Chapter 19

Credit Management
Credit Management is the process of establishing customer
credit limits, establishing credit checking policies and
monitoring Customers against those criteria. It is configured
in both the Financial Accounting (FI) and Sales & Distribution
(SD) modules.
Chapter Objectives
Provide an understanding of how credit limits are set and
maintained for customers.
Provide an understanding of the hierarchical relationships
between Credit Control Area, Company Code, and
Customer.
Identify and understand the functionality of monitoring
credit limits for Customers using Automated Credit
Checking in FI and SD.

4.6fi_19.1

Credit Management

Credit Management
Used to Set and Control Credit Limits for Customers
Customer
Sales Rep.

Customer
Sales
Order

Check

Customer
Credit
Limits

4.6fi_19.2

Credit
Check
Customer
Credit
Information

Accept Order
Accept Order /
Block Delivery
Refuse Order

Credit Management

Credit Control Area

Credit
Control
Area

Client

Company
Code

Customer

Client

Example:

PepsiCo.

Credit Control Area

Credit Control Area

CCAA

CCBB

Company Code

Company Code

Company Code

123

456

999

Customer A
4.6fi_19.3

Customer B

Customer A

Customer C

Customer A
Credit Management

Defining a Credit Control Area

Step 1: Define a Credit Control Area

Step 2: Assign Company Codes to the Credit Control Area

4.6fi_19.4

Credit Management

Assigning Credit Limits

Per Customer
2 levels of credit limit:
Globally across all Credit Control Areas
Per Credit Control Area
Example:
Customer A Global Limit: $2,000,000.00

Credit Control Area Limit: $500,000.00

Client
PepsiCo.
Credit Control Area

Credit Control Area

CCAA

CCCH

Company Code

Company Code

123

999

Customer A

Customer A

4.6fi_19.5

CCAA < = $ 500,000.00

CCCH < = $ 500,000.00
CCAA +
CCCH < = $ 2,000,000.00

Credit Management

Maintaining Credit Limits

Per Customer
Total limit already
assigned across all
Credit Control Areas
Highest limit already
assigned for an
individual Credit
Control Area

Maximum amount
that can be assigned
per Credit Control Area
4.6fi_19.6

Maximum sum amount

that can be assigned
across all Credit
Control Areas
Credit Management

Monitoring Credit Limits

for Customer
Special G/L
Transactions such
as down payment

Open Sales
Orders,
Deliveries and
Billing Docs.

Postings: Increase these amounts

Clearings: Decrease these amounts
4.6fi_19.7

Receivables
from sales

Total receivables,
Special G/L Trans.
and outstanding
order value
Credit Management

Credit Checking
SALES ORDER
TYPE
Check Credit Limit (Select One)
A: WARNING MESSAGE

STATIC ONLY

B: ERROR MESSAGE
C: WARNING MESSAGE WITH DELIVERY BLOCK
D: AUTOMATIC (AUTOMATED CREDIT CHECKING)
STATIC or
DYNAMIC
4.6fi_19.8

Credit Management

Static Credit Check

OPEN SALES DOCUMENTS

+
OPEN DELIVERY DOCUMENTS

CREDIT
EXPOSURE

OPEN BILLING DOCUMENTS

+
OPEN ITEMS (A/R)

4.6fi_19.9

Credit Management

Dynamic Credit Check

Dynamic
Component

Static
Component
OPEN DELIVERY DOCUMENTS

+
OPEN BILLING DOCUMENTS

OPEN SALES DOCUMENT

WITHIN
HORIZON

OPEN ITEMS (A/R)

Credit Exposure
4.6fi_19.10

Credit Management

Automated Credit
Checking Features
Credit Checks
STATIC CHECK
DYNAMIC CHECK
ON BASIS OF MAXIMUM DOCUMENT VALUE
WHEN CHANGES ARE MADE TO CRITICAL FIELDS
ON DATE OF NEXT INTERNAL REVIEW
ON BASIS OF OVERDUE OPEN ITEMS
AGAINST HIGHEST DUNNING LEVEL

