Bilateral Netting

Netting deposits are the result of a net of payable and receivable transactions. If your organization uses both PeopleSoft Payables and PeopleSoft Receivables, you can offset open items in PeopleSoft Receivables with open vouchers in PeopleSoft Payables by using bilateral netting. This function is useful when some of your customers are also suppliers from whom you purchase goods or services.

You need to set up a contractual arrangement with your trading partners who want to participate in the netting process. You specify which supplier IDs and customer IDs participate in each netting selection and the system nets the open vouchers and items for those customers and suppliers. You also specify rules for selecting the vouchers and items and for the order in which the system matches the items. For example, you can specify that you want the process to match the smallest items or largest items first.

Note:

If you do not want to include an item in the netting process, deselect the Available for Netting check box on the View/Update Item Details - Detail 1 page.

The netting process uses a netting bank account, which is a virtual bank, for the exchange of funds. No exchange of actual funds occurs, but the process creates a deposit that uses this bank account.

In some cases, when you net transactions, the total of the receivable items and the payable vouchers is not equal. If the receivables are greater than the payables, the process selects the items to net based on the netting rules and then partially nets one item. For example, suppose that you have two items in a netting selection: one for 100.00 and one for 50.00. You have two vouchers in a netting selection: one for 75.00 and one for 50.00. The total of the vouchers is 125.00 and the total of the items is 150.00. Your netting rules specify that you net the largest item first. So the process would net both vouchers, the 100.00 item, and 25.00 of the second item.

When you close the netting selection using Pay Cycle Manager, the system creates a deposit with one payment for the total amount of the net. In this example, the deposit would be for 125.00. The deposit uses the netting reference ID for the payment ID. The closing process creates a payment worksheet for the deposit and sets its posting status to Batch Standard.

WARNING:

If you change the item selections on the payment worksheet, the accounting entries for the net will be out of balance.

The closing process changes the due date and payment method for all of the items in the netting selection that were not paid (including the item that the net partially paid) to the same due date and payment method based on the PeopleSoft Receivables receipt settlement instructions. It also assigns the netting reference ID to each item to facilitate payment application.

If the payables are greater than the receivables, the process is essentially the same, except that all items in the netting selection are paid in full by the netting deposit.