Create Netting Agreements

Business Rules and Preferences

The netting agreement business rules and preferences indicate the high level details and preferences that apply to the agreement between you and a trading partner. Set up these requirements to create a netting agreement:

Business Rules Region

Select Legal Entity for the agreement. Netting is performed for the legal entity. If you have multiple business units assigned to a legal entity, they will all be assessed for netting.

Note: The Netting manager can only net invoices that he or she has access to from the business unit security.
Enter an Agreement Name.
You can also enter a Trading Partner Reference from your third party.
Enter a Start Date for the agreement. The start date should reflect the contractual start date with the third party.
You can also enter an End Date for the agreement.

Note: Settlements can only be created for agreements if the date of the settlement is within the start date and end date range. If the agreement has ended between you and the third party, you must provide the end date for the agreement. This prevents further netting settlements from taking place for the agreement, and the agreement can no longer be used to process netting.

Netting Preferences Region

The netting preferences dictate how you want to manage the transactions in an agreement.

Select the Netting Bank Account Name.

Note: Only active bank accounts with the Netting account selected is available for selection.
Select the Netting Order Rule. The rule indicates the priority in which transactions are selected for netting. You can change the ordering of netting transactions once a settlement has been selected in the ADFdi spreadsheet download. The Netting Order Rule consists of these rules:
- Due Date from oldest to most recent: Select this rule if you want to clear transactions that are past or near the due date first.
- Ascending Amount: Select this rule if you want to clear a large number of small transactions first.
- Descending Amount: Select this rule if you want to clear the transactions with the larger amounts first.
- Transaction date from oldest to most recent.
Select the Netting Balance Rule. The rule determines the conditions for netting. To restrict the netting to only when the balance of payables invoices is greater than the balance of receivables transactions, select Net when Payables is greater than Receivables. You can also select Net Always.
You can assign a Netting Group to your agreement.
Select the Allow early settlement discount check box if you want to ensure that eligible discounts are applied to the amounts.
Select the Netting Currency Rule.

You can set the netting currency rule to Use Single Currency if you want to select invoices and transactions for a single currency. If you have invoices in transactions for multiple currencies, you can select Net within each currency. For example, if you have GBP and EUR invoices or transactions that you want to net, a settlement will be created for each currency. Both settlements can then be treated independently of one another.
Ensure that the Multicurrency check box is selected for the Netting Bank Account.

Pay Groups

Select these options as required:

To allow all Payables invoices to be available for a settlement, regardless of which pay group is assigned to the invoice, you must select All.
To net invoices that belong to a set of pay groups, you must select Only Include and then enter the pay groups that you want to include. The settlement process then selects the invoices that belong to the pay groups assigned to the agreement.
To exclude invoices that belong to a set of pay groups, select Only Exclude and then enter the pay groups that you want to exclude. The settlement process then excludes the invoices that belong to the pay groups you enter.

Payables Invoice Types

You can restrict the types of Payables invoices that are eligible for netting by indicating the types of Payables invoices you want to consider. You can assign any of these invoice types to the agreement:

Standard: This is the default value.
Credit Memo
Debit Memo

If you only want to net the standard invoices and debit memos, select the options from the list of values. The settlement process does not pull the Credit Memos in Payables.

Note: Payables Invoice types are predefined by Oracle, and cannot be changed.

Receivables Transaction Types

Select these options as required:

To allow all Receivables transactions to be available for a settlement, regardless of which transaction type is assigned to the invoice, you must select All.
To net transactions that belong to a set of transaction types, select Only Include and then enter the transaction types that you want to include. The settlement process then selects the transactions that belong to the transaction types that are assigned to the agreement.
To exclude transactions that belong to a set of transaction types, you must select Only Exclude and then enter the transaction types you want to exclude. The settlement process then excludes the transactions that belong to the transaction types you enter.

Trading Partners

The Trading Partners tab enables you to define the suppliers and customers that you want to net transactions. Complete the setup as part of creating a netting agreement:

Select Supplier Region

Select one or more Supplier Names that represents the suppliers you want to net invoices. The Supplier Number and Supplier Tax Registration Number from the supplier profile is displayed for the purpose of validation.
You can also select one or more Supplier Sites for the Supplier Name. To include all supplier sites for netting, leave the Supplier Site field blank. The Site Tax Registration Number is displayed for the purpose of validation when you select a Supplier Site.
The netting process ranks the invoices from the suppliers based on the Priority for the Suppliers. You can change the invoices you selected even after selecting a settlement.

