SAP Financial Credit Risk Management Overview

SAP Financial Credit Risk Management Overview has a integral part as an unbiased perform for credit/danger administration is out there within the SAP system alongside Monetary Accounting and Gross sales and Distribution to reduce credit score risk when delivering goods or offering services. With the credit management function, you can outline how a buyer is to be handled when it comes to credit and set the system to respect these credit score procedures in associated business transactions.Automated credit management and resulting blocks are a part of Gross sales and Shipping. The credit score representative can use these capabilities to process pressing transactions shortly and efficiently.For additional info on Credit score Administration, see the web documentation listed below:
  1. SAP Online Help: FI-Monetary Accounting - Accounts Receivable (FI-AR) - FI/SD - Credit score Administration/Risk Management
  2. SAP Online Help: SD-Sales and Distribution - Credit score Administration and Danger Management in FI/SD Or the next chapters within the Implementation Guide:
  3. IMG: Financial Accounting - Accounts Receivable and Accounts Payable - Credit score Management
  4. IMG: Gross sales and Distribution - Primary Capabilities - Credit score Management/Risk Administration
The R/3 System provides you with numerous choices for guaranteeing payment of receivables. These completely different payment guarantee forms are all contained inside threat management.You presumably can differentiate between the different payment guarantee varieties in line with the level of safety they provide.In credit administration, you'll be able to group your customers in accordance with risk category and set a most credit score limit per risk category. How you make these assignments depends upon the level of credit score you wish to grant your customer. As of Launch 4.0, you can also use the following “safer” cost guarantee kinds to cut back the chance involved for receivables:
  1. Financial paperwork (confirmed or unconfirmed letter of credit)
  2. Export credit insurance (connection to exterior system)
  3. Payment cards
Total Commitments in Credit Management

Open order value:The open order value is the worth of all order items that haven't yet been delivered.The open order value is predicated on confirmed quantities (confirmed portions x credit score price = open order worth of an order). An order that has been blocked due to a credit examine doesn't comprise confirmed quantities. The open order value does not improve as lengthy as the block remains in place.
  1. Open delivery worth:The open delivery value is the value of all supply items that have not but been billed.
  2. Open billing worth:The open billing value is the worth of all billing items that have not but been transferred to Accounting.
  3. Receivables from sales are included in complete commitments so long as they have not been indicated as disputed items. For more info, see Unit Cost Differences and Particular Commitments.
  4. Receivables from particular G/L transactions are transferred from special commitments to complete commitments if they're related to credit score limit (for instance, payments).
  5. The system updates values based mostly on the payer.

When using credit score management, you enter a limit up to which you are ready to grant credit to your customer. However, you still have no strong guarantee that the receivables will in all probability be paid.As of Release 4.0, the R/3 system offers you with additional “safer” payment guarantee kinds in addition to credit score management. These all fall throughout the class of Threat management.If, for instance, you settle for cost from a buyer using a credit card, then subsequent authorization of the quantity by the bank card company ensures that you will receive payment.As a end result of this course of is carried out utilizing a safe payment assure type, it doesn't cause any increase in whole commitments as outlined inside credit score management.Credit management can now be used as a second stage within danger administration, under the safe forms of cost guarantee when you have also granted a credit score restrict to the client talked about above and you obtain an order that is not to be paid by credit card, then this order increases complete commitments within credit score management. In this case there is no assure that fee will doubtless be made.

The credit management space is an organizational unit that specifies and controls the credit score restrict for a customer.Relying in your company requirements, receivables might be managed utilizing a central or a decentralized credit score policy.The two firm codes in the above instance course of the identical customer.With a decentralized credit policy, every company code can decide its own credit score data for its customers.A sales group is assigned to just one company code. A business transaction is assigned to only one credit score management area.

In a centralized group, company codes are mixed into one credit score control space for Credit score Management. In this way, you probably can perform Credit score Management for the customer throughout firm codes.A default forex is ready up for each credit score management area.The next abbreviations will be used are:

n CCA = Credit score management area
n CCd = Firm code

If the credit management area contains company codes with a neighborhood forex that differs from that of the credit score management area, then the receivables are recalculated within the foreign money of the credit control area.Any open order, supply or billing values are additionally recalculated in the credit management area currency.

