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Your seriousness is my success… Manoj Tony… +91 8763427833 Page 1
CREDIT MANAGEMENT By Manoj Tony .
. Key configuration…
ONLINE TRAINING
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Name of the Document. Credit Management
Process covered in this document. Credit Management in SAP
1. INTRODUCTION OF CREDIT MANAGEMENT........................................................................................………
2. PURPOSE OF CREDIT MANAGEMENT.................................................................................................................
3. FEATURES.................................................................................................................................................................
4. TYPES OF CREDIT MANAGEMENT ...........................................................................................................
4.1 SIMPLE CREDIT CHECK .........................................................................................................................
4.2 AUTOMATIC CREDIT CHECK ……………………..…………..………………………………………………………………………
4.3 STATIC CREDIT LIMIT DETERMINATION…………………………………………………………………………………….
4.4 DYNAMIC CREDIT CHECK DETERMINATION………………………………………………………………………………
5. SETTINGS……………………………………………………………………………………..…………………………………………………
6. CHECKS………………………………………………………………………………………………..............................................
Your seriousness is my success… Manoj Tony… +91 8763427833 Page 3
1. INTRODUCTION OF CREDIT MANAGEMENT
SAP Credit Management is an application that helps organizations monitor, evaluate, and
control credit situations and credit allocations. It allows you to grant credit terms to your customers
and also perform credit checks on the sales transactions.
Most enterprises extend credit to their customers. This literally means, selling their goods and
collecting money at a later point of time. The amount of credit extended is determined by the
customer’s credit worthiness (customer’s credit limit). The number of days for which credit is
extended is based on the payment terms associated with that transaction.
CREDIT MANAGEMENT PROCESS:-
ORDER
IF CREDIT LIMIT
EXCEEDS
IF CREDIT LIMIT IS
NOT EXCEEDING
DELIVERY
INVOICE
BLOCK
ORDER
CREDIT MANAGEMENT
SYSTEM CHECKS CREDIT
LIMIT OF CUSTOMER
WE SEND MAIL TO
CUSTOMER
IF THEY DON’T
RELEASE
IF THEY RELEASE
BLOCK
ORDER
DELIVERY
INVOICE
CUSTOMER
CUSTOMER MAKES
PAYMENT TO RELEASE
ORDER
Your seriousness is my success… Manoj Tony… +91 8763427833 Page 4
2. PURPOSE OF CREDIT MANAGEMENT
Credit Management enables you to minimize the credit risk yourself by specifying a specific credit
limit for your customers. Thus, you can take the financial pulse of a customer or a group of
customers, identify warning signs earlier, and enhance credit related decision making.
3. FEATURES
Credit Management includes the following features:
➢ Depending on your credit management needs, you can specify your own automatic
credit checks based on a variety of criteria. You can also specify at which critical points
in the sales and distribution cycle (for example: sales order entry, delivery, goods issue)
the system carries out the checks.
➢ During order processing the credit representative automatically receives information
about a customer’s critical credit situation.
➢ Critical credit situations can also be automatically communicated to credit management
personnel through internal electronic mail.
➢ Your credit representatives are in a position to review the credit situation of a customer
quickly and accurately and, according to your credit policy, decide whether or not to
extend credit.
4. TYPES OF CREDIT MANAGEMENT
Types of Credit Checks:
➢ Simple Credit Check
➢ Automatic Credit Check
• Static Credit Check
• Dynamic Credit Check
a. SIMPLE CREDIT CHECK
Simple credit check compares the Customer’s credit limit to the total of all the items in the order
and the value of all open items.
Credit Exposure in Simple Credit Check = Value of all Open Items + Value of the Current Sales
Order.
Open items are orders that have been invoiced to the customer but the payment for the
invoices have not been received yet. The system can be configured to either block the delivery,
send a warning or an error message when the credit exposure has exceeded the credit limit of
the customer.
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b. AUTOMATIC CREDIT CHECK
Instead of just considering open items only, we need to consider open orders and open
deliveries as well. Also, for old and seasoned customers, even if the credit exposure exceeds the
credit limit set for the customer, the order can be still processed because of the good payment
history with the company. This is broadly classified into two:
• Static Credit Check
• Dynamic Credit Check
STATIC CREDIT CHECK
Checking Group + Risk Category + Credit Control Area
Checking Groups:
Types of Checking Groups 01) Sales
02) Deliveries
03) Goods Issue
At all these 3 levels order can be blocked.
Risk Category: Based on the risk category the company decide how much credit has to give to
the Customer. High Risk (001): Low Credit
Low Risk (002): More Credit
Medium risk (003): Average Credit
DYNAMIC CREDIT CHECK DETERMINATION
Dynamic credit check checks all these document value and check with the credit limit by
considering the horizon period.
1) Open Doc
2) Open Delivery
3) Open Billing
4) Open Items
5) Horizon Period
If the Horizon period is 4 months, the system will not consider the above 4 documents for 4
months.
Your seriousness is my success… Manoj Tony… +91 8763427833 Page 6
That is if the delivery period is after 4 months, the system will not consider the document. The
system considers the document only if the delivery period of the open document is within 4
months.
5. SETTINGS
1. Credit Control Area:
Credit management takes place in the credit control area. It is an Organizational unit that
represents the area where customer’s credit limit is specified and monitored.
