The document outlines the principles of credit management, emphasizing the roles of the credit department in setting and monitoring customer credit limits and distinguishing between simple and automatic credit checks. It discusses the configuration steps for establishing credit control areas, risk categories, and credit groups within SAP, as well as the necessary parameters for managing credit exposure and limits effectively. It also highlights various system responses such as warning messages and order blocks depending on credit limit violations.

1. CREDIT MANAGEMENT
Credit management is nothing but managing the credit limits of the customers.
Roles and Responsibilities of credit department:
1. Fixing the credit limits.
2. Monitoring the day to day transactions.
If any customers credit limit exceeds blocking the next transaction.
3. Reviewing the credit limits.
4. Releasing the orders which are blocked for credits.
SAP has provided two kinds of credit checks to carryout credit management functions:
I. Simple Credit Check
II. Automatic Credit Check
Difference between simple and automatic credit check:
Simple Credit Check Automatic Credit Check
I. In simple if customer’s credit limit exceeds
we can block at order level only.
I. In automatic if customers credit limits
exceeds we can block at order, delivery and
PGI level.
II. In simple we don't have concept of risk
categories.
II. In automatic we have concept of risk
categories.
III. In simple system considers only
receivables.
Receivables mean open items. Open items
means invoice raised to customer but not yet
paid.
III. In automatic system considers open order
values, open delivery values, open invoice
values and open item values.
If credit limit has been reached, we can set the following system responses
A - Warning
B - Error message C - Delivery block
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2. CREDIT MANAGEMENT
Credit Control Area:
Credit control area is an organizational element which takes care of all the credit management
activities within the company code.
I. Centralized Credit Processing:
Company Code 1
Credit Control
Area
Company Code 2 Company Code 3
If single credit control area is taking care of multiple company codes then we call it as
centralized credit processing.
II. De-Centralized Credit Processing:
Credit Control Area 1
Company Code 1
Credit Control Area 2 Credit Control Area 2
Company Code 2 Company Code 3
If single credit control area is taking care of single company code then we call it as de
centralized credit processing.
Credit Management is integration between
Configuration of Credit Management:
SD and FI.
de-
Simple Credit Check:In simple credit check system compares the credit exposure with payers
credit limit. The credit exposure results from the total of the net document value and the value
of the open items.
By Srinivasulu Algaskhanpet (Sr. SAP SD Consultant)
Page 2

3. CREDIT MANAGEMENT
1. Define Credit Control Area:
Path: SPRO > Enterprise structure > Definition > Financial accounting > Define credit control
area
Go to new entries and create
Update: It controls which sales document should be updated in credit management.
000012:The update group "12" will help to update all the open order values, open delivery
values, open invoice values and open items.
000015:The update group "15" helps to update open delivery values, open invoice values and
open items.
System considers update group "15" when we are doing delivery without order reference.
000018:It updates all open order values, open invoice values and open item values.
System considers update group "18" in service process and third party where there is no
delivery.
Credit Limit: For new customers we maintain common credit limits here which will be
applicable to all the new customers.
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4. CREDIT MANAGEMENT
2. Assign credit control area to company code: In this configuration step we will assign the
credit control area to our company code.
Path: SPRO > Enterprise structure > Assignment > Financial accounting > Assign company code
to credit control area
“Overwrite CCA” If you set this indicator, you can overwrite the credit control area defaulted
from the company code's global data.
This applies only to document posting.
When making changes to documents, you cannot change the credit control area.
3. SD Configuration for simple credit check
a. Assign credit limit check to the document type
Path: SPRO > S&D > Basic functions > Credit mgmt. /Risk mgmt.> Simple credit limit check
This we can do by following the path or we can assign directly in the document type.
Using Parameters we can configure according to the requirement.
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5. CREDIT MANAGEMENT
Here Credit group is not required for Simple Credit control area; it is required only for
automatic credit control area.
b.Go to our pricing procedure
Maintain subtotal "A" for the net value
We are taking simple pricing procedure here to perform the credit management.
Whichever values we want to update in credit management, use subtotal “A” against that
value.
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6. CREDIT MANAGEMENT
4. Maintain Credit Limits:
The T. Code to maintain credit limits is "FD32"
We will maintain credit limits in the combination of "customer and credit control area"
Customer: 112
Credit Control Area: SPI1
Select all the views and go to status view and maintain credit limits and save.
Create Order and check.
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7. CREDIT MANAGEMENT
So, here system gives message that credit limit has been exceeded. If we want we can proceed
further creating order by clicking on tick mark .
II. Automatic Credit Control:
Configuration steps for automatic credit control:
1. Define Credit Control Area: In this step we define automatic credit control area "SPI2".
Assign the defined credit control area to our company code "SPIL".
2. Define Risk Categories: In this step we are going to define risk categories for customers. FI
consultant will define risk categories.
Path: SPRO > Financial accounting (New) > Accounts receivables and account payable > Credit
management > Credit control account > Define risk categories
Generally we classify risk categories into 3.
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8. CREDIT MANAGEMENT
i. High risk ii. Medium risk iii. Low risk
While defining risk categories itself we will assign them to credit control area.
3. Define Credit Group: Credit group controls which transaction has to blocked if customer
credit limit exceeds.
Path: SPRO > S&D > Basic functions > Credit mgmt. /Risk mgmt.> Credit mgmt.> Define credit
group
We define 3 credit groups. One is for order, one is for delivery and other is for PGI.