Determining the credit control Area

As of Launch 4.0, additional standards can affect dedication of the credit score control area.Willpower is carried out within the following sequence:
  1. User exit (EXIT_SAPFV45K_001)
  2. Gross sales area segment from payer grasp file (Credit score control area area within the Billing view)
  3. Gross sales area
  4. Company code for the sales organization
Dedication via the corporate code corresponds to the functionality previously available. This type of assignment is still set as the standard.Solely header knowledge from the gross sales order is taken into account for the user exit.A change to the credit control area is just allowed if no subsequent documents exist.It's potential to specify credit score knowledge centrally for consolidated companies. This centralized information, such as danger classes and credit score limits, are then valid for all member companies.Open order values and receivables of all member corporations are managed in a standard credit administration account.A credit score limit for a bunch of shoppers is unbiased of the query of fee, in other phrases the members assigned to a central credit score account can be unbiased so far as cost is concerned.

Classifying the Customers

You possibly can assign a danger class to a buyer so as to classify and perform credit checks on prospects based on the credit danger they represent.The risk class determines which credit score checks are to be carried out during order and delivery processing. (see unit on Automated Credit Control).Using the client credit score control group, you can group clients in accordance with your company specific requirements (e.g. by business or by country). Credit representatives can use these groups to generate blocked paperwork for review and statistical analyses.The shopper groupings are freely definable and included in reporting. On this approach, the credit representative can group customers by trade or product group.

Central Data

  1. Total credit score limit: With the whole credit limit, you determine the credit score limit allowed for a customer for all credit management areas. The sum of all credit limits inside a credit control area cannot exceed this whole credit score limit.
  2. Most individual credit restrict:The maximum individual credit score restrict restricts the credit restrict for a specific credit score management area. In this case, you do not determine a particular credit score restrict for a credit control space, however somewhat an allowable credit score limit.
  3. Particular person credit restrict:With an individual credit score limit, you may decide a selected credit score restrict for a customer within a credit management area. This allowable particular person limit must not exceed the maximum individual credit score limit. You'll give you the option to specify a default value for the individual credit score restrict when setting up a credit score management area. Whenever you create a customer in a company code and this default value has been set,the system will robotically assign an applicable credit limit to the shopper, in other phrases the system will create the suitable credit score grasp records. For extra information, see unit on Credit Control Areas
Extended Credit Master Data

Often corporations use info from different credit score businesses to assess the creditworthiness of customers.One of many largest providers of such data is Dun and Bradstreet (D&B).D&B assigns a DUNS (Data Common Numbering System) number that clearly identifies companies and contains info on business relations.You may add this and other D&B knowledge to the credit master file in R/3. D&B presents both basic textual content reports and coded data containing identification, fee and financial information.Examples of other data are:
  • Ranking information, for example beneficial lines of credit score- Fee experience
  • Monetary knowledge, for example equity capital and sales quantity
  • Unfavorable data
This data can always be updated via periodic on-line access.The system requirement for the D&B software is the Credit score Administration part of the R/3 software element FI, Release 3.1H or higher.

Requesting Data

Before you can get new D&B info, it's a must to request a DUNS number. Which means the names and addresses maintained in you customer master form the basis of the info that's transmitted to Dun and Bradstreet.As quickly because the DUNS number has been decided and included within the extended data, you may request extra D&B information on this credit score management account (data packets and text studies). The coded knowledge is saved within the corresponding R/3 tables. Transmitted textual content stories could be analyzed by means of Extras n When the DUNS knowledge is deleted the DUNS number remains.The search capabilities utilizing addresses and DUNS numbers, along with the monitoring service, are solely used within the European market.You will discover detailed data on the D&B connection in the documentation CD D&B for SAP R/3. Use the system settings to specify whenever you want to carry out a credit control check. You may, for example, require that checks be carried out only throughout gross sales order processing.Subsequent capabilities in Sales and Shipping can't be carried out as lengthy as the relevant document is blocked by a credit check. A verify carried out at goods concern can no longer block the transaction as items issue is the final operate in Shipping. If a credit examine is carried out during items problem and the transaction exceeds the credit restrict, it isn't posted for delivery. The system issues an error message.

Account Setting

The credit control area, the danger category of the client, and the business transaction all affect the kind and scope of automated credit checking.Credit groups combine totally different business processes which can be to be handled in the same close to the credit check. These credit score groups are assigned to the sales doc types and the supply doc sorts, for which a credit score restrict verify is to be carried out. You determine for every merchandise class, whether or not an merchandise of that item category is included within the credit capabilities (verify and replace of open credit score values). The Energetic receivables field should be activated for merchandise categories which are to be taken into account in the course of the credit check.

Static and Dynamic Checks

The client credit publicity could be divided right into a static half (open objects, open billing values and delivery values) and a dynamic part (open order worth).The open order worth includes all partially delivered or undelivered orders. It's amassed for the fabric availability date within an information construction in freely definable models of time or intervals (day, week, month).When defining the credit score test, you specify a certain variety of the corresponding durations from which the date shall be decided within the future.This makes positive that sales orders planned in the future will not be taken into account when determining credit exposure.The “precise date” in this example is the initial date for determining the open order worth on the credit score horizon. The “precise date” is the current date for each check. In an order, it's the date on which the order is created or changed. In the supply, it is the date on which the delivery is created or changed.