Path: IMG -> Enterprise Structure -> Definition -> Financial Accounting -> Define Credit Control
Area
Credit management can be configured in to two ways
i. Simple credit check
ii. Automatic credit check
SIMPLE CREDIT CHECK AUTOMATIC CREDIT CHECK
1. If customer credit limit exceed we can
block only at order level.
1. In this if customer credit limit exceed u can
block it order level or delivery level or PGI
level.
2. There is no category of risk management. 2. We categories into high risk customer,
medium risk customer and low risk
customer based on customer’s past
payment history. High risk customer block
at order level. Medium risk customer block
at delivery level. Low risk customer block
at PGI level.
3. In simple system considers only receivable
(Open items means invoice raised but not
yet paid) while performing credit check.
3. Here all open order value, open delivery
value, open invoice value and open item
value are considered while performing
credit management.
Your seriousness is my success… Manoj Tony… +91 8763427833 Page 7
CONFIGURATION OF SIMPLE CREDIT CHECK:-
1. DEFINE CREDIT CONTROL AREA:-
CREDIT MANAGEMENT is an organizational unit where group of people responsible for credit
management. Fi consultant is responsible to define credit control area.
PATH:- SPRO→ ENTERPRISES STRUCTURE→ DEFINITION→ FINANCIAL ACCOUNTING→DEFINE CREDIT
CONTROL AREA
Your seriousness is my success… Manoj Tony… +91 8763427833 Page 8
NEW ENTRIES →D001
→Currency (INR) →UPDATE GROUP [000012]
Update group Controls which document should be update in credit management i.e. whether to update
open order value or open delivery value or open invoice vale or open item value.
There are 3 types of update groups: -
1) 000012: - It updates all open order values, open delivery values, open invoice values and open
item values into credit management.
2) 000015: - It updates all open delivery values, open invoice values, and open item values into
credit management. Example:- delivery without order reference.
3) 000018: - It updates all open order values, open invoice values and open item values into credit
management. Example:- third party process and service item.
Then assign FISCAL YEAR VARIANT [V3] →CREDIT LIMIT [1L]
Your seriousness is my success… Manoj Tony… +91 8763427833 Page 9
Then go back and give the description.
2. ASSIGN COMPANY CODE TO CREDIT CONTROL AREA:-
FI consultant is responsible to assign company code to credit control area.
PATH:- SPRO → ENTERPRISES STRUCTURE→ ASSIGNMENT → FINANCIAL ACCOUNTING →ASSIGN
COMPANY CODE TO CREDIT CONTROL AREA
GO TO YOUR COMPANY CODE →ASSIGN CREDIT CONTROL AREA→ save it.
There are two types of credit process
i. Centralized credit process
ii. De-centralized credit process
Centralized credit process- If a single credit control area is taking care for multiple company code, then
it is called as centralize credit process.
Your seriousness is my success… Manoj Tony… +91 8763427833 Page 10
De-centralized credit process- If every company codes are having different credit control area then it is
called de-centralized credit process.
The relationship between company code and credit control area is [one to many] i.e. One credit control
area can have many company code but one company code should be assign to single credit control area.
3. SIMPLE CREDIT CHECK:-
SD consultant is responsible for this configuration.
PATH:- SPRO →S&D→ BASIC FUNCTION →CREDIT MANAGEMENT/RISK MANAGEMENT → SIMPLE
CREDIT CHECK
GO TO YOUR DOCUMENT TYPE → MAINTAIN CREDIT CHECK AS A or B or C.
Your seriousness is my success… Manoj Tony… +91 8763427833 Page 11
4. Then go to your pricing procedure (V/08)→ which value you want to update credit management
and maintain subtotal as “A” (In net value).
5. Then go to your item category (VOV7) →TAN→CHECK CREDIT ACTIVE.
6. Then create new customer and check payment history record in company code data payment
transaction view.
Payment History record: - If you check this then customer payment will be updated in credit
management i.e. FD32.
7. Go to credit management (FD32) view. Here we can change the credit limit of the customer.
We have 5 screens in credit management:-
1. Overview
2. Address
3. Central data
4. Status
5. Payment history
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CONFIGURATION OF AUTOMATIC CREDIT CHECK:-
1. DEFINE CREDIT CONTROL AREA:-
FI consultant is responsible to define credit control area.
PATH:- SPRO→ ENTERPRISES STRUCTURE→ DEFINITION→ FINANCIAL ACCOUNTING→DEFINE CREDIT
CONTROL AREA→ NEW ENTRIES →D002 →INR →UPDATE GROUP [000012] → FISCAL YEAR VARIANT
[V3] →CREDIT LIMIT [1L]→ save it.
2. ASSIGN COMPANY CODE TO CREDIT CONTROL AREA:-
FI consultant is responsible to assign company code to credit control area.
PATH:- SPRO → ENTERPRISES STRUCTURE→ ASSIGNMENT → FINANCIAL ACCOUNTING →ASSIGN
COMPANY CODE TO CREDIT CONTROL AREA→ GO TO YOUR COMPANY CODE →ASSIGN CREDIT
CONTROL AREA→ save it.
