1. Credit and Receivables Risk Management

2. Credit is an independent function
Credit Management
Credit Management is a cross-functional activity between SD and FI SD FI C R E D I T
Sales
People
want to
sell FI
People
want to
reduce
risk
Credit is an independent function
in the SAP R/3 system

3. Credit/Risk Process
Credit Management
SD, FI
Cust: Health Express
Risk: Medium
Credit Limit: $10,000
Ttl. Commit: $6,000
Order: 5923
Order Amount: $5,000
Credit Limit Exceeded
Block order
to credit rep. (opt.)
Blocked document list
or (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

4. Total Commitments Credit Limit Open order value Open delivery value
Delivery items not yet billed
Open
billing value
Not transferred to FI (optional)
Special
commitments
Short payments, down payments
Receivables
Unpaid bills

5. Static vs. Dynamic Checks
Credit Limit
Open
order
Open
order
Open
order
Open
order
Open
order
Open
order
Dynamic Check
Open
delivery value
Open
delivery value
Receivables
Receivables
Static Check
Credit Horizon

6. 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
$4,000
$6,000
$5,000
$10,000
$5,000
<30
>30
$15,000
$30,000
= 50% > 20%
Why Total Commitment and not credit limit?

7. Other Checks: Oldest Open Date
Health Horizons
Oldest Open Item: 45
Credit Limit: $100,000
Ttl. Commit.: $30,000
Health Horizons Receivables
Days in arrears Amount
$3,000
$6,000
$5,000
$10,000
$5,000 45

8. Other Checks: Next Review Date
Health Horizons
Next check date: 6/01/04
Number of days: 10
Credit Limit: $100,000
Ttl. Commit.: $30,000
Health Horizons Order
Date: /6/04
Amount: $3,000
Health Horizons Order
Date: /14/04
Amount: $4,000

9. 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

10. Decentralized Credit Management
Credit Control Area 1
Company Code 1
Sales Org.1
Health Express
Limit: $50,000
Credit Control Area 2
Company Code 2
Sales Org.2
Health Express
Limit: $100,000
Each company code sets and monitors a credit limit independently

11. Centralized Credit Management
Credit Control Area 1
Sales Org.1
Sales Org.2
Company Code 1
Company Code 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

12. 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

13. 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)

14. Automatic Credit Control
Sales
organization
Company
Code
Credit
Control Area
Customer
Risk
Category
Transaction
Type
Credit group
When Credit is Checked
Why Credit is Checked
What the system does (warning, error)
As of release 4.0, Credit
control area can also be
Determined via:
user exits
payer
sales area

15. Receivables Types Guaranteed Payment Credit and Procurement Cards
Export
Credit
Insurance
Letters of
Credit
Transactions using
these payment
methods/guarantees
do not affect Total
Commitment
Credit
Management