Collections Management -1

The cash collection against due and overdue items has become a very
important function in increasingly competitive global marketplace for most
organizations. The collections management function within SAP FSCM
supports in active receivable management and helps to prioritize the
customer receivables function based on defined rules. These priorities which
are set up can than be used to set up distribution of collection work to
collection specialists who can than record a history of collection related
contacts with the customers.
The Collection Module functionality is integrated well with the Dispute
Management and the FI-AR Application to help provide businesses with the
ability of a well-focused and targeted AR Collections and reduce the pending
cash cycles.
The key configurations steps for Collections Management are as under:

Configuring Collection Strategy

The first step in configuration of collections management is to define a
collection strategy. It is important step, since it decides the prioritization of
customers for collections and also decides the information in the work list

which is used for collections management. The prioritization of customers is

done based on certain rules. These rules could be parameters like:
- Currency of the Due Bills
- Ageing of the overdue items
- Risk Category of the customers in credit management
There are standard delivered strategies which can be used (SAMPLE0001).
However, in most cases the collection strategy is configured based on the
business requirements. The keys steps which are involved in defining a
collection strategy are as under:
-

Define Basic Rules

Define Collection Rules
Process Priorities
Defining derivation of priorities

Define Basic Rules - The conditions defined in the Basic Rule govern the
prioritization of Customers or Business Partners for Collections Management.
There are lot of standard rules which are delivered by SAP to decide on the
prioritization, but a BADI, UDM_BASIS_RULE is also available for defining
additional rules. The configuration path for defining a rule is as shown
under:

Define Collection Rules - The next step is to define a collection rule to be

assigned in the collection strategy. The collection rule will have the basic
rules for creation of a collection worklist.

Define Collection Strategy - The next step in Collections Management is to

define a collection strategy. The collection strategy performs the below key
functions:
- Prioritize the Customers for Collections
- Display the currency for worklist display

- Define the time period in which the Customer receivables are to be sorted
- Define the integration with Dunning for Collections Management

Once a collection rule has been assigned to the collection strategy, the
system calculated the valuation points per collection rule to determine the
priority for creation of worklist for collection.

Determine the priority & derivation of Collection Rule - Once the collection
strategy has been defined, the next step is to determine the priority and the
derivation of Collection rule through the collection strategy. The path to
configure a collection priority is as shown below:

The key aspect in determination of the priority for a customer is the

calculation of valuation and percentage valuation. We have seen that in the
configuration of a collection strategy, each rule is assigned a valuation point.
When the collection strategy is executed, system determines the valuation
points for each collection rule. The points for each collection rules are added
and the overall valuation points determined for a customer.
The proportion of these valuation points to the maximum valuation points
that can be determined by the system results in percentage valuation. The
percentage valuation is assigned to the priority to generate the worklist.

Define Organizational Structure for Collections Management

The collections management defines a priority for each customer and
assigns the same to a worklist to be actioned on by a collections specialist.
This is achieved by assigning a collection profile to a Business Partner in
FSCM created for every customer.The other important activity is to activate
the company code for collections management. The path to activate the
company code for collections management is as under:

The next step is to determine the collection segment.The collections

segment groups together data for a customer from one or more than one
company codes for collections management. This includes transnational data
as well as data from credit management, when the link is also specified
between collections management and credit management. The path for the
same is as shown below:

The next step is to define the collection profile. Each collection profile is than
assigned to a business partner, which completes the link of a customer
master to collections management. The path to define a collection profile is
as under:

The collection segment is assigned to a collection profile.

The next step is to determine the people who will be contacting the
customers for follow up on collections. These are designated as collection
specialists in the system. The specialists are grouped together as Collection
Group, which are than assigned to a collection segment. The configuration
path for the same is as under:

You can assign a processor and a substitute as well in the collection group.
This will ensure that the worklist is assigned to a backup if the processor is
on a leave.

Usage of Promise to Pay

A promise to pay is an object in SAP which tells the Specialist or a business
user that the customer has agreed to pay an open overdue item which was
part of a collections worklist.
One promise to pay can be assigned to one open invoice. When the customer
is contacted and agrees to pay an overdue item fully or partially, the promise
to pay is created against the overdue item or disputed item. The updation of
a dispute case can also be linked to a promise to pay. The configuration for a
promise to pay is as under:

Generally the standard case type F_PP is used for creating a Promise to Pay.
However, one can use own case type as well and assign the necessary
Attribute and status profile for promise to pay. The other important step is to
set up the integration of promise to pay with FI-AR. You specify the case type
to be used for Promise to Pay and the no of days for tolerance which needs to
be considered before the promise to pay can be considered to be broken.

Once the above steps have been completed, we are ready to use Collections
Management. The steps for using collections management in integration with
FI-AR and dispute management along with the required master data set up
will be followed up in the next document in this series.