Configure and Customize SAP Automatic Credit Management - SAP Blogs

4/29/2019 Configure and Customize SAP Automatic Credit Management | SAP Blogs
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Former Member
September 7, 2013 12 minute read
Con gure and Customize SAP Automatic Credit

Management
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51 Likes 65,435 Views 24 Comments
Introduction
Credit management is the management of credit facility granted to customers as credit exposure allowed. Credit
facility is just like telling our customers that they need not pay immediately, they can pay at a future point of time after
receiving the goods or services. But, this payment at a future point of time involves risk. So, according to the risk
foreseen, the amount and time of credit (Credit Exposure) granted changes. For some customers, the risk perceived
may be high such that we may demand payment in advance.
This credit management comes partially under preview of Sales and Distribution (SD) and partially of Account
Receivables (AR).
Key challenge: Reducing credit risk without hampering the supply chain.
Dealing with Bad Debt: Before getting involved, ask yourself:
How do I react to a bad debt?

Do I block orders from important customers, or do I grab a phone?
https://blogs.sap.com/2013/09/07/configure-and-customize-sap-automatic-credit-management/ 1/25
What is the volume of blocked orders my F&A department can handle?

Can I afford to block customers (small customer base)?
What do I save?
What is the cost in terms of damage?
Credit Management in SAP
Assuming that we already have SD and AR implemented, credit management can be broadly used to:
Assign credit limit to customers

Facilities like the credit master sheet or early warning list help you monitor the customer’s credit situation
Automatic credit limit checks as well as to specify the points at which they have to be carried out
Automatically alert the credit representative of a customer’s critical credit situation as soon as order processing starts
and he may be able to check a customer’s credit situation quickly and reliably, and, in line with the appropriate credit
policy, to decide whether the customer should be granted credit.
Credit Check
Every customer is having a certain credit limit, which is measured and maintained by Finance people. Credit
check is done for each and every order/SD documents generated.
Credit check is performed at the following stages of Sales order cycle, Credit check settings present in each SD
document is responsible for interacting with FI module.
Figure 1:Stages of Credit Check
Con guration Setting
De ne Risk Category
SPRO > Financial Accounting > Account Receivable and Accounts Payable > Credit Management > Credit Control Account >
Define Risk Categories
Figure 2:De ne Risk Category
De ne Credit Control Area
SPRO > Enterprise Structure > Definition > Financial Accounting > Define Credit Control Area
Figure 3:De ne Credit Control Area
Figure 4:De ne Credit Control Area – Details
The type of update chosen controls when the values of open sales orders, deliveries and billing documents are
updated depending upon the type of document being generated. One of the following update groups can be chosen
as available in standard SAP
Blank – If the field is left blank, the SD documents are ignored and only open receivables and open special
G/L items are used for calculating credit exposure.
000012 – When a new order is created, the open order value is added to the credit exposure. When the order
is delivered, the open order value is subtracted and the open delivery value added to the exposure. On billing
the delivery, open delivery value is subtracted and the open billing value is added to the exposure. When
billing posts to accounting, the open billing value is subtracted and the open A/R value added to the
exposure. The exposure is finally reduced when the cash is applied against open A/R.
000015 – Calculates exposure without considering open sales order value. When the order is delivered, the
open delivery value is added to exposure. On billing the delivery, open delivery value is subtracted and the
open billing value is added to the exposure. When billing posts to accounting, the open billing value is
subtracted and the open A/R value added to the exposure. The exposure is finally reduced when the cash is
applied against open A/R.
00018 – This is relevant for non-delivery-relevant orders only. When a new order is created, the open delivery
value is added to the credit exposure. When the order is billed, the open delivery value is subtracted and the
open billing added to the exposure. When billing posts to accounting, the open billing value is subtracted and
the open A/R value added to the exposure. The exposure is finally reduced when the cash is applied against
open A/R.
Note: SAP recommends the use of update group 000012
Organizational Unit in Credit Management
The organizational unit used in credit management is Credit Control Area. It represents the area where customer
credit limits are specified and monitored.
Depending on the relationship between credit control area and company code, the credit management can be
categorized as:
Decentralized credit management
Every company code has its own credit control area. Hence, we can define credit limits for a customer
separately for each company code. This method delivers benefits such as the local payment cultures can
be respected, each company code has the independence to make its own decisions.
Centralized credit management
Multiple company codes are clubbed under the same credit control area. So, if the customer transacts
with company codes which are under the same credit control area, the limit is set for all the company
codes combined together.
If the currencies of these company codes are different from that of the credit control area, the receivables are
converted to the credit control area currency to check with the credit limit set. Centralized credit management has
benefits such as easier analysis of credit policy and modifications required, the focus is shifted to other important
areas such as bad debt reductions and improved customer relations as there is only a central credit team that needs
to be consulted irrespective of the geography etc.
Figure 5: Organisational Unit in Credit Management
Assigning Company Codes to a Credit Control Area
SPRO > Enterprise Structure > Assignment > Financial Accounting > Assign Company Code to Credit Control Area
Figure 6: Company Codes to Credit Control Area
Assigning Sales Area to a Credit Control Area
SPRO > Enterprise Structure > Assignment > Sales and Distribution > Assign Sales Area to Credit Control Area
Figure 7: Sales Area to Credit Control Area
De ne Credit Groups
SPRO > Sales & Distribution > Basic Functions > Credit Management and Risk Management > Credit Management >
Define Credit Groups.
The credit group specifies which subsequent transaction can be blocked for processing, if the credit limits are
exceeded.You can use the default credit groups or create new once.
Figure 8: De ne Credit Groups
Assigning Sales Documents and Delivery Documents to Credit Group