Select Customer Region

Select one or more Customer Names that represents the customers you want to net transactions. The Customer Number and Customer Tax Registration Number from the customer profile is displayed for the purpose of validation.
You can also select one or more Customer Sites for the Customer Name. To include all customer sites for netting, leave the Customer Site field blank. The Site Tax Registration Number is displayed for the purpose of validation when you select a Customer Site.
The netting process ranks the transactions from the customers based on the Priority for the Customers. If you select only one Customer Site, the priority does not apply. However, for more complex relationships, you must order the priority of the customer and customer sites to ensure that you net transactions from certain customer representations first.

Letters

The Letters tab enables you to configure how you want the Netting Letter to be distributed to your third party. The letter is a confirmation to the third party that the invoices have been netted, and lists all the invoices and transactions that were included in the netting amount.

Letter Preferences

When you first create an agreement, the Generate Netting Letter is selected by default. If you do not want letters to be generated to send to your third party, then you can disable this by deselecting the Generate Netting Letter check box. The Agreement setup is complete when you click Save.
If you want to email the netting letters to the third party, enable the Send Letters by E-Mail check box.

Netting Letter Contacts

If you enable the Generate Netting Letter, the letter is sent to the Recipient Address. The address is automatically collected from the Supplier Address of the highest priority supplier site that is Primary Pay, and entered on the Trading Partner tab. You can override this address to any other address for the supplier or customer combination that you define in the trading partner tab. The address you select appears on the Netting Letter.
Select the Language in which you want the letter to be presented to the customer. The value will default from the Site Language of the supplier site that is selected in the Recipient Address.
If you have enabled the Send Letters by E-Mail option, you must also enter these values:
- To Email: Enter the email address or addresses to which the letter will be sent. Follow the standard email syntax, for example, "name@companyname.com" and separate multiple emails using a comma (,). You can send letters to multiple sites by entering multiple email recipients. The Primary contact of the supplier site is set as default in the Recipient Address. You can overwrite this with a different email address if required.
  
  Note: To Email field input limit is 240 characters.
- From Email: Enter the email address that will appear on the recipients From E-Mail. This should be the person or department email that created the settlement. The value will default from the Statement Delivery Using E-Mail: From E-Mail from the Receivables System Options if it exists. You can overwrite this with a different email address if required.
- From Name: Enter the From Name that will appear on the netting letter. This should be the person or department email that created the settlement. The value will default from the Statement Delivery Using E-Mail: From Name on the Receivables System Options if it exists. You can overwrite this to a different value if required
- Reply-to E-Mail: This is optional. The Reply-to E-Mail address appears on the recipients Reply to E-Mail. This should be the person or department email address that will deal with any queries from the third party relating to the netting settlement. The value will default from the Statement Delivery Using E-Mail: Reply-to E-Mail from the Receivables System Options if it exists. You can overwrite this with a different email address if required.

Saving a Netting Agreement

After all section details are entered, you can either select Save and Create Another agreement, or Save and Close. When you save the agreement, the validation runs on the third party entities and sites that have been entered. If the application detects different Tax Registration numbers on the third party records, a warning is displayed, asking for verification that you have selected the correct combination. This is intended to ensure that you validate the correct combination of suppliers, supplier sites, customers, and customer sites have been selected for netting.

Once an agreement is saved, you can edit it at a later date. However, you cannot change these attributes:

Legal Entity
Agreement Name

You can create a Netting Settlement based on the Netting Agreement that you have set up.

Importing Netting Agreements

You can also import Netting Agreements from the Import Netting Agreements FBDI spreadsheet. We recommend you review the demonstration that is available in the training material.

Summary guidance for importing netting agreements:

Download the Import Netting Agreements FBDI spreadsheet.
Enter the agreements in the spreadsheet based on the guidance in the notes.
Create a .zip file.
Use File Import to import the .zip file. Select fin/payables/import account.
Run the Load Interface File for Import process, select the Import Netting Agreements for the Import process. When the process is complete, the netting agreements from the spreadsheet will be uploaded into the netting interface tables
Run the Import Netting Agreements process. You can optionally select a range of legal entities or a range for the Netting Agreement name.