Tips, Tricks, and Techniques to Configure and Optimize Your SAP Credit Management System Sharon (Qian) Tang Applied Materials © 2007 Wellesley Information Services. All rights reserved.
What We’ll Cover … • What is SAP R/3 Credit Management? • Key capabilities of Credit Management • Credit Check vs. Credit Update • Credit Management configuration • Tables, user exits, and reports • Troubleshooting techniques • Wrap-up
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SAP R/3 Credit Management Overview • Helps you determine whether or not to extend credit to
your customers, and minimize your credit risk
Categorize your customers by creditworthiness Group sales transactions by relevance to credit control Establish specific credit limit per Risk Category and transaction type f How much to sell on open account R/3 updates credit exposure, triggers automatic credit checks during order and delivery processing Identify early warning signs, and enhance your credit-related decision making
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SAP R/3 Credit Management – Why is It So Difficult? • Credit Management adds value by letting you sell to
marginal customers “safely,” not by over-controlling • SAP R/3 Credit Management is not an exact science, rather an approximation • Numerous scenarios of credit “checks and balances”
Inconsistent treatments for SD and Service Management, etc.
• Credit issues are often intermittent and hard to replicate
Client Issue
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Frequently Asked Questions About Credit Management • Is Credit Management an SD or Finance function? • How is a credit check different from a credit update? • How to reconcile credit exposure with transactions? • What kind of credit check should I adopt for various
types of business processes? • Which credit update reports should I use, for what purposes? • What do I need to consider in order to enable credit management globally? • How to troubleshoot and reorganize credit data? 5
In This Session ... • Key features of SD and A/R Credit Management in R/3 SAP Financial Supply Chain Management is not in scope for this session • The difference between Credit Check and Check Update • Intricacies of R/3’s Credit Check methods, e.g., dynamic • • • •
Credit Check Integration of SAP R/3 Credit Management with FI, SD, and Service Management An SAP R/3 Credit Management configuration checklist A list of useful, time-saving Credit Management reports/ programs A step-by-step troubleshooting procedure Tip
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What We’ll Cover … • What is SAP R/3 Credit Management? • Key capabilities of Credit Management • Credit Check vs. Credit Update • Credit Management configuration • Tables, user exits, and reports • Troubleshooting techniques • Wrap-up
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Standard Sales Order Credit Cycle Credit Management
Sales and Distribution Financial Accounting
Create Credit Account
Enter Customer Order
Customer: ABC Co. Medium Risk Credit Limit: $10,000 Credit Exposure: $9,000
Order 1001 Sold-to/Payer ABC Co. Credit Value: $1,200
Mailbox/ Blocked Order Transaction XYZ Co. $8,000 ABC Co. $1,200 Investigate and Release Credit Credit Information Information System System Contact Contact Customer Customer Release Release Order Order
Credit Credit Limit Limit Exceed Exceed Order Order Blocked Blocked Email Email Credit Credit Rep. Rep. (Optional) (Optional)
Quantities Quantities Confirmed Confirmed Included Included in in Delivery Delivery Proposal Proposal Shipping, Billing Incoming Payment
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Total Commitment • Credit Limit – an upper limit for the total receivables and
the foreseeable receivables from the customer • Credit Exposure Composition Open sales orders
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Internal View of Credit Management • Credit Control Area and Credit Representative Group Represents the area or group where customer credit is awarded and monitored Represents an internal organizational view f Centralized vs. decentralized credit management Global Credit Total Limit North America Credit Control Area
Europe Credit Control Area
Asia Credit Control Area Eastern Europe Credit Rep Group
Western Europe Credit Rep Group
Alex Summers
John Winters
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External View of Credit Management • Represents types of customers for credit purposes • Captures an external view or customer characteristics Risk Category f Controls the Credit Check function Customer Credit Group or Customer Group f Industry, product groups, geographical locations, etc.
