Netting in Accounts Receivable and Accounts Payabl...

rakhmatilla_tuganov

In this blog post, I would like to cover a small yet useful functionality in the Accounts Payable (AP) module of SAP S/4HANA: Netting of Accounts Receivable (AR) and Accounts Payable (AP). While researching this topic online, I found limited end-to-end documentation, so this blog is aimed at filling that gap with a clear walkthrough.

Scope of the Blog

Create a Business Partner and extend it to Supplier (FI) and Customer (FI) roles
Create AR and AP invoices
Execute netting using the Automatic Payment Program (APP)

1. Create a Business Partner and Extend It to Customer and Supplier Roles

First, create a Business Partner (BP) who will act as both a supplier and a customer. To do this, use the "Maintain Business Partner" app.

Select "Organization" as the BP type.
In the "Business Partner (Gen.)" role, go to the "Payment Transactions" tab and maintain the Bank Details (Bank Key, Account Number, IBAN, etc.) as shown in the screenshot below:

Next, extend the same BP to the following roles:

Customer (FI)
Supplier (FI)

Within the Company Code section of each role, ensure the following:

In the Payment Transactions tab, specify a Payment Method that will later be used in the APP.
Tick the "Clearing with Vendor"/"Clearing with Customer" checkbox. This setting is critical for enabling netting between AR and AP.

Finally, under the Supplier (FI) role, make sure to fill in the Customer Number in the General Data section to establish the link between the customer and supplier accounts:

2. Create AR and AP Invoices

Now, create AR and AP invoices using the customer and supplier accounts created in the previous step. A few important points to remember:

Leave the Payment Method field empty in both documents. If it is filled, the APP will treat them as separate payments, defeating the purpose of netting.
Ensure that the total payable amount is greater than the receivable, so that the APP will generate a net payment for the difference.

This ensures that the system can offset the AR and AP balances during payment processing.

3. Schedule the Automatic Payment Program (APP)

Use the "Manage Automatic Payments" app to execute the netting process:

Create a new parameter run and enter the relevant Customer/Supplier number, Company Code, and Payment Method.
Ensure the invoices are due on the payment run date.
Run the Payment Proposal and check the results.

If everything is configured correctly, you will see a single payment that offsets both open items and pays only the balance.

Conclusion

This simple configuration allows you to reduce unnecessary cash flows and administrative efforts by settling AR and AP balances for the same business partner via netting. Although small, this functionality can be very useful in real-world business scenarios—especially when dealing with intercompany transactions or recurring vendors who are also customers.

Regards,
Rakhmatilla Tuganov

james589batson

@rakhmatilla_tuganov wrote:
In this blog post, I would like to cover a small yet useful functionality in the Accounts Payable (AP) module of SAP S/4HANA: Netting of Accounts Receivable (AR) and Accounts Payable (AP). While researching this topic online, I found limited end-to-end documentation, so this blog is aimed at filling that gap with a clear walkthrough.
Scope of the Blog
Create a Business Partner and extend it to Supplier (FI) and Customer (FI) roles
Create AR and AP invoices
Execute netting using the Automatic Payment Program (APP)
1. Create a Business Partner and Extend It to Customer and Supplier Roles
First, create a Business Partner (BP) who will act as both a supplier and a customer. To do this, use the "Maintain Business Partner" app.
Select "Organization" as the BP type.
In the "Business Partner (Gen.)" role, go to the "Payment Transactions" tab and maintain the Bank Details (Bank Key, Account Number, IBAN, etc.) as shown in the screenshot below:
Next, extend the same BP to the following roles:
Customer (FI)
Supplier (FI)
Within the Company Code section of each role, ensure the following:
In the Payment Transactions tab, specify a Payment Method that will later be used in the APP.
Tick the "Clearing with Vendor"/"Clearing with Customer" checkbox. This setting is critical for enabling netting between AR and AP.
Finally, under the Supplier (FI) role, make sure to fill in the Customer Number in the General Data section to establish the link between the customer and supplier accounts:
2. Create AR and AP Invoices
Now, create AR and AP invoices using the customer and supplier accounts created in the previous step. A few important points to remember:
Leave the Payment Method field empty in both documents. If it is filled, the APP will treat them as separate payments, defeating the purpose of netting.
Ensure that the total payable amount is greater than the receivable, so that the APP will generate a net payment for the difference.
This ensures that the system can offset the AR and AP balances during payment processing.
3. Schedule the Automatic Payment Program (APP)
Use the "Manage Automatic Payments" app to execute the netting process:
Create a new parameter run and enter the relevant Customer/Supplier number, Company Code, and Payment Method.
Ensure the invoices are due on the payment run date.
Run the Payment Proposal and check the results.
If everything is configured correctly, you will see a single payment that offsets both open items and pays only the balance.
Conclusion
This simple configuration allows you to reduce unnecessary cash flows and administrative efforts by settling AR and AP balances for the same business partner via netting. Although small, this functionality can be very useful in real-world business scenarios—especially when dealing with intercompany transactions or recurring vendors who are also customers.
Regards,
Rakhmatilla Tuganov

Hello @rakhmatilla_tuganov,
This blog fills a critical documentation gap by providing a clear step-by-step guide on netting AR and AP in SAP S/4HANA. The walkthrough ensures smooth execution, from setting up a Business Partner to processing invoices efficiently. Well-structured and highly useful! kroger feedback

Best Regards,
James Batson