After defining credit groups, we need to assign them to sales document and delivery document.
Path: SPRO > S&D > Basic functions > Credit mgmt. /Risk mgmt. > Credit mgmt.> Assign sales
documents and delivery documents
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9. CREDIT MANAGEMENT
4. Define Automatic Credit Control: We define automatic credit control with the combination
of credit control area, risk category and credit group.
We have 3 credit control areas, 3 risk categories and 3 credit groups.
CCA Risk Category Credit Group
SPI2 SP1 (High risk) S1 (Order level)
SPI2 SP2 (Medium risk) S2 (Delivery level)
SPI2 SP3 (Low risk) S3 (PGI)
Path: SPRO > S&D > Basic functions > Credit mgmt. /Risk mgmt. > Credit mgmt. >Define
automatic credit control area
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10. CREDIT MANAGEMENT
Fields in Automatic Credit Control:
1. Item Check: If we check this particular field system performs availability check at every line
item. If customer credit limit exceeds system will give either warning message or error message
If we uncheck this, system will perform credit check while save the sales document.
2. Deviation in %:After releasing order which is blocked for credit and if user is trying to change
the value in the sales order then system will again block the order for credit.
If we maintain some percentage here then after releasing the order which is blocked for credit,
system will allow changing the order value up to that percentage. If percentage exceeds then
system will again block the order for credits.
3. Number of Days: If we maintain number of days here then after releasing the order which is
blocked for credit, if there is no further process with in the number of days then system will
again block the order for credits.
4. Credit Limit Seasonal Factors: If we want to increase or decrease the credit limit during a
particular period then we maintain credit limit seasonal factors.
5. Static Check: If we check this field, system considers open order values, open delivery values,
open invoice values and open item values while performing credit check.
6. Reaction: This field controls how system should respond if the credit limits of a customer
exceeds. Whether to give warning message, error message or no message.
7. Status/Block: This field controls whether to block the order or not if customer credit limit
exceeds.
If we check this then only system will block the order if not it won't block.
8. Open orders and Open deliveries: If we check these two fields system considers open orders
and open deliveries values while performing credit check.
9. Dynamic: In dynamic, system considers all open order values, open delivery values and open
item values. But any open order, if the delivery creation date is exceeding the horizon date then
that order will not be updated in credit management (FD32).
Q.Client requirement is he wants to change horizon period from month to days. Where is the
control?
A. We can to this by changing month to days in info structure "S066"
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11. CREDIT MANAGEMENT
10. Document Value: If we check this and if we maintain "maximum document value", While
creating sales order system will check sales order value with the maximum document value. If
sales order exceeds maximum document value then system will block the order for credit limit
even though the customer is having enough credit balance.
Here the reason for blocking is maximum document value.
11. Critical Field: If we check this, while creating sales order if user changes any of the critical
fields then system will block the order for credit, even though the customer is having enough
credit balance.
Critical fields in sales document are:
i. Payment terms
ii. Additional value days
iii. Fixed value date
12. Next Review date: If we check this, while creating sales order system will check today's date
with next review date which maintained in "FD32".
If today's date exceeds next review date then system will block order for credit. The reason is
review date is passed.
Note: We maintain last review date and next review date in FD32 status views.
13. Open Items: If we check this field, while creating sales order system will check whether the
customer is having any open items or not. If yes, then system cumulates the value of open
items and system will also check is any of the open items are overdue. If yes, system cumulates
the values of overdue items and calculates the percentage between the open items value and
overdue item value. If percentage exceeds "Max. Open item" percentage then system will
block the order for credit.
14. Oldest open item: Oldest open item is nothing but overdue item i.e., payment terms
exceeded but not yet paid.
If we check this while creating sales order system will check for this customer whether there
are any invoices which are overdue. If yes, system blocks the transaction.
Note: If we check both open items and oldest open items system will give preference for oldest
open items.
15. Payer: We use this field if we have multiple payers for a single customer.
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12. CREDIT MANAGEMENT
If we check this then system considers only that particular payer's invoices while performing
open item check and oldest open item check.
If we uncheck this, system considers the invoices for all the payers who are in a group while
performing open item check and oldest open item check.
We always maintain credit limits for payer.
Q. How to group multiple customers into single credit limit?
A. We maintain credit limit for one customer and we assign that customer as credit account for
remaining customers.
Go to edit > change credit account
And give first payer number and maintain risk category.
16. Highest Dunning Levels: Dunning means sending reminders to customers for making
payment.
If we check this and if we maintain highest dunning level, if that dunning level reaches then
system will block for credit.
17. User1, User2, User3: User1, User2, User3 are user exits.
We use these user exits if the client requirement related to credit management is not fulfilling
with the standard SAP.
SAP has provided 3 user exits for credit management.
If we are using first user exit then check "User1"
If we are using second user exit then check "User2"
If we are using third user exit then check "User3"
The path for searching user exits is:
Path: SPRO > S&D > System modifications > User exits
Note:
1. The T. Code to release the credit block order is "VKM3"
2. The T. Code to release the sales document and delivery is "VKM4"
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13. CREDIT MANAGEMENT
3. The T. Code to release delivery document is "VKM5"
4. The T. Code to see info structure is "OMO1"
Note: The info structure for credit management is "S066"
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