Your seriousness is my success… Manoj Tony… +91 8763427833 Page 13
3. DEFINE RISK CATEGORY:-
FI consultant is responsible to define risk category. We have 3 risk categories.
i. High risk category
ii. Medium risk category
iii. Low risk category
PATH:-SPRO→FINANCIAL ACCOUNTING NEW→ACCOUNT RECEIVABLE & PAYABLE→CREDIT
MANAGEMENT →CREDIT CONTROL ACCOUNT →DEFINE RISK CATEGORIES
NEW ENTRIES→CREATE THREE RISK CATEGORIES.
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4. DEFINE CREDIT GROUP:-
It is used to combine different document types for the purpose of credit management. SD consultant is
responsible to define credit group. Credit groups specifies which transaction to block if customer credit
limit exceed i.e. whether to block at order level, delivery level or PGI level
PATH:-SPRO →S&D →BASIC FUNCTION→ CREDIT MANAGEMENT/RISK MANAGEMENT→CREDIT
MANAGEMENT→DEFINE CREDIT GROUPS
NEW ENTRY→DEFINE 3 CREDIT GROUPS
Your seriousness is my success… Manoj Tony… +91 8763427833 Page 15
5. ASSIGN SALES DOCUMENT AND DELIVERY DOCUMENT:-
In this configuration steps we assign credit groups to order type and delivery type
PATH:-SPRO →S&D →BASIC FUNCTION→ CREDIT MANAGEMENT/RISK MANAGEMENT→CREDIT
MANAGEMENT→ASSIGN SALES DOCUMENT AND DELIVERY DOCUMENT.
i. CREDIT LIMIT CHECK FOR ORDER TYPE:-
DOUBLE CLICK ON CREDIT LIMIT CHECK FOR ORDER TYPES →GO TO OR→ CHECK CREDIT LIMIT [D]
AND CREDIT GROUP [D1] → SAVE IT.
ii. CREDIT LIMIT CHECK FOR DELIVERY TYPE:-
DOUBLE CLICK ON CREDIT LIMIT CHECK FOR DELIVERY TYPES →GO TO LF → DELIVERY CREDIT
GROUP [D2] AND PGI GROUP [D3]→ SAVE IT.
Your seriousness is my success… Manoj Tony… +91 8763427833 Page 16
6. DEFINE AUTOMATIC CREDIT CONTROL:-
We define automatic credit control to the combination of [credit control area +risk category +
credit group]
T-code for automatic credit control is OVA8.
PATH:-SPRO → S&/D → BASIC FUNCTIONS → CREDIT MANAGEMENT/RISK MANAGEMENT →
CREDIT MANAGEMENT → AUTOMATIC CREDIT CONTROL.
Define automatic credit control for 3 risk category and 3 credit group.
Your seriousness is my success… Manoj Tony… +91 8763427833 Page 17
8. Then go to your pricing procedure (V/08)→ which value you want to update credit management
and maintain subtotal as “A” (In net value).
9. Then go to your item category (VOV7) →TAN→CHECK CREDIT ACTIVE.
10.Then create 3 new customers (high risk customer, medium risk customer and low risk customer)
and check payment history record in company code data payment transaction view.
11.Go to FD32 and maintain your risk category in status view. Here create credit management for
three customers you have created and maintain their risk category.
AUTOMATIC CREDIT CONTROLS (OVA8):-
Your seriousness is my success… Manoj Tony… +91 8763427833 Page 18
NO CREDIT CHECK:-
Here you can specify a routine number that contains conditions for when a credit limit check should take
place.
ITEM CHECK:-
If you check this then system will perform credit check while entering the line item in sales document. If
you uncheck this then system will perform credit check while saving the sales document.
CREDIT LIMIT SEASONAL FACTOR:-
Here you can increase or decrease the credit limits to the entire customer during a particular period. If
you maintain some percentage over here and maintain the from and to date, then system will increase
the credit limit up to that percentage. If you check minus then the credit limit will decrease.
DEVIATION IN PERCENTAGE:-
Generally after releasing the order which is blocked for credit, if user increases the value in that order
then system will again block the order for credit. If you maintain some percentage in deviation in %,
then system will allow to increase the quantity to that extent in that released order.
PAYER:-
Payer check will come into picture if you have multiple payers. If you check payer then performing open
item check and oldest open item check system consider the invoice of the particular payer.
If you uncheck payer then while performing open item check and oldest open item check system
consider the invoices of all the payer who are in a group.
[Rough – Create a customer with SP – SH – BP – PY and create another two payer and assign both payer
with SP.]
Grouping of multiple payers or customer into single credit limit. First maintain credit limit for one
payer and assign this payer as credit account for other payer in FD32.
Status view →edit →change account →maintain 1st payer→ maintain risk category →save it.
STATIC:-
If you check static then system will update all open order values, open delivery values, open invoice
values, & open item values into credit check. (FD32).
REACTION:-
This field controls how system should response if order is block for credit i.e. whether to give warning
message or error message or no message.
STATUS/BLOCK:-
if you check this then while creating sales order if customer credit limit exceed then system will block
the order for credit.
If you uncheck this system will not block the order for credit even a customer credit limit exceeds.
Your seriousness is my success… Manoj Tony… +91 8763427833 Page 19
OPEN ORDERS:-
If you check this then only system will perform credit check in order level while creating order. If
customer credit limit exceeds then system will block the order.
If you uncheck this then system will not perform credit check in sales order and system will not block
orders.