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Credit Master • Payer partner function is subject to credit control Accounts Receivable protection • Group multiple customers under a single credit account Credit limit shared • Blocked by Credit Management • Date fields Last internal review Next internal review f Next check
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Currency Considerations • A centralized model can use another currency
(e.g., group currency) as the Credit Control Currency • Credit exposure is
translated from local or document currency into Credit Control Currency Simplifies reporting at the global level Makes it harder to reconcile at a local level
Source: SAP
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What We’ll Cover … • What is SAP R/3 Credit Management? • Key capabilities of Credit Management • Credit Check vs. Credit Update • Credit Management configuration • Tables, user exits, and reports • Troubleshooting techniques • Wrap-up
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Credit Check vs. Credit Update • Credit Check Automatic credit check Action-oriented f Induces credit block Blocked orders don’t count towards credit exposure Service orders can subject to credit check 8 standard and 3 userdefined methods to perform credit checks
• Credit Update Updates credit exposure Updates the database behind the scenes Only approved open sales value constitutes credit exposure Only sales documents are subject to credit update 3 major methods to update credit exposure
• Credit Update is the foundation that enables Credit Check i.e., credit checks are executed against the credit exposures updated by Credit Update 15
Credit Check • Credit checks are
action-oriented
Sales Order Credit Status: Blocked
Warning, error, no message Set Check Status or block
• Credit block only makes
sense if there are subsequent documents or functions to prevent
Subsequent function(s) exist: Sales Order and Delivery No subsequent functions exist: Goods Issue and Service Order
Delivery Credit Status: Blocked
Tip
Good Issue Credit Status: Blocked
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Credit Check Statuses • Credit checks are
executed against open and approved sales values only
i.e., undelivered quantity
• Credit statuses include: Not performed Approved Not approved Released • Status for individual check
and overall credit status
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Processing Credit Block • Blocked documents can be viewed and reprocessed
from the Credit Blocked Order Worklist (VKM1-VKM5) • Processing options Release Reject f Specify a reason for rejection Forward f Transfer to another Credit Representative Group Reassign f Reset per the requested delivery date
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Dynamic vs. Static Check • Open Delivery, Open Billing, Open Item are always static • Open Order can be set up as static or dynamic If dynamic, it is subject to the Credit Horizon Calculation f
i.e., ignore credit exposure caused by future shipments beyond the Credit Horizon, measured by Material Availability Date
Source: SAP
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Set Proper Credit Horizon • Overall, consistency is the key • However, longer Credit Horizons are harder to manage Potentially, more orders can be blocked • Possibility of large order demands visibility Large quantities of deliveries will be generated all at once Delivery with large $ value transaction will deplete available credit all of a sudden • Should approximate the order to cash cycle On average, how much in advance are customers ordering from us? How long are our payment terms or how long does it takes for customers to pay? Current Date
Order
Delivery and Invoice Month 1
Payment
Month 2 20
Credit Update Group 000012 • Controls critical points in SD for Credit Checks (OB45) • Update with Open Order Value: Group 000012 Applicable for delivery-relevant schedule lines Testing steps by regular and exceptional scenarios Reduce handoffs wherever you can (billing and accounting) Credit Update Transaction
Open Order S066
Sales Order Creation
Increase
Delivery Creation
Decrease
Billing Release to Accounting
Open Delivery S067
Open Billing S067
Open Item
Increase Decrease
Increase Decrease
Increase 21
Credit Update Group 000015 • Update without Open Order Value: Group 000015 Only delivery and billing updates total commitments No open sales order update f No visibility to exposure caused by incoming orders Credit Update Transaction
Open Order S066
Open Delivery S067
Open Billing S067
Open Item
Sales Order Creation Delivery Creation
Increase
Billing
Decrease
Release to Accounting
Increase Decrease
Increase
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Credit Update Group 000018 • Update for without Deliveries: Group 000018 Applicable for order items not relevant for delivery f Service sale, debit/credit memo request, etc. Can be automatically determined by system at time of sales order creation Credit Update Transaction
Open Order S066
Sales Order Creation
Increase
Open Delivery S067
Open Billing S067
Decrease
Increase
Open Item
Delivery Creation Billing Release to Accounting
Decrease
Increase 23
Sales Information System (SIS) for Credit Update • SIS contains two tables for credit exposure update • S066: Open Order Day, week, month intervals f Select the right interval
• S067: Open Delivery and Open Billing No time interval
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Automatic Credit Control Example • Step 1: Display credit blocked order
• Step 2: Check scheduled line
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Automatic Credit Control Example (cont.) • Step 3: Display credit master – initial exposure
• Step 4: Release credit blocked order
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Automatic Credit Control Example (cont.) • Step 5: System updates released credit value
• Step 6: System confirms material
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Automatic Credit Control Example (cont.) • Step 7: Display credit master – after order release