SPRO > Sales and Distribution > Basic Functions > Credit Management/Risk Management > Credit Management >
Assign Sales Documents and Delivery Documents > Credit Limit Check for Order Types > Credit Limit Check for
Delivery Types
Figure 9: Credit Limit Check for Order Type
Figure 10: Credit Limit check for Delivery Type
Simple Credit Check Vs Automatic Credit Check
a. High-volume, low-value requires automation and efficient handling through grouping, with as little personal
handling as possible (refuse orders as much as possible)
b. Low-volume, high-value requires individualization with emphasis on reporting and blocked orders or
deliveries that can be checked and unblocked.
Figure 11: Simple Credit Check Vs Automatic Credit Check
Simple Credit Check
The simple credit check compares the payer customer master record’s credit limit to the net document value
plus the value of all open items.
In case the value of the document and open items is more than the credit limit:
System may respond with a warning message in the sales order [OR]
Warning message and a delivery block [OR]
Error message, which will cause the document not to be saved.
Automatic Credit Check Variations & Recommended Use
Automatic Credit Check – Gives extra parameters to define credit checks like Credit Control Area, Risk Category
and…
Figure 12: Automatic Credit Check Maintenance
STATIC CREDIT LIMIT DETERMINATION:
1. Open Sales Orders + Sales Order Value

2. Open Delivery
3. Open Billing
4. Open Receivables
Recommended Use: This is seen to be safer to use as compared to Dynamic Credit Check as it covers all
documents due to varying business needs. For high volume and very low risk customers (e.g. Risk Category 001), it
is good practice to put deliveries on block and leave the orders untouched. This prevents a level of check.
DYNAMIC CREDIT CHECK:

1) 2) 3) 4) Above Mentioned
5) Horizon Period : Eg. 3 Months.
Here the System will not consider the Open items 1, 2, 3 & 4 values for beyond 3 months.
Recommended Use: If the business is always likely to have fast moving items leaving no chances of Open
Orders, Open Deliveries etc for long time period, this is good to use. There can be other business considerations
to include only Open items within certain period
Maximum Document Value

The sales order or delivery value may not exceed a specific value which is defined in the credit check. The value is
stored in the currency of the credit control area. This check is useful if the credit limit has not yet been defined for a
new customer. It is initiated by a risk category which is defined specifically for new customers.
Recommended Use: Use it for Credit Group 01 (Orders) and high risk category customers which you always want to
review beyond a particular value. It may also be used for prepaid or one-time customer with Max doc value.
Critical Fields:
This Credit check is initiated by document changes done in credit sensitive fields. One such example is terms of
payment. When this field changes, a check is done on the data in sales order against the data in the customer master.
Date of Next Review