OPEN DELIVERY:-
If you this then only system will perform credit check while creating delivery document. The blocked
order values will not be updated into credit management (FD32).
DYNAMIC:-
If you check Dynamic it updates all open order values, open delivery values, open invoice values, and
open item values but any open order if the delivery creation date exceeds horizon date then that order
will not update into credit management (FD32).
We maintain horizon period in credit management ( FD32 ) overview.
STATIC DYNAMIC
If you check static then system will update all open
order values, open delivery values, open invoice
values, & open item values into credit check.
(FD32).
If you check Dynamic it updates all open order
values, open delivery values, open invoice values,
and open item values but any open order if the
delivery creation date exceeds horizon date then
that order will not update into credit management
(FD32).
DOCUMENT VALUE:-
If you check this and if you maintain maximum document value then while creating sales order if sales
order value exceeds Max. Doc. Value then system will block the order for credit.
CRITICAL FIELDS:-
If you check this then 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 are [Payment terms, fixed value date and additional value days] in credit management.
We can change the critical fields in sales document billing document tab.
Your seriousness is my success… Manoj Tony… +91 8763427833 Page 20
NEXT REVIEW DATE:-
If you check this then while creating sales order system will check order date with next review date if the
sales order date exceeds next review date then system will block the order for credit. We maintain next
review date in FD32 status view.
The number of days field in next review date is grace days.
OPEN ITEMS:-
If you check this and if you maintain maximum open item % then while creating sales order, system
checks is there any open item exist for this customer or not, if yes then it will accumulate the value of
open items and system will also check is any of the open item overdue or not, if there is any overdue
item then system will add the values of overdue items and calculate the % between overdue item values
and open item values. If this % is exceeds maximum open item % then system will block the order for
credit.
HOW TO OVERDUE AN ORDER:-
There are 3 steps:-
1. Change the billing date while creating invoice.
2. Go to VF02 → click on accounting →change mode →double click on customer number
→change baseline date.
3. Go to FBL5N→ maintain your customer number →company code→ execute→ double click on
invoice number → change mode →change billing date.
OLDEST OPEN ITEM:-
It is nothing but overdue item if check oldest open item then while creating sales order system checks
for this customer is any one of the previous invoice is overdue or not, if yes then system will block the
next transaction.
HIGHEST DUNNING LEVEL:-
Dunning is the process of sending reminders to the customer whose payment is delayed.
Dunning configuration is done by FI consultant.
If you check dunning level and if you maintain highest dunning level and if that dunning level executes
then system will block the next transaction.
Generally we have 3 dunning level.
USER-1/USER-2/USER-3:-
If client’s requirement related to credit management is not fulfilling with standard configuration, then
we need to use user exits. SAP has provided 3 user exits if you are using 1st user then check user 1, if
you are using 2nd user exits then check user 2 and if you are using 3rd then check user 3.
Your seriousness is my success… Manoj Tony… +91 8763427833 Page 21
DIVISION WISE CREDIT CONTROL AREA:-
If you have 6 divisions then you have to create 6 + 1 = 7 credit control areas. 6 actual and 1 dummy
credit control area.
First create credit control areas, Z100 make it as dummy which we already created and create
Z101 for Z1 division, Z102 for Z2, Z103 for Z3, Z104 for Z4, Z105 for Z5 and Z106 for Z6.
Then assign dummy credit control area to company code.
Assign permitted credit control area to company code.
In this configuration steps we assign actual credit control area to company code.
Go to new entry ZALK – Z101, ZALK – Z102, ZALK – Z103, ZALK – Z104, ZALK – Z105, and ZALK –
Z106 →save it.
Define risk category
New entry → Z01 – Z101, Z02 – Z101, Z03 – Z101
Z01 – Z102, Z02 – Z102, Z03 – Z102
Z01 – Z103, Z02 – Z103, Z03 – Z103
Z01 – Z104, Z02 – Z104, Z03 – Z104
Z01 – Z105, Z02 – Z105, Z03 – Z105
Z01 – Z106, Z02 – Z106, Z03 – Z106
Assign credit control area to sales area
SPRO →ENTERPRISES STRUCTURE →ASSIGNMENT → S&D →ASSIGN SALES AREA TO CREDIT
CONTROL AREA
(In this configuration steps we assign actual credit control area to sales area).
ZDOM – Z1 – Z1 = Z101 ZDOM – Z2 – Z1 = Z101
ZDOM – Z1 – Z2 = Z102 ZDOM – Z2 – Z2 = Z102
ZDOM – Z1 – Z3 = Z103 ZDOM – Z2 – Z3 = Z103
ZDOM – Z1 – Z4 = Z104 ZDOM – Z2 – Z4 = Z104
ZDOM – Z1 – Z5 = Z105 ZDOM – Z2 – Z5 = Z105
ZDOM – Z1 – Z6 = Z106 ZDOM – Z2 – Z6 = Z106......do for Z3 & Z4 distribution channel.
Define credit Groups
SPRO →S&D → BASIC FUNCTION →CREDIT MANAGEMENT / RISK MANAGEMENT →CREDIT
MANAGEMENT →DEFINE CREDIT GROUPS.