• Step 8: Display credit master – after Delivery/PGI
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Automatic Credit Control Example (cont.) • Step 7: Display credit master – after billing
• Step 8: Display SD document flow
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Automatic Credit Control Example (cont.) • Step 9: Display credit master – after billing cancellation
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Automatic Credit Control Example (cont.) • Step 10: Change sales order – increase order quantity
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Automatic Credit Control Example (cont.) • Step 11: Release blocked order and system updates
released credit value
• Step 12: Display credit master – after order release
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Automatic Credit Control Example (cont.) • Step 13: Set the reason for rejection
• Step 14: Display credit master – after rejection
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Releasing and Rechecking Documents • Only check released documents when necessary Main complaints of Credit Departments • Credit Check loses some precision within a day Refer to SAP Note 718260 – Released documents are not checked
Source: SAP 34
Work with Upstream Business Processes Closely • Take into consideration all upstream business
processes in Sales and Distribution, or Service Management for credit control purposes • Reject the Sales Document Items
Do not simply delete items
• Stock Transport Order No credit management function possible f Neither Credit Check nor Credit Update Think twice before using it with external customers
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Example – Customer Consignment Process • Customer Consignment Process Consignment fill-up, not relevant for billing Consignment issue, relevant for billing and credit management f Customers consume inventory first, report usage after f Credit Check is not real time Helps to have customer report usage more frequently Credit Update should be turned on for consignment issue
Source: SAP 36
Examples – Service Management Process • Service orders Plan Cost is used for credit check Credit update doesn’t take place until transferred to an SD document; refer to SAP Note 555925 f Resource related quotation and billing • Service contracts Static only, update Open Delivery value
Warning
• Value contracts Preferred option for contract Only release order is subject to credit check
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What We’ll Cover … • What is SAP R/3 Credit Management? • Key capabilities of Credit Management • Credit Check vs. Credit Update • Credit Management configuration • Tables, user exits, and reports • Troubleshooting techniques • Wrap-up
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Configuration Warning • If you haven’t yet configured Credit Management,
be careful! Configuration errors are the primary leading causes for erroneous credit check f It’s very hard to correct the data after-go-live Invest any extra time needed to test the relevant business processes end to end for credit update and credit check both
Warning
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Enterprise Structure • Define Credit Control Area
(txn OB45) Assign a default Credit Update Group Automatically sets up a Credit Master when a new customer is created f Better option for control
• Assign Credit Control Area Assign a Credit Control Area to a Company Code (txn OB38) Assign a Credit Control Area to a Sales Area directly (txn OVFL) 40
Determine Credit Control Area • Assign the permitted company
codes to a Credit Control Area (txn OBZK) • Other ways the system can derive a Credit Control Area: Customer master (txn XD02) Company Code assigned to the Sales Organization (txn OVX3) User Exits (txn SE37) to determine Credit Control Areas
• Simplifying the process is key! 41
FI Settings for Credit Management • Create and read an A/R
summary Performance optimization Reporting Distributed scenario
• Define and assign risk
categories (txn OB01)
Low, Medium, High, Very High, and New
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Additional FI Settings • Configure Special G/L
(transaction OBXY)
Relevant for Credit Management f Down payment f Down payment request
• Alternative
Reconciliation Account “Safe” Receivables in Japan Deferred Revenue
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SD Settings for Credit Management • Mostly located under
Basic Functions of SD configuration in the IMG • Additional configurations are found elsewhere in SD
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Automatic Credit Control • Define Credit Groups Sales Order, Delivery, Goods Issue, etc. • Assign Sales Document
Type (OVAK/OVAD) Relevant for automatic credit control Assign credit group
• Assign Sales Document
Item Category (VOV7) Credit active Relevant to Billing
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Automatic Credit Control (cont.) • Define Automatic Credit Control (txn OVA8) By Credit Control Area, Risk Category, and Credit Group User exit to control transactional credit check f Credit card transactions, prior to version 4.7 Released document is rechecked if: f Current value greater than approved value + deviation %, or f Current date later than prior release date + tolerance days This improves system performance and efficiency
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Automatic Credit Control (cont.) • Define Automatic Credit Control (txn OVA8) (cont.) Type of Checks: Static, dynamic, document value, etc. System Reaction: No message, warning, error Status/block: Controls follow up actions Credit Horizon by month can deviate exposure by up to 30 days
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Additional SD Settings • Set up SIS Info Structure S066 Update Parameters
(txn OMO1)
Synchronous update, by certain time intervals f Any other update will lead to errors
• Calculate credit price Define SD pricing procedures (V/08) f Subtotal “A” to determine the Credit Price (KOMP-CMPRE) f Credit Price = Net Value plus Sales Tax f Updated in field VBAP-CMPRE 48
