Inter-entity netting setup

Netting of inter-entity payable and receivable accounts is a process to help monthly reconciliation. The process can be run as needed and will generate the appropriate journal entries by entity.

These are features of inter-entity netting:

  • Inter-entity journals are an arrangement between the accounting entities in a finance enterprise group where each accounting entity shares revenue and expenses.
  • Inter-entity netting is the offsetting of accounts receivable and accounts payable between two accounting entities owned by the same finance enterprise group. It reduces credit and settlement risk.
  • Journal entries are automatically generated for the selected accounting entity parameter at the time that the inter-entity netting process is initiated.

You can select sub accounts or dimensions for netting inter-entity journals. Select the sub account or dimension on the Inter Entity Dimension field on the Options tab of the finance enterprise group.

System accounts must be created for inter-entity Payables and inter-entity Receivables to use inter-entity netting. See System accounts.

Create an accounting entity relationship between the required accounting entities to create inter-entity journals. If an inter-entity dimension is selected as the Sub Account, then you must select the respective sub account values for the sub account. Select the Create Reverse Relation check box to create the reverse relation. See Creating accounting entity relations.
Note: If you select the Entity Dimension option as Dimension 1-10, the value should already exist before creating the relationship.

These fields and accounts are affected by the inter-entity netting process:

  • A Netting Journal Approval check box is available on the Options tab of the finance enterprise group. If the check box is selected, Approval Code will become a required field when running the Inter Entity Netting action. If the check box is cleared, the Approval Required check box will be displayed when running the Inter Entity Netting action. If the Approval Required check box is selected, Approval Code is displayed.
  • Inter-entity netting journals must use the functional amount.
  • If the inter-entity Payables account is greater than the inter-entity Receivables account, then the journal would use the amount from the inter-entity Receivables account. The transactions would be a credit to inter-entity Receivables and a debit to inter-entity Payables.
  • If inter-entity Receivables is greater than inter-entity Payables, then the journal would use the amount from the inter-entity Payables account. The transactions would be a credit to inter-entity Receivables and a debit to inter-entity Payables.
  • If the accounts are equal, then the journal would use the amount from the inter-entity Payables account. The transactions would be a credit to inter-entity Receivables and a debit to inter-entity Payables.
  • A separate journal is created for each accounting entity and includes all the transactions for each inter-entity relationship.
  • The Transaction Date is set to the inter-entity netting batch job run date.
  • The Total is based on the core ledger and user-defined ledgers.
  • Required dimensions have the default dimension values.
  • The System Code is GL and the Event Code is CB.
  • The netting journal post date is the period end date.