ASSIGN SALES DOCUMENT AND DELIVERY DOCUMENT
DEFINE AUTOMATIC CREDIT CONTROL
Z101 – Z01 – Z1 Z102 – Z01 – Z1 Z103 – Z01 – Z1
Z101 – Z02 – Z2 Z102 – Z02 – Z2 Z103 – Z02 – Z2
Z101 – Z03 – Z3 Z102 – Z03 – Z3 Z103 – Z03 – Z3 ......Do for same Z104, Z105 & Z106.
Create new customer for division wise credit control
Extend the customer from one division to another division and assign credit control area in
billing tab.
Maintain credit limits (FD32)
Customer number [xxxxxxx
Credit control area Z101 Z102 Z103 Z104 Z105 Z106
Credit limit 1L 2L 3L 4L 5L 6L
Your seriousness is my success… Manoj Tony… +91 8763427833 Page 22

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Credit Management Process step by step in SAP SD

  • 1. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 1 CREDIT MANAGEMENT By Manoj Tony . . Key configuration… ONLINE TRAINING
  • 2. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 2 Name of the Document. Credit Management Process covered in this document. Credit Management in SAP 1. INTRODUCTION OF CREDIT MANAGEMENT........................................................................................……… 2. PURPOSE OF CREDIT MANAGEMENT................................................................................................................. 3. FEATURES................................................................................................................................................................. 4. TYPES OF CREDIT MANAGEMENT ........................................................................................................... 4.1 SIMPLE CREDIT CHECK ......................................................................................................................... 4.2 AUTOMATIC CREDIT CHECK ……………………..…………..……………………………………………………………………… 4.3 STATIC CREDIT LIMIT DETERMINATION……………………………………………………………………………………. 4.4 DYNAMIC CREDIT CHECK DETERMINATION……………………………………………………………………………… 5. SETTINGS……………………………………………………………………………………..………………………………………………… 6. CHECKS………………………………………………………………………………………………..............................................
  • 3. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 3 1. INTRODUCTION OF CREDIT MANAGEMENT SAP Credit Management is an application that helps organizations monitor, evaluate, and control credit situations and credit allocations. It allows you to grant credit terms to your customers and also perform credit checks on the sales transactions. Most enterprises extend credit to their customers. This literally means, selling their goods and collecting money at a later point of time. The amount of credit extended is determined by the customer’s credit worthiness (customer’s credit limit). The number of days for which credit is extended is based on the payment terms associated with that transaction. CREDIT MANAGEMENT PROCESS:- ORDER IF CREDIT LIMIT EXCEEDS IF CREDIT LIMIT IS NOT EXCEEDING DELIVERY INVOICE BLOCK ORDER CREDIT MANAGEMENT SYSTEM CHECKS CREDIT LIMIT OF CUSTOMER WE SEND MAIL TO CUSTOMER IF THEY DON’T RELEASE IF THEY RELEASE BLOCK ORDER DELIVERY INVOICE CUSTOMER CUSTOMER MAKES PAYMENT TO RELEASE ORDER
  • 4. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 4 2. PURPOSE OF CREDIT MANAGEMENT Credit Management enables you to minimize the credit risk yourself by specifying a specific credit limit for your customers. Thus, you can take the financial pulse of a customer or a group of customers, identify warning signs earlier, and enhance credit related decision making. 3. FEATURES Credit Management includes the following features: ➢ Depending on your credit management needs, you can specify your own automatic credit checks based on a variety of criteria. You can also specify at which critical points in the sales and distribution cycle (for example: sales order entry, delivery, goods issue) the system carries out the checks. ➢ During order processing the credit representative automatically receives information about a customer’s critical credit situation. ➢ Critical credit situations can also be automatically communicated to credit management personnel through internal electronic mail. ➢ Your credit representatives are in a position to review the credit situation of a customer quickly and accurately and, according to your credit policy, decide whether or not to extend credit. 4. TYPES OF CREDIT MANAGEMENT Types of Credit Checks: ➢ Simple Credit Check ➢ Automatic Credit Check • Static Credit Check • Dynamic Credit Check a. SIMPLE CREDIT CHECK Simple credit check compares the Customer’s credit limit to the total of all the items in the order and the value of all open items. Credit Exposure in Simple Credit Check = Value of all Open Items + Value of the Current Sales Order. Open items are orders that have been invoiced to the customer but the payment for the invoices have not been received yet. The system can be configured to either block the delivery, send a warning or an error message when the credit exposure has exceeded the credit limit of the customer.
  • 5. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 5 b. AUTOMATIC CREDIT CHECK Instead of just considering open items only, we need to consider open orders and open deliveries as well. Also, for old and seasoned customers, even if the credit exposure exceeds the credit limit set for the customer, the order can be still processed because of the good payment history with the company. This is broadly classified into two: • Static Credit Check • Dynamic Credit Check STATIC CREDIT CHECK Checking Group + Risk Category + Credit Control Area Checking Groups: Types of Checking Groups 01) Sales 02) Deliveries 03) Goods Issue At all these 3 levels order can be blocked. Risk Category: Based on the risk category the company decide how much credit has to give to the Customer. High Risk (001): Low Credit Low Risk (002): More Credit Medium risk (003): Average Credit DYNAMIC CREDIT CHECK DETERMINATION Dynamic credit check checks all these document value and check with the credit limit by considering the horizon period. 1) Open Doc 2) Open Delivery 3) Open Billing 4) Open Items 5) Horizon Period If the Horizon period is 4 months, the system will not consider the above 4 documents for 4 months.
