Netting Option – AFE/Operations

Each AFE will get a specialized code indicating separate project budgets. That code is attached to each entry so the system knows which budget that entry belongs to. If an entry is not coded to a specific AFE, it’s called an Operation cost. This will come into play when setting up netting. This means that the item will not be covered by Prepayment funds and will need to be paid separately.

You may also match up multiple A/R Accounts with Multiple Prepaid Accounts. These options will affect how the statement looks when (1) revenue and billing are to be netted and (2) prepayment funds are not available.

The AFE Netting Option in Company Maintenance determines how we want the system to treat (and present) the AFE prepaid funds.

1. Mix AFE and Operations and net AFE with Operations.
   Classic style: Current month AFE charges, all balances forward, and current monthly operating costs are netted against Operations Revenue. This option allows multiple A/R Accounts.
2. Separate AFE and Operations – no netting of AFE
   There is no netting whatsoever between AFEs and Operations. This will be the default option when creating a new company. Meaning if there are left over prepaid funds in an AFE – those will not be used on normal Operational charges. NOTE: you can still net Operations Revenue less Operations Costs as an Owner level option.
3. Separate AFE and Operations – net unpaid Beg AFE Balance only
   If they received an AFE billing one month and didn’t make a prepayment, nor did they pay what was billed on the AFE, and the amount is still outstanding on the following billing, it deducts only the outstanding AFE balance forward from their operations income. It will not deduct any current cycle AFE charges.
4. Separate AFE and Operations – net AFE with Operations
   Current month AFE charges and balance forward AFE charges are both netted against Operations revenue. This is the same netting behavior as the classic style (of one A/R account), but you can enjoy the separation of AFE charges and Operation charges that the new style provides.

NOTE: When using any of the "Separate AFE..." options, we recommend that you set your Owner AR to Open Item instead of Balance Forward. This way, you will be able to attach a deposit to a specific invoice, e.g., AFE charges or Operating charges.

Mix AFE and Operations and net AFE with Operations.

Separate AFE and Operations – no netting of AFE

Separate AFE and Operations – net unpaid Beg AFE Balance only.

In this example, there is no unpaid Beginning AFE Balance. If there had been a balance and the owner had paid into the prepay before this statement, the AFE expenses would have been netting. Since there was no beginning balance and no prepay payment was made, this is how the statement would look.

If the owner pays his Prepay before the next cycle, the beginning balance will be withdrawn from the Prepay account.

Separate AFE and Operations – net AFE with Operations