Subsequent Functions for SD Documents • SD Requirements and Formulas (VOFM) • Requirements were passed for MRP-controlled materials Set “Fixed date and qty” – refer to SAP Note 744305
Don't Forget
Source: SAP 49
Credit Check for Service Orders • Credit Limit Checks for Service Orders (txn OIOL) Sales Document Type and DIP Profile Type of checks and Credit Group f No check f Manual check by function key f Automatic check At release of Service Order, or input of Sold-to
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What We’ll Cover … • What is SAP R/3 Credit Management? • Key capabilities of Credit Management • Credit Check vs. Credit Update • Credit Management configuration • Tables, user exits, and reports • Troubleshooting techniques • Wrap-up
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Tables and User Exits • Tables KNKK V_VMVAH
Customer master credit control area data Credit blocked/released SD documents
• User Exits EXIT_SAPFV45K_001 Determining the credit control area LVKMPFZ1 Subroutines for user credit check user exit 1 LVKMPFZ2 Subroutines for user credit check user exit 2 LVKMPFZ3 Subroutines for user credit check user exit 3
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Reporting • R/3 provides a large number of reports and tools that
contain a wide range of information Credit Management Reports Others from related areas
• Master Data RFDKLI41 RFDKLI43 RFDKLI10 RFDKLI30 RFDKLI40 RFDKLI50 RFDKLIAB
Credit master list (single customer) Credit master list (multiple customers) Customers with missing credit data Credit limit overview (short) Credit limit overview (extensive) Credit limit data mass change Display changes to Credit Management 53
Transaction Data • RFDKLI42 • RVKRED01
Early warning list SD documents worklist (blocked/released: VKM1 ~ VKM5) New credit check for blocked SD docs
• RVKRED06 Schedule to run after incoming payment program
• RVKRED08 Check sales orders that reach horizon Schedule to run at the start of a credit period • RVKRED09 Check SD documents in background Reorganize after Risk Category has been changed • RFDKLI20
Recreation of credit data after organizational changes
Every time organizational elements have changed 54
What We’ll Cover … • What is SAP R/3 Credit Management? • Key capabilities of Credit Management • Credit Check vs. Credit Update • Credit Management configuration • Tables, user exits, and reports • Troubleshooting techniques • Wrap-up
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Errors and Likely Causes • Incorrect credit update leads to incorrect credit
check results SIS information structures capture unrealistic values Problem is intermittent, exact cause is unknown Can’t replicate the error in development
• Likely cause Newly introduced or changed business processes f Incorrect or inadequate configuration Newly implemented or changed SD user exits Caution f Subsequent functions and copy control Changed credit update methods f Order-based (group 18) to delivery-based (group 15) Changed SD documents in unacceptable way 56
Do Your Due Diligence • Check your configuration Refer to last section on configuration Refer to SAP Note 18613, Checklist for Credit Management • Consider all possible business scenarios relevant to
Credit Management • Test each scenario and analyze the results
Deactivate and reactivate SD user exits to compare the results
• Follow the sequential troubleshooting procedure
shown on the slides that follow
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Sequential Troubleshooting Procedure Execute RVKREDSP to lock key SD tables against transactions: VBAK, LIKP, and VBRK Execute nightly RVKRED07 or RVKRED77 to reorganize SD data after update errors
Random Update Errors
Continue Continueto toobserve observethe thedata data Execute ExecuteRVKRED88 RVKRED88to tosimulate simulatedata datareorganization reorganization Compare Comparewith withactual actualcredit creditexposure exposuredata data
More Discrepancies?
Yes Yes
Contact SAP
Issue
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Sequential Troubleshooting Procedure (cont.) Execute RVKREDH1 to capture documents changed/created since reorganization that may be the source of error Execute program CHECK_CM to analyze credit management process for problematic SD documents Execute transaction MCVR to check SIS updates (S066 and S067) Deactivate and reactivate SD user exits to compare the results
Configuration
User Exits
SAP Bug 59
A Great Program for Troubleshooting: Check_CM
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A Great Program for Troubleshooting: Check_CM (cont.)
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What We’ll Cover … • What is SAP R/3 Credit Management? • Key capabilities of Credit Management • Credit Check vs. Credit Update • Credit Management configuration • Tables, user exits, and reports • Troubleshooting techniques • Wrap-up
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Resources • Help.sap.com (ECC 6.0) Follow Financials > Financial Accounting > Accounts Receivable > Credit Management/Risk Management (FI-AR-CR) Follow Logistics > Sales and Distribution > Credit and Risk Management (SD-BF-CM) • SAP Notes 18613 - Checklist for Credit Management 425523 - Collection of consulting notes: Credit update 425483 - Consulting note collection: Credit checks 396338 - Problems in credit management: Analysis help 381685 - Analysis of the credit-relevant data of a document 377165 - Update open credit values for credit management 63
7 Key Points to Take Home • SAP Credit Management is both an FI and SD function • Credit Update Credit Check • Grasp how Credit Management should influence
subsequent functions • Credit Management is for much more than just regular SD processes – consider opportunities with customer consignment and service management, etc. • Periodic house cleaning activities are important • If you’re just starting your Credit Management configuration, take your time
It’s very difficult to correct the data after go-live
• Contact SAP, but do your due diligence to troubleshoot 64
Your Turn!
How to contact me: Sharon (Qian) Tang
[email protected] 65