  • 6. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 6 That is if the delivery period is after 4 months, the system will not consider the document. The system considers the document only if the delivery period of the open document is within 4 months. 5. SETTINGS 1. Credit Control Area: Credit management takes place in the credit control area. It is an Organizational unit that represents the area where customer’s credit limit is specified and monitored. Path: IMG -> Enterprise Structure -> Definition -> Financial Accounting -> Define Credit Control Area Credit management can be configured in to two ways i. Simple credit check ii. Automatic credit check SIMPLE CREDIT CHECK AUTOMATIC CREDIT CHECK 1. If customer credit limit exceed we can block only at order level. 1. In this if customer credit limit exceed u can block it order level or delivery level or PGI level. 2. There is no category of risk management. 2. We categories into high risk customer, medium risk customer and low risk customer based on customer’s past payment history. High risk customer block at order level. Medium risk customer block at delivery level. Low risk customer block at PGI level. 3. In simple system considers only receivable (Open items means invoice raised but not yet paid) while performing credit check. 3. Here all open order value, open delivery value, open invoice value and open item value are considered while performing credit management.
  • 7. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 7 CONFIGURATION OF SIMPLE CREDIT CHECK:- 1. DEFINE CREDIT CONTROL AREA:- CREDIT MANAGEMENT is an organizational unit where group of people responsible for credit management. Fi consultant is responsible to define credit control area. PATH:- SPRO→ ENTERPRISES STRUCTURE→ DEFINITION→ FINANCIAL ACCOUNTING→DEFINE CREDIT CONTROL AREA
  • 8. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 8 NEW ENTRIES →D001 →Currency (INR) →UPDATE GROUP [000012] Update group Controls which document should be update in credit management i.e. whether to update open order value or open delivery value or open invoice vale or open item value. There are 3 types of update groups: - 1) 000012: - It updates all open order values, open delivery values, open invoice values and open item values into credit management. 2) 000015: - It updates all open delivery values, open invoice values, and open item values into credit management. Example:- delivery without order reference. 3) 000018: - It updates all open order values, open invoice values and open item values into credit management. Example:- third party process and service item. Then assign FISCAL YEAR VARIANT [V3] →CREDIT LIMIT [1L]
  • 9. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 9 Then go back and give the description. 2. ASSIGN COMPANY CODE TO CREDIT CONTROL AREA:- FI consultant is responsible to assign company code to credit control area. PATH:- SPRO → ENTERPRISES STRUCTURE→ ASSIGNMENT → FINANCIAL ACCOUNTING →ASSIGN COMPANY CODE TO CREDIT CONTROL AREA GO TO YOUR COMPANY CODE →ASSIGN CREDIT CONTROL AREA→ save it. There are two types of credit process i. Centralized credit process ii. De-centralized credit process Centralized credit process- If a single credit control area is taking care for multiple company code, then it is called as centralize credit process.
  • 10. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 10 De-centralized credit process- If every company codes are having different credit control area then it is called de-centralized credit process. The relationship between company code and credit control area is [one to many] i.e. One credit control area can have many company code but one company code should be assign to single credit control area. 3. SIMPLE CREDIT CHECK:- SD consultant is responsible for this configuration. PATH:- SPRO →S&D→ BASIC FUNCTION →CREDIT MANAGEMENT/RISK MANAGEMENT → SIMPLE CREDIT CHECK GO TO YOUR DOCUMENT TYPE → MAINTAIN CREDIT CHECK AS A or B or C.
  • 11. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 11 4. Then go to your pricing procedure (V/08)→ which value you want to update credit management and maintain subtotal as “A” (In net value). 5. Then go to your item category (VOV7) →TAN→CHECK CREDIT ACTIVE. 6. Then create new customer and check payment history record in company code data payment transaction view. Payment History record: - If you check this then customer payment will be updated in credit management i.e. FD32. 7. Go to credit management (FD32) view. Here we can change the credit limit of the customer. We have 5 screens in credit management:- 1. Overview 2. Address 3. Central data 4. Status 5. Payment history
  • 12. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 12 CONFIGURATION OF AUTOMATIC CREDIT CHECK:- 1. DEFINE CREDIT CONTROL AREA:- FI consultant is responsible to define credit control area. PATH:- SPRO→ ENTERPRISES STRUCTURE→ DEFINITION→ FINANCIAL ACCOUNTING→DEFINE CREDIT CONTROL AREA→ NEW ENTRIES →D002 →INR →UPDATE GROUP [000012] → FISCAL YEAR VARIANT [V3] →CREDIT LIMIT [1L]→ save it. 2. ASSIGN COMPANY CODE TO CREDIT CONTROL AREA:- FI consultant is responsible to assign company code to credit control area. PATH:- SPRO → ENTERPRISES STRUCTURE→ ASSIGNMENT → FINANCIAL ACCOUNTING →ASSIGN COMPANY CODE TO CREDIT CONTROL AREA→ GO TO YOUR COMPANY CODE →ASSIGN CREDIT CONTROL AREA→ save it.