System uses the date of the next credit review as a trigger for an automatic credit check. If you process a sales
order after a customer’s next review date has already gone by, the system automatically carries out a credit
check.
Overdue Open Items

The relation between open items which are more than a certain number of days overdue and the customer
balance may not exceed a certain percentage. These values are defined in the customizing for automatic credit
control.
Recommended Use: Use it for Credit Group 01 (Orders) in conjunction with Static Credit Check for slightly
higher risk category customers, where you don’t want to have more than a certain % of open items. The values
may be reduced with increase in risk category values.
Oldest Open Item

The oldest open item may not be more than a specified number of days overdue.
Recommended Use: Use it for any Credit Group 01 or 02 (Orders or deliveries) in conjunction with Static Credit
Check for slightly Low-Medium risk category customers.
Maximum Number of Dunning Levels Allowed
The customer’s dunning level may only reach a specified maximum value exceeding which the item may be
blocked if so configured.
User-De ned Checks- For e.g. Cheque received from a customer bounced, then subsequent orders may get
blocked.
Credit Management at work

For each customer, credit limits are specified in the particular credit master record. If the customer exists in multiple
credit control areas, individual limit can be specified for each credit control area. In addition, a central credit limit can
also be specified for all the credit control areas under which the customer exists. Then, the total of the credit limits for
each credit control area should not exceed the central credit limit.
FD32 (FI T code) is used to set credit limit and credit risk category for the customer.
Figure 13: Credit Limit for Customer
Overview Screen
It gives an overview of credit settings of the customer.
Customer‘s credit limit, credit exposure, percentage of credit limit used and horizon (as applicable in dynamic credit
check) are presented as status
Payment history along with the average number of days taken for payment is shown
Payment data contains details such as authorized cash discount and unauthorized cash discount that was
available for cleared items, the outstanding receivables in sales days
Dunning data consists of dunning area for the customer, when he was last dunned and the dunning level reached
during the last dunning run
Control contains the credit risk category of the customer, date of the last check on customer credit limit, if the
customer is blocked for credit management business transactions, the credit representative group responsible for
the customer, the payment history classification, the financial standing of the customer and date when the credit
check of the customer was carried out last.
Figure 14: Overview Screen
Central Data Screen
It gives an overview of central credit limit settings of the customer.
The maximum permitted credit limit as a total of limits across all credit control areas to which the customer is
assigned
The maximum permitted individual credit limit that a customer can have under any one credit control area
The currency in which the two maximum limits are specified. This is because we can enter the central data in any
currency of choice, independently of the currencies of the control areas
The currently exhausted credit limit as a total (percentage) across all credit control areas to which the customer is
assigned (should be less than or equal to max limit)
The currently assigned largest credit limit across all credit control areas to which the customer is assigned (should
be less than or equal to max limit)
Date on which the most recent general information about the customer was obtained
Figure 15: Central Data Screen
Status Screen
Shows the customer’s actual individual details according to particular credit control area
The credit limit for the credit control area, credit account if the limit is to be specified for a group of customers, the
percentage of credit exposure, horizon date to be taken into consideration, the receivables, special G\L
transactions and the order value not yet transferred to FI used for the credit exposure calculation as well as the
amount of secured receivables is shown under credit limit data
The credit risk category, credit representative group, customer credit group and customer group used mainly for
sorting or reporting, the reference data for customer credit review, if the customer is blocked for credit management
business transactions, the last and next internal review date for the customer credit limit as applicable to the
particular credit control area are shown under Internal data
The date of last external review, the credit information number as applicable to external agency, the classification of
payment history of the customer as well as the financial standing is shown under external data
Figure 16: Status Screen
Credit Check at work in Sales Order creation
When sales order is created (SD), system verifies the credit limit used by the customer by communicating with values
set in FD32 (FI)
Figure 17: Credit Check
Release Sales Documents from Credit Block
Block will be released if the Agent discussed with Customer and / or payment is received from Customer. VKM1,
VKM3 and VKM5 are key T codes used to release Sales and Delivery documents from Credit Block. For the
document selected, the following options are available:
Grant the credit and release the document

