The Basics of Netting

The actual problem in netting is not the calculation of the net payments per participating company, but the reconciliation that is necessary in advance of the derivation of the payments to be reconciled, i.e. the intercompany reconciliation at the invoice level. This reconciliation prior to netting significantly increases the added value of the entire process for everyone involved. At the same time, it reduces the work required in all areas, both for the subsidiary companies and in the netting center.

tm5 is structured for the direct connection of the reconciliation, which is designed for single invoices, to the ERP system. From there, the necessary information about individual invoices can easily be transferred and used as the basis for the booking at the end of the process. For the companies, the clearing of internal invoices can be fully automated. The balances of the IC accounts will then no longer show any differences. Additionally, complete transparency about disputed cases or open points is guaranteed.

Optimization by Reconciliation

By using IC reconciliation in advance of netting, some essential points of the netting process can be improved.

• The reconciliation is done on the basis of all booked invoices and no longer on the basis of the due invoices reported by one party. This means that there is significantly more time available for the reconciliation and the obsessive modification of payment goals is no longer necessary. The invoices used are assigned by their due date, simply by the appropriate netting run by tm5. Especially for longer terms of payment, the time until payment is due can be used by both parties to come to an agreement about the processing and the settlement.
• All companies can participate in netting. This also applies for those who, to comply with legal foreign exchange requirements, are not allowed to clear the payments. These companies can participate in the reconciliation of the individual invoices without restrictions. In combination with the choice of the type of netting for the company (see netting), the decision to clear the payments gross, net or virtual can be made as part of the overall settlement.
• The principle "agreement before processing"  or AGREEMENTDRIVENNETTING – developed by BELLIN – applies. Owing to the separation of netting and reconciliation, the decision which invoices should flow into the next netting run for clearing can be made during reconciliation. Invoices where no agreement has been reached remain in reconciliation. The result that is available for netting is based on all invoices where the debitor and creditor are in agreement. The company decides who is responsible for the agreement and who finally makes the decision about the settlement.
• The netting messages are no longer required and are completely replaced by the reconciliation process. The companies only need to deal with the multilateral reconciliation.