  • 13. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 13 3. DEFINE RISK CATEGORY:- FI consultant is responsible to define risk category. We have 3 risk categories. i. High risk category ii. Medium risk category iii. Low risk category PATH:-SPRO→FINANCIAL ACCOUNTING NEW→ACCOUNT RECEIVABLE & PAYABLE→CREDIT MANAGEMENT →CREDIT CONTROL ACCOUNT →DEFINE RISK CATEGORIES NEW ENTRIES→CREATE THREE RISK CATEGORIES.
  • 14. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 14 4. DEFINE CREDIT GROUP:- It is used to combine different document types for the purpose of credit management. SD consultant is responsible to define credit group. Credit groups specifies which transaction to block if customer credit limit exceed i.e. whether to block at order level, delivery level or PGI level PATH:-SPRO →S&D →BASIC FUNCTION→ CREDIT MANAGEMENT/RISK MANAGEMENT→CREDIT MANAGEMENT→DEFINE CREDIT GROUPS NEW ENTRY→DEFINE 3 CREDIT GROUPS
  • 15. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 15 5. ASSIGN SALES DOCUMENT AND DELIVERY DOCUMENT:- In this configuration steps we assign credit groups to order type and delivery type PATH:-SPRO →S&D →BASIC FUNCTION→ CREDIT MANAGEMENT/RISK MANAGEMENT→CREDIT MANAGEMENT→ASSIGN SALES DOCUMENT AND DELIVERY DOCUMENT. i. CREDIT LIMIT CHECK FOR ORDER TYPE:- DOUBLE CLICK ON CREDIT LIMIT CHECK FOR ORDER TYPES →GO TO OR→ CHECK CREDIT LIMIT [D] AND CREDIT GROUP [D1] → SAVE IT. ii. CREDIT LIMIT CHECK FOR DELIVERY TYPE:- DOUBLE CLICK ON CREDIT LIMIT CHECK FOR DELIVERY TYPES →GO TO LF → DELIVERY CREDIT GROUP [D2] AND PGI GROUP [D3]→ SAVE IT.
  • 16. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 16 6. DEFINE AUTOMATIC CREDIT CONTROL:- We define automatic credit control to the combination of [credit control area +risk category + credit group] T-code for automatic credit control is OVA8. PATH:-SPRO → S&/D → BASIC FUNCTIONS → CREDIT MANAGEMENT/RISK MANAGEMENT → CREDIT MANAGEMENT → AUTOMATIC CREDIT CONTROL. Define automatic credit control for 3 risk category and 3 credit group.
  • 17. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 17 8. Then go to your pricing procedure (V/08)→ which value you want to update credit management and maintain subtotal as “A” (In net value). 9. Then go to your item category (VOV7) →TAN→CHECK CREDIT ACTIVE. 10.Then create 3 new customers (high risk customer, medium risk customer and low risk customer) and check payment history record in company code data payment transaction view. 11.Go to FD32 and maintain your risk category in status view. Here create credit management for three customers you have created and maintain their risk category. AUTOMATIC CREDIT CONTROLS (OVA8):-
  • 18. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 18 NO CREDIT CHECK:- Here you can specify a routine number that contains conditions for when a credit limit check should take place. ITEM CHECK:- If you check this then system will perform credit check while entering the line item in sales document. If you uncheck this then system will perform credit check while saving the sales document. CREDIT LIMIT SEASONAL FACTOR:- Here you can increase or decrease the credit limits to the entire customer during a particular period. If you maintain some percentage over here and maintain the from and to date, then system will increase the credit limit up to that percentage. If you check minus then the credit limit will decrease. DEVIATION IN PERCENTAGE:- Generally after releasing the order which is blocked for credit, if user increases the value in that order then system will again block the order for credit. If you maintain some percentage in deviation in %, then system will allow to increase the quantity to that extent in that released order. PAYER:- Payer check will come into picture if you have multiple payers. If you check payer then performing open item check and oldest open item check system consider the invoice of the particular payer. If you uncheck payer then while performing open item check and oldest open item check system consider the invoices of all the payer who are in a group. [Rough – Create a customer with SP – SH – BP – PY and create another two payer and assign both payer with SP.] Grouping of multiple payers or customer into single credit limit. First maintain credit limit for one payer and assign this payer as credit account for other payer in FD32. Status view →edit →change account →maintain 1st payer→ maintain risk category →save it. STATIC:- If you check static then system will update all open order values, open delivery values, open invoice values, & open item values into credit check. (FD32). REACTION:- This field controls how system should response if order is block for credit i.e. whether to give warning message or error message or no message. STATUS/BLOCK:- if you check this then while creating sales order if customer credit limit exceed then system will block the order for credit. If you uncheck this system will not block the order for credit even a customer credit limit exceeds.
  • 19. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 19 OPEN ORDERS:- If you check this then only system will perform credit check in order level while creating order. If customer credit limit exceeds then system will block the order. If you uncheck this then system will not perform credit check in sales order and system will not block orders. OPEN DELIVERY:- If you this then only system will perform credit check while creating delivery document. The blocked order values will not be updated into credit management (FD32). DYNAMIC:- If you check Dynamic it updates all open order values, open delivery values, open invoice values, and open item values but any open order if the delivery creation date exceeds horizon date then that order will not update into credit management (FD32). We maintain horizon period in credit management ( FD32 ) overview. STATIC DYNAMIC If you check static then system will update all open order values, open delivery values, open invoice values, & open item values into credit check. (FD32). If you check Dynamic it updates all open order values, open delivery values, open invoice values, and open item values but any open order if the delivery creation date exceeds horizon date then that order will not update into credit management (FD32). DOCUMENT VALUE:- If you check this and if you maintain maximum document value then while creating sales order if sales order value exceeds Max. Doc. Value then system will block the order for credit. CRITICAL FIELDS:- If you check this then 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 are [Payment terms, fixed value date and additional value days] in credit management. We can change the critical fields in sales document billing document tab.
