How to Configure Credit Management in SAP Sales & Distribution 20/02/2012
Semiconductor/ Hi-Tech / SAP CRM
Sumit Kumar Jha
[email protected]
TCS Public
Introduction Most of the sales in an industrial or manufacturing environment are based on credit selling. Customers receive goods or services and then make the payments. As such it is very important to track and control how much a customer owes as credit and whether it wise to give him further credit. Different customers have different kinds of payment histories. Also customers may purchase simultaneous products or may buy regularly or may have a long relationship with the company. Defaults can happen easily if things go unchecked. As such the decisions of credit management are taken by business people keeping in mind all the complex factors listed above.
Benefits: SAP Credit management helps Business Enterprise to control the financial risk by monitoring and limiting the credit exposure of their customers. Based on the requirement of business, credit checks can be configured at different stages of business process.
Limitation: Standard SAP computes the credit exposure at the delivery based on the credit price determined in the sales order, therefore if there is any change in price during delivery the credit status would not be reflect correctly in this case. However with enhancements this can be resolved.
Features: SAP supports the functionality of Credit Management in a very effective way. Credit management effectively allows business team to minimize the credit risk. Credit management includes the following functions: •
Carrying out credit checks according to different criteria and at different points in time
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Automatic notification of the responsible employees in critical credit situations by means of an interface to the mail system and therefore rapid processing of urgent credit problems
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Support in critical credit situations concerning credit allocation by means of an interface to the Sales Information System and FI
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Allocation of different authorizations to credit representatives according to certain criteria (for example, authorizations according to the level of the credit limit used or according to document value classes)
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Monitoring credit allocation (for example, by creating overview lists)
Two types of credit management are available in SAP: •
Simple Credit check: In this only one system reaction ('A' warning, 'B' error, 'C' delivery block) can be configured, when the credit limit is exceeded. Remaining credit management functions cannot be used in this case.
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Automatic Credit control: The automatic credit check can target certain aspects during a check and run at different times during order processing. In this activity, credit checks can be defined to correspond to business requirements in the area of Credit Management.
Configuration: •
Maintaining credit control area (Tcode: OB45)
Menu path: IMGÆ Enterprise Structure Æ Maintain StructureÆ Definition ÆFinancial Accounting ÆMaintain Credit Control Area Credit control area is an organizational unit that represents the area where customer credit is awarded and monitored. This organizational unit can either be a single or several company codes, if credit control is performed across several company codes. One credit control area contains credit control information for each customer.
Credit control area represents the way in which a company controls its credit management. This gives flexibility in case there are totally different ways of credit management in different departments. We can define multiple credit control areas to get that flexibility.
Decentralized Credit Management -If business credit policy requires decentralized credit management, you can define credit data for the customer for each company code
Central Credit Management - If business requires centralized credit management then combine company codes in one credit control area. Credit management then regards the customer as valid for all company codes.
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In the above screen we have defined the credit control area 1000. After defining credit control area, we have to assign the credit control area to company code. •
Assign the credit control area to company code Tcode OB38. Next, we have to assign the sales areas, where we want to have credit management implemented, to credit control area.
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Assign the sales area to Credit Control area
Menu Path: IMG Æ Enterprise Structure ÆAssignment ÆSales and Distribution-->Assign Sales Area to Credit Control Area
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Define Risk Categories for credit control area in FI (Tcode OB01)
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Menu Path: IMGÆ Financial AccountingÆ Accounts Receivable and Accounts Payable ÆCredit Management ÆCredit Control AccountÆ Define Risk Categories
Three risk categories for our credit control area 1000 are defined based on customer risk profiles/ratings etc. •
Define credit groups. (Tcode OVA6)
Menu Path: IMGÆ Sales and Distribution ÆBasic Functions ÆCredit Management / Risk ManagementÆ Credit ManagementÆ Define Credit Groups
In this screen we have defined three credit groups. This allows us to have credit check at sales order level, or delivery level or at goods issue level.
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Assignment of credit management to Sales documents (Tcode OVAK) :
Here we define to each document type whether credit check is required, if required whether it is simple or automatic, which credit group the document belongs to. Similar assignment is done for delivery documents in Tcode OVAD •
Defining Automatic credit control settings (Tcode OVA8)
Menu Path: IMGÆSales and DistributionÆBasic FunctionsÆCredit Management / Risk ManagementÆCredit ManagementÆDefine Automatic Credit control
This screen controls all the automatic credit management settings. Here we define automatic credit management for combinations of:
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Credit control area + Risk Category + Credit group
This screen basically tells the system how to behave in different documents for different types of customers. Ex: The credit settings for a high risk customer in sales order may be different to a low risk customer in sales order.
In this detailed view screen of automatic credit control we can define many settings. We can assign different types of checks to be performed, assign different reactions, the horizon period to be considered, Max doc value etc. •
Maintain Customer Credit Data ( Tcode FD32) :
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In this screen we define credit limit for each customer, which risk category he belongs to. We can also see credit limit used by customer, payment data etc.
Process Flow: 1. User enters a sales order. Assuming that this sales order leads to the credit limit being exceeded for this customer, the system now responds in one of two ways (depending on the settings you made in Customizing for Sales and Distribution.) o
It outputs an error message, but prevents user from saving the order.
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It outputs a warning message, but does not prevent user from saving the order. It blocks the order.
In the second case, the procedure continues as follows:
2. If the order is blocked, the credit representative processes the blocked order either from a list of blocked sales and distribution documents, or from his/her Mailbox. The credit representative now decides how to proceed with this order. From the list of blocked documents he or she can use the Information Functions (such as credit master sheet and early warning list) in Credit Management to help make the decision. 3. Once the credit representative releases the order, a delivery can be created and a billing document generated.
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Once user has saved this document, the system automatically creates a financial accounting document. 4. The customer pays the invoice that business user created in the previous step. Finance team then post the incoming payment in Accounts Receivable.
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