Can you please advise if there is a method that Oracle will net the intercompany balances between AP and AR so that only the net amount is paid or received?



For example, if we have a higher AP balance recorded for a vendor and a small AR balance. Instead of recorded in the payment in AP and then recording a receipt in AR. Can Oracle net the amounts and then you only record the payment for the difference?

Thanks in Advance

Yes, Oracle R12 allows you to use AP AR Netting, so that you pay your supplier the difference you may owe them, or you receive from them the difference they may owe you.

can you provide the steps to implement that

Automatic netting of AP invoices and AR transactions within a company is possible through AP AR netting feature.
The netting process will automatically generate AP payments and AR receipts in order to clear selected invoices and transactions.
I will try to produce a video on this but here are some high level steps for now.
1) You need to setup a bank in Oracle Cash Management that will be used by the netting process. The flag "Netting Account" must be set to Yes.
2) The netting bank account then is assigned to the seeded AR Receipt class "AP/AR Netting".
3) Enable "Allow payment of Unrelated Transactions" checkbox in Receivables System Options. This will enable netting agreement across multiple unrelated customers.
4) If approvals are requried for netting agreements, then create a contact (with email address) for the trading partner: supplier or customer.
5) Set the profile option "Chargeable Subcontracting Enabled" as Yes/No/D based on your requirements.
D: All eligible invoices will be selected for netting irrespective of whether or not they are matched to purchase orders.
Yes: Only invoices that were matched to purchase orders with outsourced assemblied, would be selected.
No: Only invoices that were matched to purchase orders without outsourced assemblies, would be selected.
6) How AP invoices and AR transactions are netted for a group of trading partners is controlled by Netting agreements.
Create netting agreements. Setup Rules.
Rules dictate which transactions will be selected for netting, and how they are ordered, and how they are processed.