Credit Management in distributed Scenario

As of Launch 4.0, it is attainable to hold out credit administration in a system utilizing a central Financial Accounting system with native SD workstations.Credit checks in SD take be aware of local credit-relevant data. Distribution features for payers and credit account data will probably be made out there centrally from FI. This affects the FI checks (checks in opposition to open gadgets, checks aga inst oldest open gadgets, checks towards dunning level) as properly as the static and/or dynamic credit restrict test (due to the total of open items).An FI vector is created at common intervals to allow switch of this information.In Customizing for automated credit score management, you'll have the opportunity to outlined how current the FI vector needs to be (variety of days and hours after which the FI vector have to be recreated).A new credit standing has been included in the SD doc Credit score knowledge out of date which is used within the credit total status.Depending on the settings made for the relevant FI check, the system points either a warning, an error message or a block.Credit score management areas can't be outlined across completely different servers/workstations.

For every company code, distinction causes are determined to manage cost differences. Distinction causes are used, for example, when the money low cost interval has been exceeded, when an unauthorized cash discount is claimed, or if the client has simply made an error in calculation.You indicate for every difference reason whether fee differences should lead to disputed items.Disputed objects do not elevate the entire receivables within credit management due from a customer.Once you carry out a credit check against the oldest open objects and the share of open items with a certain variety of days in arrears, the system does not take disputed gadgets into account. For extra info see the chapter on Automated Credit Control.

Special normal ledger transactions characterize particular transactions in accounts receivable and accounts payable, which cannot be proven in the standard means within the sub-ledger account. Examples include down payments and bill of change posting.The “Credit restrict relevance” indicator ensures that the system takes posting under consideration when the credit score restrict verify is carried out for particular common ledger transactions (in different phrases, this value is included in whole commitments).

Information Sources

In Credit score Administration there is extra essential information specific to the customer that may influence determination making. You ought to utilize common info on the final cost made by the client and the oldest items due,for instance, taken instantly from a customer's credit management area data.Moreover, it's possible to department from Credit score Management to the shopper's dunning and rely data.From the credit score control area knowledge, the credit master information, and the credit overview, you'll give you the chance to list the customer's line gadgets, carry out an account analysis or analyze the payment history.Utilizing the FI information system you can too analyze due dates, the DSO, and overdue items.

Further Functions of Orders

The standard version incorporates predefined necessities which affirm the credit score status of a Gross sales and Distribution document. If the document is blocked, these requirements will not be met.Requirements are used to prevent subsequent features from being carried out for blocked orders or deliveries (see the next slide).It's essential to first make the suitable settings for every situation and related subsequent perform in Customizing.Be positive that the block indicator set in a checking rule for computerized credit score control is only activated when a corresponding requirement confirms this indicator within the document as well.This allows you to decide which subsequent capabilities are to be allowed or prevented within your firm when a document is blocked.You can prevent the creation of the confirmed amount for a supply, however switch of requirements takes place anyway. It is because it's assumed that generally a supply might be made at some level in the future.

Managing Credit Control

Report RFDKLI20 is used for reorganizing the credit restrict data in the credit control areas. Reorganization have to be carried out if the assignment of control areas to firm codes modifications or if the forex of a control space is changed.This report reads the open gadgets of all selected customers and determines the quantity of the item in the (new) currency of the current control area. This reorganizes the credit score restrict knowledge related to the control area.Whenever you use the new reorganization function in a buyer’s credit score management knowledge, the reorganization is barely carried out for the shopper for whom the transaction was known as up. When there are groups of affiliated companies that are grouped together in a joint credit account, the individual corporations’ accounts are usually not reorganized.

It's the intention of every credit score policy, to reduce the chance represented by customer receivables.Together with Credit score Management, you also have entry to several different payment assure kinds within the enterprise processes. These embody letters of credit, export credit insurance coverage (external connection) and payment cards.These cost guarantee forms differ in the level of security they can offer you, and are all integrated within Risk Management. When a cost guarantee is used (for instance, a letter of credit score), the system first tries to offer the optimum in threat minimization.If this is not attainable, then you ought to use Credit Administration in a second step, to create a credit limit and due to this fact limit the level of risk.Which cost guarantee type you utilize depends drastically upon the business transaction being processed. Letters of credit score are used predominantly for big-scale export transactions, whereas credit score cards are more vital for Retail transactions.

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