IMG Settings for SAP FI Credit Management

Explain credit control area and why do we create them. 

The Credit Control Area is an organizational unit that represents an area responsible for granting and monitoring credit. Credit information can be made available per customer within a credit control area.  One will use one credit control area that is four characters “JHEN”.  All of the available functionality for credit management will not be used since a service has already been provided. 

Stopping the billing process is not an option Organizational unit in an organization that specifies and checks credit limits for customers. A credit control area can include one or more company codes. It is not possible to assign a company code to more than one credit control areas.  Credit and risk management takes place in the credit control area. 

4.6x

OB45 - Maintain Credit Control Area 
A company code can be assigned to one credit control area.  However, a credit control area can be assigned to more than one company code.

OB38 - Assign Company Code to Credit Control Area. 
If your company have different business area, you can assign each with a Credit Control Area.  e.g.  0001 for BA-A, 0002 for BA-B, 0003 for BA-C etc.  In this case, the same customer master code can have different credit limits for the different Business Area.

OB01 - Define Credit Risk Categories.

OB02 - Define Account Clerk Groups

OB51 - Define Credit Representatives

OB39 - Define Intervals for Days in Arrears for Credit Management

Credit Limit Check & its configuration

Follow these steps:

1. Go to IMG - enterprise structure - definition - financial accounting - define credit control area.

2. Assignment of company code to credit control area & sales area to credit control area.

3. Go to OVAK select ur sales document type and in the check credit column choose from A B or C. D is for automatic credit control for which you have to maintain the credit group and risk categories.

4. In FD32 you select your customer and click on STATUS icon and press enter. here u maintain the credit amount allowed. but this is done by the Finance people.

5. Now when you create the sales order and if the amount exceeds the credit limit then u will get the message as you maintained in the TC OVAK.  Normally the system starts doing credit checks from the second sales. 
order. 
 

What are the different types of credit checks?

By Sunilmadho

Credit Check can be : 
1) Simple Credit Check 
2) Automatic Credit Control

Automatic Credit Control can be at various levels : 
1) Order 
2) Delivery 
3) Goods Issue

Automatic Credit Check is of many types : 
1) Static 
2) Dynamic 
3) MaximumDocument Value 
4) Maximum Open Items in percentage 
5) Oldest Open Item in number of days 
6) Crtitical fields change 
7) Highest dunning level, etc. 
You can create more.

Credit Check happens only in SD module, never in FI. Because the stage of the check is in the sales cycle, which exists in SD. FI guys will check the credit master sheets of the customer, the MIS, the analysis etc, review the credit limits of customers. But the check will happen only in SD, while creating order, delivery or doing the goods issue.

Difference Between Static and Dynamic Credit Check

Tell me the difference between Static and Dynamic Credit Checks.  
What is the difference between the Open Order Value used in Static check and the one used in Dynamic Check?

*Simple Credit Check :* Tr.Code - FD32

It Considers the Doc.Value + Open Items.

Doc.Value : Sales Order Has been saved but not delivered

Open Item : Sales Order has been saved , Delivered, Billed & Transfered to FI, but not received the payment from the customer.

*Static Credit Check* it checks all these doc value & check with the credit limit

1) Open Doc.Value / Sales Order Value : Which is save but not delievered

2) Open Delivery Doc.Value : Which is delivered but not billed

3) Open Billing Doc.Value : Which is billed but not posted to FI

4) Open Item : Which is transfered to FI but not received from the customer.

*Dynamic Credit Check*         1) Open Doc 
                                                   2) Open Delivery 
                                                   3) Open Billing 
                                                   4) Open Items 
                                                   5) Horizon Period = Eg.3Months

Here the System will not consider the above 1, 2, 3 & 4 values for the lost 3 months.          

Useful SAP Credit Management program

RVKRED06 - Background jobs for checking blocked credit management. 
If an order is no longer outside the horizon as defined in the dynamic credit check, (i.e. it is INSIDE the horizon) it can cause existing "good" orders to block. If you run this job every night, if you have your horizon set for 1 month it can cause a lot of blocks at beginning of month. Try to use 'W' for weekly horizon status.