System Reaction
WARNING
WARNING WITH BLOCK
ERROR

4.6fi_19.11

Credit Management

Automated Credit Checking

Configuration in FI
Credit Control Areas (CCA)
EURO
CCCS

Europe
North America

Risk Categories
RO1
RO2
RO3

High Risk
Medium Risk
Low Risk

Customer Credit Management

Area
Customer

: 6

Credit Control Area

: EURO

Risk Category

: R02

Credit
Representative Group

: 001

Credit Limit

: 10,000 USD

Credit Representative Groups

001
002

4.6fi_19.12

Europe
North America

Credit Representative
Part Func.
KB

Pers.No.
012

Mail
Jones

Credit Management

Automated Credit Checking

Configuration in SD
Document Credit Groups
01
02
03

Item Categories

Sales Order
Delivery
Goods Issue

Sales Document Types

OR
D
.
.
.

Active
TAN
AGN

Yes

= Automated
Check
Factors influencing credit:
Credit + Risk + Document
Control Category
Credit
Area
Group

4.6fi_19.13

Credit Management

Reviewing and Releasing

Credit Holds
Credit Control Area CCXX
Credit Rep Group US
Credit Account

Order

Customer A
Customer X
Customer Y

351
567
595

Blocked SD Orders
Credit Value
1000.00
200.00
50000.00

Risk

Status

Medium
High
Low

Dynamic Chk
Dynamic Chk
Static Chk

Release the order(s)

4.6fi_19.14

Credit Management

Risk Management
Risk Management
Payment Cards
Letters of Credit

Credit Management

Static/Dynamic
Checks
Manual Checks

Export Credit
Insurance
Sales Order 101
Sold-to #6
Net value $1000
XYZ 10

500

ABC 20

500

1. At sales order entry, the

sytem determines what types of
payment guarantees are allowed
for the payer and document type.

4.6fi_19.15

Letter of Credit
for customer 6
of $600

3. System performs a credit

check against remaining $400
of the sales order.

2. The system determines that

letters of credit are allowed and
finds one for this customer valued
at $600.
Credit Management

Credit Control Area

Determination Options
First
A User Exit at the Header Level
Order of checks
for determining
the Credit
Control Area

Billing View of the Payer Master Record

The Sales Area of the transaction
Company Code of the Sales Organization

Last
4.6fi_19.16

Credit Management

Early Warning List

Creates a report on customers who

are likely to become critical
The Early Warning List derives its
information from the A/R Summary. It
is necessary to run the A/R Summary
on a timely basis to ensure up to date
information.
Management can use the results of
these reports to determine a course of
action on clients. Automatic actions
can also be set in customizing.

4.6fi_19.17

Credit Management

A/R Summary in distributed and

non-distributed systems
Report: RFCMCRCV

SD
SD
Creating
CreatingSD
SD--Documents
Documents
Non distributed
systems:
CHECK
a) performance+

b)

Distributed
systems:
CHECK

Creates

a)

A/R Summary

b)performance?

Actual Data

via RFC

4.6fi_19.18

FI
FI
Report:
Report:
RFDKLI42
RFDKLI42
CHECK

Early g
in
Warn
List

Credit Management

AR Summary

It contains all credit

information for an account
in compact form

Can be used for SD credit

checks both in distributed
and non-distributed credit
management

Increases efficiency in nondistributed systems as

repeated read of open items
is avoided

Preliminary settings are done here.

4.6fi_19.19

Credit Management

AR Summary - Aging Settings

A/R Summary aging settings in SD

A/R Summary aging settings in A/R

4.6fi_19.20

Credit Management

Credit Management Chapter

Summary

4.6fi_19.21

Key Terms
Credit Management
Credit Control Area
Credit Limit
Automated Credit Checking
Static Credit Checking
Dynamic Credit Checking
Risk Category

Credit Management

Credit Management Chapter

Summary

4.6fi_19.22

Key Terms
Document Credit Group
Risk Management
Early Warning List
A/R Summary

Credit Management