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Configure and Customize SAP Automatic Credit

September 7, 2013 | 20,987 Views |

Sandeep Agarwal
more by this author

FIN (Finance)
SAP ERP | enterprise resource planning | sap erp financials

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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
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?
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
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
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
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
Figure 8: De ne Credit Groups

Assigning Sales Documents and Delivery Documents to Credit

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

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

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


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.


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
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
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
Figure 15: Central Data Screen

Status Screen

Shows the customer’s actual individual details according to particular credit control

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


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
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
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subhash pandit

September 11, 2013 at 10:55 am

Dear Sandeep,

Thanks for your knowledge sharing. It is too useful for me.


Subhash P.

Gulshan Batra

September 11, 2013 at 2:54 pm

Very thorough and well researched Sandeep.

Good job here!



Advait Kulkarni

September 11, 2013 at 3:06 pm

This is really helpful Sandeep.Thanks for sharing


Karteek k

June 11, 2014 at 6:56 am

Nice document.. thanks for detail explanation !!

Lakshmi Sama

June 12, 2014 at 6:20 am

Hello Sandeep,

Nice explanation and it is really helpful.

Thanks for sharing your knowledge and keep sharing.


Lakshmi S

Jurairat Damrongtham

June 20, 2014 at 10:36 am

Dear Sandeep,

I would like to ask more about dynamic credit check. If I set at 3 options as follow:

– Dynamic

– Document value

– Open items

1. How the system work? SAP will check from Dynamic -> Document value -> Open items or
Open items -> Document value -> Dynamic?

2. After SAP have checked and display credit blocked message. If system found credit blocked
from ‘Document value’ and ‘Open items’ , How SAP display credit blocked message? Message
come from ‘Document value’ or ‘Open items’?

Thank you in advance,

Jurairat D.

Vinod Vemuru

June 20, 2014 at 11:14 am

Thanks Sandeep. This is a ready reference document for credit management



G Lakshmipathi

June 20, 2014 at 11:30 am

A comprehensive blog on Credit Management. Good work done.

G. Lakshmipathi

Phanikumar Valiveti

June 21, 2014 at 3:59 am

Sir—in document” Configure and Customize SAP Automatic Credit Management”.

—please correct the flaw as mentioned in my comment–thereby the people who
follows this ,will get correct information..

I dont know why moderator approved this again even after my alert…


Jose Antonio Martinez

June 20, 2014 at 12:42 pm


Thanks for share this info.

Very useful .

Regards Antonio Martinez

Phanikumar Valiveti

June 20, 2014 at 3:03 pm

Good work–i appreciate being an FI guy your presentation including SD is very nice…

Sorry to tell you that there a mistake in your document while sharing about dynamic credit check
about Horizon period.

as per you–

“”“””5) Horizon Period : Eg. 3 Months.

Here the System will not consider the Open items 1, 2, 3 & 4 values for beyond 3 months“”””

No— here-actually system will divides this 1,2,3,4 as two parts—2,3,4 will be fixed called as static part and the
the first option 1 will be called as dynamic part(open sales orders)
(2,3,4 will be taken in credit calculations if lying beyond 3 months)
the only difference is whether open sales order(with confirmed delivery schedule lines)–has to be considered in
credit calculations or not(if lies in these 3 months–then this open sales order value will be added in credit
calculations–otherwise no)

See F1 at dynamic credit check in OVA8–you will get more clarity.

Please change this flaw in your presentation–once after confirming…


Sada Bandla

June 20, 2014 at 4:30 pm

Hi Sandeep,

Good document thank you for sharing knowledge.

Regards ,

Sada Bandla
G Lakshmipathi

June 21, 2014 at 5:45 am

Sandeep Agarwal

Please check Phanikumar V comments, retest the scenario and change your blog if necessary.

G. Lakshmipathi

kajendran jayaraman

October 23, 2017 at 2:45 pm

Hi Lakshmipathi,

In our client we are running daily – RVKRED09)

Do we need to run the below two program also? because sometime, the orders are
keep on going to block.

RVKRED06- Checking blocked credit documents

RVKRED08 – Checking sales documents which reach the dynamic credit check

It would be appreciated if you provide your suggestions. Thanks

Mariks .

July 7, 2014 at 2:13 pm

Many thanks for sharing valuable document….

Ashok J S
July 11, 2014 at 8:32 pm

Very helpful document..thanks for posting

Kundan Kumar

July 13, 2014 at 10:38 am

nice document…


November 5, 2014 at 5:08 pm


Thanks for the document, very usefull, during an Audit review with a client i came accross with
the next question:

Reviewing this process with a client I verified that when the Customer excided the credit limit
assigned in SAP, the system automatically blocked the purchase requisition. In order to release
it the Credit, the Clerk needed the Management authorization and this was done manually and
outside SAP. Once she had the authorization sheet signed the clerk manually released the PR.

I wonder if it is possible to configure a SAP work flow in order to release credit block as when
the control is manually performed it could be easily override.

Thanks in advance


Venkata Seshagiri Rao Mullapudi

July 6, 2015 at 2:11 pm

Nice doc of great value. Good job.

Karteek k

May 6, 2016 at 7:37 am


Nice document.



Nilima Choudhari

September 13, 2016 at 8:45 am

Good job!!

Venkatanarayanan G

April 5, 2017 at 8:43 am

First of all, thanks for your effort in preparing the document.

But one clarification in this, For Dynamic Credit Check, the horizon period is only for the Open
Sales Orders and not for all Items.



Luis Ortiz Gracia

April 24, 2017 at 10:13 am

Dear Sandeep:
Thanks for your comments. Very good post.
I’m working as a Credit Manager and I need to have several Sold To’s (Same VAT code), but
different payment conditions and different Credit Limits.

How can I do that setting in FD32 Screen?


Jesus Alberto Rodriguez

June 1, 2017 at 4:10 pm


I’m wondering if anyone is having the same issue I have.

We have the full credit up and running, I released from the credit perspective a Sales Document
with VKM3, but the Business Unit keeps working on the order and the Hold is triggered
automatically again. So they have to come to us and request a credit release again;
(eventhough it was approved already).

Is there anyway I can configure the Sales Order to avoid going back on hold after it has been
released for the first time?

I’ll wait for your comments


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