Vendor And Customer Balances Netting | Microsoft Dynamics 365 F&O

Microsoft Dynamics 365 F&O | Vendor and Customer Balances Netting | D365 Finance Managing vendor and customer balances efficiently is crucial for any business. In this Blog, we’ll walk you through the Vendor and Customer Balances Netting process in Microsoft Dynamics 365 Finance & Operations (D365 F&O). You’ll learn how to offset payables and receivables, streamline financial reconciliation, and optimize cash flow management.

 What You’ll Learn:

• How to configure vendor and customer netting in D365 Finance
• Step-by-step guide to settling balances
• Best practices for financial reconciliation
• How to improve cash flow efficiency

 

We cover: When and why to use this feature.

• Step-by-step configuration.
• An end-to-end demo showcasing the netting process.
• Advanced automation options for even greater efficiency.

Set Up Customer-Vendor Relationships

• Path: Accounts payable > Vendors > All vendors > Select Vendor > Related Information > Customer/Vendor
• Add the related customer account to the vendor.

Or do the same from the customer side:

• Accounts receivable > Customers > All customers > Select Customer > Related Information > Customer/Vendor

This step links customer and vendor for netting purposes

Run the Netting Process

• Path: Cash and Bank Management  > Netting > Netting agreementsNetting agreements

Create a Netting Agreement

1. Click New. Click the “New” button to create a new agreement.
2. Enter Agreement Details Name: Enter a unique name (e.g., MR ENTERPRISES). Description: (Optional) e.g., (MR ENTERPRISES). Add Journal Name and Main account for Netting Effective from and to Date.
3. Save the Agreement. Click Save.
4. Activate Click Activate to make the agreement available for use in the Netting Process.

Create Vendor Invoice Journal

Accounts payable > Invoices > Invoice journal

• Click “New”
• In the action pane, click New to create a new invoice journal.
• Add the Vendor to test the netting for Process (MS-V-00000293)

Free Text Invoice Process (Customer Billing)

Accounts receivable > Invoices > All free text invoices

Create Free Text Invoice

• Click “New”
• Click New on the action pane to create a new free-text invoice.

Customer and vendor balance netting Process

Cash and Bank Management > Netting > Customer and vendor balance netting

Click on Create Netting

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Additionally, you can review the full history of all netting processes, including detailed records of each transaction. The system also allows you to view open customer and vendor transactions that qualify for netting before processing. In case a netting transaction is processed incorrectly, it can be reversed to restore the original balances and cancel the associated settlements.

How to View the Netting Voucher in Vendor Transactions

Accounts payable > Vendors > All vendors > [Select Vendor]

1. Open the desired vendor account.
2. In the Action Pane, click on Transactions.
3. In the Vendor transactions form, locate the transaction related to netting:

Automatic netting

You can automatically net customer and vendor balances by defining a netting rule and then running it through a batch job or the process automation framework.

Set up a netting rule

• Go to Cash and bank management > Netting > Netting rule.
• Create a record, and enter a name and description.
• Select a netting sequence. Four options are available:

By due date - From oldest to newest

By due date - From newest to oldest

By invoice balance - From largest to smallest

By invoice balance - From smallest to largest

• Select the netting agreement scope. If you select All, all the active netting agreements are included in this rule. If you select Selected, define a netting agreement list.
• In the automatic netting, in the Include credit note and debit note field, select Yes or No.
• On the Netting criteria FastTab, define the criteria if users want to automatically net only specific vendor accounts, customer accounts, or invoice currency.
• Activate the netting rule.

Run automatic netting

There are three ways to run automatic netting.

• Trigger a one-time automatic netting by selecting Automatic netting on the Customer and vendor balances netting page.
• Trigger a one-time automatic netting by selecting Automatic netting on the Netting menu in the Cash and bank management module.
• Schedule periodic automatic netting by selecting Process automation on the Netting menu in the Cash and bank management module.