  • 20. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 20 NEXT REVIEW DATE:- If you check this then while creating sales order system will check order date with next review date if the sales order date exceeds next review date then system will block the order for credit. We maintain next review date in FD32 status view. The number of days field in next review date is grace days. OPEN ITEMS:- If you check this and if you maintain maximum open item % then while creating sales order, system checks is there any open item exist for this customer or not, if yes then it will accumulate the value of open items and system will also check is any of the open item overdue or not, if there is any overdue item then system will add the values of overdue items and calculate the % between overdue item values and open item values. If this % is exceeds maximum open item % then system will block the order for credit. HOW TO OVERDUE AN ORDER:- There are 3 steps:- 1. Change the billing date while creating invoice. 2. Go to VF02 → click on accounting →change mode →double click on customer number →change baseline date. 3. Go to FBL5N→ maintain your customer number →company code→ execute→ double click on invoice number → change mode →change billing date. OLDEST OPEN ITEM:- It is nothing but overdue item if check oldest open item then while creating sales order system checks for this customer is any one of the previous invoice is overdue or not, if yes then system will block the next transaction. HIGHEST DUNNING LEVEL:- Dunning is the process of sending reminders to the customer whose payment is delayed. Dunning configuration is done by FI consultant. If you check dunning level and if you maintain highest dunning level and if that dunning level executes then system will block the next transaction. Generally we have 3 dunning level. USER-1/USER-2/USER-3:- If client’s requirement related to credit management is not fulfilling with standard configuration, then we need to use user exits. SAP has provided 3 user exits if you are using 1st user then check user 1, if you are using 2nd user exits then check user 2 and if you are using 3rd then check user 3.
  • 21. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 21 DIVISION WISE CREDIT CONTROL AREA:- If you have 6 divisions then you have to create 6 + 1 = 7 credit control areas. 6 actual and 1 dummy credit control area. First create credit control areas, Z100 make it as dummy which we already created and create Z101 for Z1 division, Z102 for Z2, Z103 for Z3, Z104 for Z4, Z105 for Z5 and Z106 for Z6. Then assign dummy credit control area to company code. Assign permitted credit control area to company code. In this configuration steps we assign actual credit control area to company code. Go to new entry ZALK – Z101, ZALK – Z102, ZALK – Z103, ZALK – Z104, ZALK – Z105, and ZALK – Z106 →save it. Define risk category New entry → Z01 – Z101, Z02 – Z101, Z03 – Z101 Z01 – Z102, Z02 – Z102, Z03 – Z102 Z01 – Z103, Z02 – Z103, Z03 – Z103 Z01 – Z104, Z02 – Z104, Z03 – Z104 Z01 – Z105, Z02 – Z105, Z03 – Z105 Z01 – Z106, Z02 – Z106, Z03 – Z106 Assign credit control area to sales area SPRO →ENTERPRISES STRUCTURE →ASSIGNMENT → S&D →ASSIGN SALES AREA TO CREDIT CONTROL AREA (In this configuration steps we assign actual credit control area to sales area). ZDOM – Z1 – Z1 = Z101 ZDOM – Z2 – Z1 = Z101 ZDOM – Z1 – Z2 = Z102 ZDOM – Z2 – Z2 = Z102 ZDOM – Z1 – Z3 = Z103 ZDOM – Z2 – Z3 = Z103 ZDOM – Z1 – Z4 = Z104 ZDOM – Z2 – Z4 = Z104 ZDOM – Z1 – Z5 = Z105 ZDOM – Z2 – Z5 = Z105 ZDOM – Z1 – Z6 = Z106 ZDOM – Z2 – Z6 = Z106......do for Z3 & Z4 distribution channel. Define credit Groups SPRO →S&D → BASIC FUNCTION →CREDIT MANAGEMENT / RISK MANAGEMENT →CREDIT MANAGEMENT →DEFINE CREDIT GROUPS. ASSIGN SALES DOCUMENT AND DELIVERY DOCUMENT DEFINE AUTOMATIC CREDIT CONTROL Z101 – Z01 – Z1 Z102 – Z01 – Z1 Z103 – Z01 – Z1 Z101 – Z02 – Z2 Z102 – Z02 – Z2 Z103 – Z02 – Z2 Z101 – Z03 – Z3 Z102 – Z03 – Z3 Z103 – Z03 – Z3 ......Do for same Z104, Z105 & Z106. Create new customer for division wise credit control Extend the customer from one division to another division and assign credit control area in billing tab. Maintain credit limits (FD32) Customer number [xxxxxxx Credit control area Z101 Z102 Z103 Z104 Z105 Z106 Credit limit 1L 2L 3L 4L 5L 6L
  • 22. Your seriousness is my success… Manoj Tony… +91 8763427833 Page 22