/AP Netting Transactions

This section provides an overview of revisions to AR/AP netting transactions and discusses how to:

• Review documents associated with AR/AP netting transactions.

• Void and delete AR/AP netting transactions.

Understanding Revisions to AR/AP Netting Transactions

After you enter AR/AP netting transactions, you can use the Manual Netting program to review associated source, transfer and result documents and to review netted and un-netted transactions.

In addition, you can delete or void netting transactions for which the associated result document has not been paid. You follow the same steps to delete and void netting transactions; if the transfer and result documents are unposted, the system deletes the result and transfer records, if the transfer and result documents are posted, the system creates new reversing records.

To delete and void netting transactions, you must select the result document to initiate the delete and void process. The system automatically deletes or voids the corresponding transfer document when you delete or void the result document.

When you delete a result document, the system:

• Restores the open amount of the source document.

• Changes the pay status on the source document from P (Paid) to the value assigned to the customer master record if the source document is an accounts receivable transaction, or the value assigned to the supplier master record if the source document is an accounts payable transaction. If the customer master and supplier master records do not have pay status values defined, the system then assigns the data dictionary value.

• Deletes the values in the source document Netting Transaction ID, Netting Doc Number and Netting Line ID fields.

• Deletes the transfer and result documents.

If you void a result document, the system:

• Restores the open amount of the source document.

• Changes the pay status on the source document from P to the value assigned to the customer master record if the source document is an accounts receivable transaction, or the value assigned to the supplier master record if the source document is an accounts payable transaction.

• Deletes the values in the source document Netting Transaction ID, Netting Doc Number and Netting Line ID fields.

• Marks the transfer and result documents as voided.

• Creates void records for the transfer and result documents, maintaining the values in the Netting Transaction ID, Netting Doc Number and Netting Line ID fields.

Note. You must delete and void netting documents in the Manual Netting program. You cannot delete and void netting documents in the application to which the documents belongs. For example, you cannot delete and void voucher result documents in the Standard Voucher Entry program.

Form Used to Work with AR/AP Netting Transactions

Reviewing Documents Associated with AR/AP Netting Transactions

Access the Work with Netting Inquiry form.

To review AR/AP netting transactions:

1. (Optional) Complete the Customer/Supplier, Company, Currency Code, G/L Date, Due Date and Transaction ID fields to narrow the selection criteria of the transactions that the system displays.

2. Select the Netted Documents option and then click Find to review netted documents.

   The system displays netted source and result documents in the detail area.

   Note. Source documents contain a 1 in the Netting Status field. Result documents contain a 0 in the Netting Status field.

3. To review the transfer document that is associated with a source or result document, select the source or result document in the detail area and then click Transfer Document.

   The system displays the transfer document on the form applicable to the type of document. For example, if the transfer document is a manual payment (PN), the system displays the Work with Payments form.

4. To review the source document that is associated with a result document, select the result document on the Work with Netting Inquiry form and then click Source/Result Document.

   The system displays the source document on the form applicable to the type of document.

5. To review the result document that is associated with a source document, select the source document on the Work with Netting Inquiry form and then click Source/Result Document.

   The system displays the result document on the form applicable to the type of document.

Voiding and Deleting AR/AP Netting Transactions

Access the Work with Netting Inquiry form.

To void and delete AR/AP netting transactions:

1. Select the result document that is associated with the netting transaction for which you want to delete or void.

2. Click Delete/Void.

3. Click OK on the Confirm Delete form.

   • If you are voiding an AP netting transaction and the result and transfer documents are posted, the Enter Void Information form displays. Enter a date and reason code in the Void G/L Date and Reason Code (03B/VR) fields, respectively, and then click OK.

   • If you are voiding an AR netting transaction and the result and transfer documents are posted, the Enter Void Information form displays. Enter a date and reason code in the Void G/L Date and Invoice Revision Code (03B/AR) fields.

Detail Area Fields

These fields are located in the detail area of the Work with Netting Inquiry form: