Create a Netting Settlement

The topic describes these processes:

• Creating a Settlement

• Reviewing a Settlement

• Modifying a Settlement

• Submitting a Settlement

Creating a Settlement

You can create a netting settlement between a legal entity and your trading partners. Create a settlement either for a single agreement or a group of agreements. After you run the settlement process, the application lets you review the settlement in a spreadsheet. You can select any of these options to create a settlement:

• Create settlements for all agreements that belong to the legal entity.

• Create settlements for specific netting groups that you define

• Create a single agreement

To create a new settlement, perform these steps:

1. Select the Legal Entity for the first party. Only legal entities with active agreements are available for selection.

2. For multiple agreements: Select All Agreements to perform netting on all agreements that belong to the legal entity.

3. For specific netting groups: Select All Agreements, and select the Netting Group to perform netting for a specific group of agreements assigned to your legal entity.

4. For a single agreement: Select Specific Agreement, and select the Netting Agreement that you want to use to perform netting.

5. Select the Settlement Date. The settlement date signifies the date when you want the netting to occur. It cannot be a prior date, and the default value is the current date.

6. Enter a Settlement Name. The predefined values for the settlement name are legal entity, agreement option, and today's date. You can override the default values.

7. Select Yes in the Settle Without Review field to settle a settlement without reviewing the content. However, you should use the default value of No so that you can internally verify and modify the settlement details before creating the settlement.

8. Enter the Transaction Due Date. All transactions are selected in the netting process if their due dates are before or equal to the transaction due date. Entering the transaction due date helps you to avoid late payment charges, and plan your settlement better.

9. Enter the Accounting Date. All the payments and receipts that are created have the accounting date stamped on the documents.

10. Select the Conversion Rate Type. This is the exchange rate that is used when you calculate any foreign currency transaction gains and losses. For example, GBP may be your ledger currency but the transactions may be in EUR. The default value of the conversion rate type comes from the AR_DEFAULT_EXCHANGE_RATE_TYPE profile option in Manage Receivables Profile Options. The default value is taken from the user level. If that has not been set up, then it is taken from the site level value. If neither option is set, the default value is set to the corporate rate.

You can either Save and Create Another settlement, or Save and Close. Once you save the record, you will receive a confirmation that the netting process has started. The netting process then selects all eligible invoices and transactions that meet the criteria on the netting settlement and the agreements to which they relate. The netting process may create multiple settlement numbers depending on these reasons:

• Number of agreements you have selected for running the netting settlement.

• Number of different currencies in the settlement: A settlement is created for every currency of transactions.

For example, if you have 5 agreements and 2 of the agreements contain two different currencies of invoices or transactions, the application creates 7 different settlement numbers for the settlement name. Each settlement is then processed independently.

Generating Settlement

Generating Settlements

You can generate and schedule netting settlements between a legal entity or business unit, and your trading partners. Settlements can be for a single agreement, a group of agreements, or all agreements. To generate netting settlements, select these parameters and run the Generate Netting Settlements process.

• Legal Entity or Business Unit: Legal entity or business unit for which you want the netting to be generated for.

• Netting Group: Group of agreements for which the netting is generated for.

• Agreement Name: Agreement name for which the netting is generated. To generate netting for all agreements, leave this blank.

• Settlement Date: Date when the netting occurs. It cannot be a prior date and the default value is the current date.

• Settlement Name: Name for the settlement you're generating. The predefined name combination is legal entity, agreement option, and today's date. You can override this and have any name. For multiple settlements, the same settlement name is applied, but different settlement numbers are associated for each agreement within the settlement.

• Settle Without Review: To generate settlements without reviewing the content, select Yes. However, we recommend you use the default value No so that you can internally verify and modify the settlement details before generating the settlement.

• Transaction Due Date: Due date to select transactions that must be processed. Transactions having their due dates are before or equal to the transaction due date are processed for netting.

• Accounting Date: All the payments and receipts that are created have the accounting date published on the documents.

• Conversion Rate Type: Exchange rate that is used to calculate any foreign currency transaction gains and losses. For example, GBP may be your ledger currency but the transactions may be in EUR.

After you run the settlement job, the application lets you review the settlements in spreadsheets.

The netting process may create multiple settlement numbers depending on these reasons:

• Number of agreements you have selected.

• Number of different currencies in the settlement. A separate settlement is created for each currency of transactions.

Reviewing a Settlement

If you have opted to review the settlement before the creation of payments and receipts, you can review the proposed settlement in a spreadsheet. You must review the content to confirm that you have selected the correct set of invoices and transactions for netting.

Note: You cannot alter the settlement after this point until the netting process creates the payments and receipts.

To review a settlement perform these steps:

1. Select Download Settlement to Spreadsheet. You can also download the settlement in a spreadsheet from the Download option in the settlement search results table against your settlement number.

2. Open the downloaded ADFdi excel spreadsheet, and review the details of the settlement.

   Note: Ensure that you have installed the Oracle ADF Desktop Integration Add-In for Excel before reviewing a settlement.

3. Netting Toolbar: Open the spreadsheet, and connect to the instance. The Netting Settlement menu appears in the excel ribbon. You must click the Upload Settlement icon if you make changes to the settlement through the ADFdi spreadsheet before submitting the final settlement.

4. Netting Summary: The summary information appears on both Payables and Receivables tabs. These fields comprise the netting summary:

   • Status of the settlement when you download the spreadsheet. The values are Selected, Reversed, and Settled.

   • Payables Amount that sums up the total amount of Payables invoices for your suppliers.

   • Receivables Amount that sums up the total amount of Receivables transactions for your customers.

   • Proposed Netting Amount that represents the amount that can be netted.

5. Payables Invoice Details: The Payables tab lists the invoices that were selected for netting in the spreadsheet. These fields comprises the key columns:

   • Changed, Exclude, Row Status: These are indicators that track which rows have been removed or changed.

   • Rank: Indicates the order in which the final netting process will net the invoices. You can change the ranking if you want to include or exclude other Payables invoices in the netting settlement.

   • Invoice Number: Indicates the invoice that is selected by the process as a candidate for netting.

   • Invoice Type: Represents the Payables invoice type. Only the invoice types that you selected in the agreement setup is selected.

   • Supplier Name, Number, and Site: The supplier details indicate the trading partner in Payables to which the invoice is related.

   • Invoice Date: Indicates the date that is stamped on the invoices in Payables.

   • Invoice Amount: Indicates the total invoice amount in Payables.

   • Open Amount: The amount that will be netted.

   • Invoice Currency: The invoice currency on the Payables invoice.

   • Settlement Currency: The currency in which the invoice will be settled.

6. Receivables Transaction Details: The Receivables tab lists the transactions that were selected for netting. These fields comprises the key columns:

   • Changed, Exclude, Row Status: These are indicators that track which rows have been removed or changed.

   • Rank: Indicates the order in which the final netting process will net the invoices. You can change the ranking if you want to include or exclude other Receivables transactions in the netting settlement.

   • Transaction Number: Indicates the transaction that is selected by the process as a candidate for netting.

   • Transaction Type: Represents the Receivables transaction type. Only the transaction types that you selected in the agreement setup is selected.

   • Customer Name, Number, and Site: The customer details indicate the trading partner in Receivables to which the transaction is related.

   • Transaction Date: Indicates the date that is stamped on the invoices in Receivables.

   • Transaction Amount: Indicates the total invoice amount in Receivables.

   • Open Amount: The amount that will be netted.

   • Transaction Currency: The invoice currency on the Receivables invoice.

   • Settlement Currency: The currency in which the invoice will be settled.

Modifying a Settlement

After reviewing the proposed settlement, perform these actions:

• Exclude or remove invoices or transactions

• Include or add invoices or transactions

• Reorder the settlement

To remove some invoices or transactions from the proposed settlement, perform these steps:

1. Double click the Exclude cell for the invoice or transaction number.

2. Save your changes, and click Upload Settlement.

3. The Payables or Receivables amount decreases in the spreadsheet after the invoice or transaction is removed.

To add other invoices or transactions into the settlement that were not originally selected as part of the process since they did not adhere to the settlement criteria, perform these steps:

1. Add a new row in the spreadsheet.

2. Double click the Invoice Number to add a Payables invoice or the Transaction Number to add a Receivables transaction.

3. Search for the Invoice Number or the Transaction Number. Once you have selected your invoice or transaction, the application adds it to the spreadsheet.

4. The Row Status changes, indicating that you have new data.

5. Save your changes, and click the Upload Settlement. The row status indicates that the row has been successfully inserted.

6. The Payables or Receivables amount increases in the spreadsheet after the invoice or transaction is added.

You can reorder some invoices or transactions to force them to be netted. For example, you notice that you have a very important invoice that you want to be netted. However, since the AP total amount is substantially more than the AR total amount, there is not enough AR balance to net with AP. You can then increase the ranking of the AP invoice to 1 to force the invoice to be netted. To reorder an invoice or transaction, perform these steps:

1. Increase the Rank according to your requirements.

2. A confirmation is displayed in the Changed column. Review to confirm the reordering.

3. Save your changes, and click Upload Settlement.

Submitting a Settlement

Submitting a settlement in the Selected status runs the settlement process to create payments and receipts. Depending on the Netting Letters setup, the netting letter may automatically be submitted from the netting routine. To submit a settlement, perform these steps:

1. Search for the settlement in the Manage Netting Settlements page.

2. Select the row that lists the settlement.

3. Click Submit Settlement.

4. A confirmation message is displayed, indicating that the process has been submitted.

5. Refresh the date in the settlement table.

6. The status of the settlement changes from Selected to Clearing. This indicates that the payments and receipts are being created in Payables and Receivables.

7. When the settlement is complete, the status of the settlement changes to Settled. Click Status to confirm.

These reports are also run during the settlement process:

• Netting Report: Lists all the invoices and transactions with details about the amounts netted.

• Netting Letter: If you have enabled the Generate Netting Letter option, a netting letter is generated for your third party. If you have enabled the Send Letter by E-Mail option, the letter is automatically sent to the third party. For more information, see the Letter section in Netting Agreements: Explained.

You can review the settlement details before the final submission. Settlement details include:

• Payment Numbers

• Receipt Numbers

• Invoice Netted

• Transactions Netted

• Invoice Not Netted: Indicates that the Payables balance is greater than the Receivables balance.

To review the settlement details, the netting manager should perform these steps:

1. Search for the settlement in the Manage Netting Settlements page.

2. Click the Download link to download the spreadsheet.

3. Open the spreadsheet to review the details. You must connect to the instance when you are prompted.

Results

The Payables tab displays these columns:

• Payment Number: Indicates the payment number that was stamped on the invoice in Payables.

• Netting Amount: Indicates the sum of the Payables invoices that were successfully netted.

• Netted Amount: Indicates the netted amount for each Payables invoice.

• Payables and Receivables: If Payables is greater than Receivables, some invoices will not be netted. An invoice can also be partially netted. The netting manager can review the details in the spreadsheet so that the Netted Amount is zero or less than the Invoice Amount.

• Payment Numbers: Indicates that the invoice was not netted if the column is blank. The invoice is made available for the next netting settlement. You can also make the payment in Payables.

• Netted Amount: Indicates that the netted amount of invoices that were not netted will have zero in the Netted Amount column.

• Partially Netted Invoices: Indicates invoices where the Invoice Amount greater than the Netted Amount, and the netted amount is not zero. In cases like this, the invoices has been partially paid. You can use the partial payments in future settlements or mark as paid in the traditional business process outside the Netting functionality.

The Receivables tab displays these columns:

• Receipt Number: Indicates the receipt number that was stamped on the transaction in Receivables.

• Netting Amount: Indicates the sum of the Receivables transactions that were successfully netted.

• Netted Amount: Indicates the netted amount for each Receivables transaction.