Reject the credit and cancel the document
Forward the blocked document to another processor
Recheck the blocked document
Reassign the blocked document and specify a new sequence of documents. This enables to give priority to and
release several documents with a low document value until their credit limit is completely used up, instead doing so
for a single document with a high document value that has already exceeded its credit limit.
Figure 18: Release Credit Block
Reports
RFDKLI10 – Customers with missing credit data

RFDKLI20 – Reorganization of credit limit for customers in credit control areas
RFDKLI30 – Central and credit control area related data for customer (short overview)
RFDKLI40 – Overview credit limit (extensive)
RFDKLI41 – Credit master sheet
RFDKLI42 – Early warning list
RFDKLI43 – Master data list especially for printing customer cards along with data from external systems
RFDKLI50 – Mass change for master data in credit management
RFDKLIAB – Display changes for credit management data

RVKRED06- Checking blocked credit documents
RVKRED08 – Checking sales documents which reach the dynamic credit check horizon (periodic report)
RVKRED09 – Checking the credit documents from credit view (released documents are checked only if the validity
period for the release is up)
RVKRED77 – Reorganization of open credit, delivery and billing document values especially when update errors
occur
RVKRED88 – Simulation reorganization credit data SD
Alert Moderator
Assigned tags
FIN (Finance) | SAP ERP | enterprise resource planning | sap erp nancials |
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4/29/2019 Configure and Customize SAP Automatic Credit Management | SAP Blogs

Con gure and Customize SAP Automatic Credit

51 Likes 65,435 Views 24 Comments

Dealing with Bad Debt: Before getting involved, ask yourself:

How do I react to a bad debt?

What is the volume of blocked orders my F&A department can handle?

Credit Management in SAP

Assign credit limit to customers

Figure 1:Stages of Credit Check

Con guration Setting

Figure 2:De ne Risk Category

De ne Credit Control Area

Figure 3:De ne Credit Control Area

Figure 4:De ne Credit Control Area – Details

Note: SAP recommends the use of update group 000012

Organizational Unit in Credit Management

Decentralized credit management

Centralized credit management

Figure 5: Organisational Unit in Credit Management

Assigning Company Codes to a Credit Control Area

Figure 6: Company Codes to Credit Control Area

Assigning Sales Area to a Credit Control Area

Figure 7: Sales Area to Credit Control Area

Figure 8: De ne Credit Groups

Assigning Sales Documents and Delivery Documents to Credit Group

Figure 9: Credit Limit Check for Order Type

Figure 10: Credit Limit check for Delivery Type

Simple Credit Check Vs Automatic Credit Check

Figure 11: Simple Credit Check Vs Automatic Credit Check

Simple Credit Check

Automatic Credit Check Variations & Recommended Use

Figure 12: Automatic Credit Check Maintenance

STATIC CREDIT LIMIT DETERMINATION:

1. Open Sales Orders + Sales Order Value

DYNAMIC CREDIT CHECK:

Maximum Document Value

Date of Next Review

Overdue Open Items

Oldest Open Item

Maximum Number of Dunning Levels Allowed

Credit Management at work

Figure 13: Credit Limit for Customer

It gives an overview of credit settings of the customer.

Figure 14: Overview Screen

Central Data Screen

It gives an overview of central credit limit settings of the customer.

Figure 15: Central Data Screen

Figure 16: Status Screen

Credit Check at work in Sales Order creation

Figure 17: Credit Check

Release Sales Documents from Credit Block

Grant the credit and release the document

Figure 18: Release Credit Block

RFDKLI10 – Customers with missing credit data

RFDKLIAB – Display changes for credit management data

Related Blog Posts

How to customize Credit Control Area

APP Con guration Document

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