Credit and Receivables
Risk Management
1
Credit Management
 Credit Management is a cross-functional
activity between SD and FI
SD
Sales
People
want to
sell
C
R
E
D
I
T
FI
Credit is an independent function
in the SAP R/3 system
FI
People
want to
reduce
risk
2
Credit/Risk Process
Credit Management
Cust: Health Express
Risk: Medium
Credit Limit: $10,000
Ttl. Commit: $6,000
SD, FI
Order: 5923
Order Amount: $5,000
Credit Limit Exceeded
Block order
E-mail to credit rep. (opt.)
Blocked document list
or E-mail (opt.)
Review situation
Release order
Pick, pack & ship order
Bill Customer
Credit control (blocks) can be applied at order entry,
delivery creation or goods issue
3
Total Commitments
Open
Credit Limit
order value
Open
Delivery items not yet billed
delivery value
Open
Not transferred to FI (optional)
billing value
Special
Short payments, down payments
commitments
Receivables
Unpaid bills
4
Static vs. Dynamic Checks
Credit Limit
Open
order
Open
order
Open
order
Open
delivery value
Open
order
Open
delivery value
Receivables
Receivables
Static Check
Open
order
Open
order
Dynamic Check
Credit Horizon
5
Other Checks: Open Items
Health Horizons
Max. open items: 20%
Number of days: 30
Credit Limit: $100,000
Ttl. Commit.: $30,000
Health Horizons Receivables
Days in arrears
Amount
10
17
<30 28
>30 33
46
$4,000
$6,000
$5,000
$10,000
$5,000
$15,000
= 50% > 20%
$30,000
Why Total Commitment and not credit limit?
6
Other Checks: Oldest Open Date
Health Horizons
Health Horizons Receivables
Days in arrears
Amount
Oldest Open Item: 45
Credit Limit: $100,000
Ttl. Commit.: $30,000
45
10
17
28
33
$3,000
$6,000
$5,000
$10,000
46
$5,000
7
Other Checks: Next Review Date
Health Horizons
Health Horizons Order
Next check date: 6/01/04
Number of days: 10
Credit Limit: $100,000
Ttl. Commit.: $30,000
Date:
Amount:
6/6/04
$3,000
Health Horizons Order
Date:
Amount:
6/14/04
$4,000
8
Credit Control Area
 The credit control area is the organizational
unit that specifies and controls the credit limit
for a customer
 Credit control areas can be used to create
centralized or decentralized credit control in a
company with more than one company code
 A company code can be assigned to only one
credit control area, but each sales area within
a company code can be assigned to a different
credit control area
9
Decentralized Credit Management
Credit Control Area 1
Company Code 1
Credit Control Area 2
Company Code 2
Sales Org.1
Sales Org.2
Health Express
Limit: $50,000
Health Express
Limit: $100,000
 Each company code sets and monitors a credit limit
independently
10
Centralized Credit Management
Credit Control Area 1
Company Code 1
Company Code 2
Sales Org.1
Sales Org.2
Health Express
Health Express
Limit: $150,000
 Transactions with each company code apply to the
single credit limit set for the single credit control area
11
Exchange Rates
Credit Control Area 1
Currency: USD
Company Code 1
Currency: USD
Company Code 2
Currency: EU
Sales Org.1
Sales Org.2
Health Express
Health Express
Limit: $150,000
 Receivables for Company Code 2 are converted from
Euros to US Dollars when credit is checked
12
Automatic Credit Control
 Determine points at which credit check is
carried out (order creation, delivery creation or
goods issue)
 Determine type of check
 Based on:
 Credit control area
 Risk category
 Document (credit group)
13
Automatic Credit Control
Sales
organization
Company
Code
Customer
Transaction
Type
Credit
Control Area
Risk
Category
Credit group
As of release 4.0, Credit
control area can also be
Determined via:
user exits
payer
sales area
When Credit is Checked
Why Credit is Checked
What the system does (warning, error)
14
Receivables Types
Letters
of
Credit
Credit and
Procurement
Cards
Export
Credit
Insurance
Guaranteed
Payment
Transactions using
these payment
methods/guarantees
do not affect Total
Commitment
Credit
Management
15