Netdeting is a method of reducing risks in financial contracts by combining or aggregating multiple financial obligations to arrive at a net obligation amount. Netting is used to reduce settlement, credit, and other financial risks between two or more parties.Netting is also used when a company files for bankruptcy whereby the parties tend to net the balances owed to each other. This is also called a set-off clause or set-off law. In other words, a company doing business with a defaulting company may offset any money they owe the defaulting company with money that's owed them. The remainder represents the total amount owed by them or to them, which can be used in bankruptcy proceedings.Companies can also use netting to simplify third-party invoices, ultimately reducing multiple invoices into a single one. For example, several divisions in a large transport corporation purchase paper supplies from a single supplier, but the paper supplier also uses the same transport company to ship its products to others. By netting how much each party owes the other, a single invoice can be created for the company that has the outstanding bill. This technique can also be used when transferring funds between subsidiaries.