Setup Considerations: Invoice Netting

When you've external customers that are also your suppliers, you can net their invoices and settle the balance as a single payable or receivable amount. Example: A food service organization sells goods to its customers and also buys certain goods from them, making them suppliers too.

To use netting functionality, you need to configure the netting rules to establish relationships between the customers, sponsors, and suppliers for a given company. Workday enables you create invoice eligibility criteria to determine which customer and supplier invoices can net. This functionality doesn't extend to multicompany or direct intercompany netting.

You can:

Schedule the netting transactions for automatic processing.
Print a netting statement that you can add as an attachment to the supplier payment email.
Customize netting statement layout using the netting Business Intelligence and Reporting Tools (BIRT) form in Workday Studio Report Designer.

When you uptake netting functionality, Workday enables you to:

Eliminate the workaround of calculating the differences between supplier invoice and customer invoice amounts, records the payment in the journals automatically, and offsets the appropriate transactions.
Simplify your settlement process by eliminating the need to process supplier and customer invoices separately, improving efficiency.
Reduce your operational costs by eliminating multiple bank settlements.
Improve your financial cash forecasting because you can now appropriately fund relevant accounts.
Improve your collections risk because you can now offset overall receivables with payables at once.

Question	Considerations
Do you have contracts or external agreements with your business entities?	Ensure you finalize the netting agreements first as they determine how you configure your netting rules. For a single company, you can configure netting rules to establish relationships between specific: Customers and suppliers. Award sponsors and suppliers. Customers plus sponsors and suppliers.
Do you need to net specific invoices when older invoices are still open?	You can manage which invoices to net by: Defining the netting priority of invoices when you configure invoice eligibility rules. Selecting specific invoices and adjustments when you run the netting process manually.
Can you net any customer and supplier invoice?	You can only include those invoices in a netting transaction that have open balances, even if only the partial amount is eligible for netting.
Do you have past due invoices that are part of dunning?	Even when an invoice is part of a netting transaction, Workday includes that invoice in the dunning as long as the netting transaction is in a draft status. To exclude that invoice from dunning, first complete the netting transaction.
Does the netting process also include invoices that aren't yet due?	Netting functionality uses the invoice date to determine if an invoice is eligible for netting transaction. Therefore, it can include invoices that aren't yet due. Once the netting transaction is complete, Workday settles the net payable on the due date of that invoice as per the payment terms.
Do you have payment discounts as part of your payment terms?	When you net supplier and customer invoices, Workday calculates the payment discount only on the balance remaining after the netting transaction is complete.
Do you need to cancel a netting transaction and what is the impact?	When you cancel a netting transaction, Workday: Reverts the payment status on the supplier and customer invoices. Reverses the accounting entries for the transaction amount on the same ledger period as long as the period is open. Otherwise, Workday reverses the accounting entries in the next open period. Releases the supplier invoices and customer invoices. You can then include those invoices in another netting transaction or a settlement run.
Can you edit a netting transaction?	You can edit a netting transaction but can't change the header information. You can, however, add or remove invoices, change invoice amounts, and add attachments.
Can you net invoices in different transaction currency?	You can net in a different transaction currency but both the supplier invoices and customer invoices must be in the same currency. When the netting transaction currency is different from the invoice currency, the difference between the 2 exchange rates creates a realized exchange gain or loss journal entry.
Do you have worktag balancing enabled in your tenant?	When you define netting rules, Workday enables you to specify the worktags, including optional worktag balancing. Workday uses the worktag you specify to calculate interworktag balancing entries when netting customer and supplier invoices.
Do you need to net invoices originating from awards?	When you run netting, Workday enables you to bill both indirect and direct award costs to the sponsor.
Do you use scheduled settlement runs for remittance?	Workday recommends that you process your netting transactions before the scheduled settlement runs. Once you start the netting run, the included invoices aren’t available for settlement or payment until after the netting transaction is complete.
Do you need to void a check after the settlement is complete?	When you void a check after the settlement is complete, then the associated invoices become eligible again for netting.
Can you send netting statements to your suppliers?	Workday enables you to print a netting statement from the related actions menu of the netting transaction that you can later add as an attachment to the remittance email. You can only include those netting statements that have a print run type of Final .
Do you have a large number of customers that are also your suppliers?	Workday provides web services to mass load the netting rules instead of manually creating 1 rule at a time .

Use the

Edit Tenant Setup - Financials

task to enable the netting transaction ID sequence generator in your tenant.

Domains	Considerations
Setup: Netting Rule in the Common Financial Management functional area.	Enables you to create netting rules.
Process: Netting Transaction in the Customer Accounts and Supplier Accounts functional area.	Enables you to create netting transactions. Workday uses netting rules and invoice eligibility rules to retrieve invoices for netting. In Workday, all netting transactions occur by netting relationships. You can only view customers and suppliers that you have access to.
Subdomains for Process: Netting Transaction in the Customer Accounts and Supplier Accounts functional area: Process: Netting Transaction – Add Attachment Process: Netting Transaction – Cancel Process: Netting Transaction – Change Process: Netting Transaction – Reporting Process: Netting Transaction – View	Enables you to secures access to a specific netting feature, giving you more control over users activities.

Configure the

Netting Transaction Event

business process to review, edit, and approve netting transactions.

Workday also includes netting activity in these existing customer and supplier reports:

Customer Activity Details and Summary
Customer Balance Details and Summary
Customer Open Items
Customer Statements
Invoice Aging - Composite View
Receivables Aging Detail and Summary
Sponsor Statements
View Customer Invoices
Payables Aging
Payables Aging Detail
Payables to Supplier Balance Reconciliation and Exception Summary
Retention Payables to Supplier Balance Reconciliation
Supplier Activity Details and Summary

Web Service	Considerations
Get Invoice Eligibility Rules for Netting Transaction Put Invoice Eligibility Rule for Netting Transaction	Use to create, update, or retrieve invoice eligibility rules for netting transactions.
Get Netting Rules Put Netting Rule	Use to create new netting rules, update or delete existing rules, and retrieve rules.
Cancel Netting Transaction Get Netting Transactions Submit Netting Transaction	Use to cancel, retrieve, or mass load netting transactions in Workday. When you submit the web service, we create an in progress netting transaction.

The

SAF-T Core

and

SAF-T Norway

integration templates support invoice netting and account for netting in arrears.

Workday offers a Touchpoints Kit with resources to help you understand configuration relationships in your tenant. Learn more about the Workday Touchpoints Kit on Workday Community.