RFDKLI10 - Customers With Missing Credit Data

RFDKLI20 - Reset Credit Limit for Customers

RVKRED77 - Reorganize SD credit data 
When updating errors occur, it enables you to reorganize the open credit, delivery and billing document values.

RVKRED08 -  Checking sales documents which reach the credit horizon 
You should runs this report periodically, usually at the start of a period. The report checks all the sales documents, which reach the dynamic credit check horizon. The period for the ‘date of the next credit check’ is proposed from the current date, with the help of the period split for open sales order values.

Releasing the Credit Block

These are the three transaction code you can used for releasing the SAP credit management block.

VKM3 - Sales Order

VKM5 - Delivery Order

VKM4 - Both Sales Order and Delivery Order

SAP SD Credit Management Tcodes

All business have their own credit management needs, SAP allows you to specify your own automatic credit checks based on a variety of criteria.  You can also specify at which critical points in the sales and distribution cycle the system carries out these checks.

SM30 - Table/View

• V_TVTW - Define Distribution Channel
• V_TVTA_KKB - Assign sales area to credit control area
• V_T014 - FI - Define Credit Control Area
• T001CM - FI - Assign Permitted Credit Control Area to company code

OVXG - Set up Sales Areas 
e.g.  Sales Organization 
                  Distribution Channel 
                              Division 
                  Distribution Channel 
                              Division

FD32 - Customer Credit Management

OVAK - Define credit limit check by sales document type

• Check Credit
• A - Credit limit check and warning message
• B - Credit limit check and error message (no sales order can be created)
• C - Credit limit check and delivery block (block delivery if hit credit limit)
• Options B and C -> used for checking open order values (when you create/change the sales order)
• D - Automatic credit control with open order values
• More control in transaction OVA8 - Automatic credit control
• You check for open orders and deliveries, or just open deliveries.
• or open order values with other options
• Credit group
• Allows you to combine different sales document types for the credit limit check

VKM1 - Blocked SD Documents - Finance have to released the delivery block

OVAD - Define credit limit check by delivery order

• whether the automatic credit check occurs at the time of delivery creation and/or goods issue

OVA7 - Define credit limit check by item category

• Set whether to include/exclude item category for credit limit check

OVA6 - Define credit group. You can groups together different business transactions which should be dealt with in the same manner with regard to the credit check.
You enter the credit groups when you configure the sales document types for credit management and define the (D - automatic credit check).

• SAP default credit groups
• 01 - credit group for sales order
• 02 - credit group for delivery
• 03 - credit group for goods issue

OVA8 - Automatic credit control - Double click on the line items

You can have the followings credit limit check :-

• Static

Depends on the customer total value of open orders, deliveries, billing documents and open items. 
 
• Open items

No of days open 
Overdue open items checks is based on the ratio of open items that are overdue by a certain number of days.

Max open items % 
The customer balance must not exceed a certain percentage. 
 

• Oldest open items

If you don't want to deliver to the customer at all when even only 1 invoice is overdue. 
Tick the Check for Oldest Open Item and Set the field Days oldest item = 1.

Days oldest item 
No of days allowed for overdue or payment terms.

Use of the credit check Oldest Open Item. If a user attempts to alter the order quantity of a released sales document 
that was previously blocked, it would be reblocked again by the system.  The system only reblocks the sales document if the new order quantity is above a certain % amount.

• Released documents are still unchecked

The preset % is whatever you want to set it as when configuring your automatic credit processing. You enter a deviation % and number of days,eg, you can set it so that an order can be changed by up to 10% within 30 days of original order entry date without it going back on credit block. 
 
• Next Review Date

If a customer has a credit limit of 1000 USD, and you would like to restrict this credit limit only to be available in current month (say March). If the document day is in April then the credit limit is zero.

You can use the "NextReview date" and "Number of days" fields and combined it with the "Last int.review" field in customer credit master "Status"view (FD32).

VOKR - Display of work list for credit management (configure the display variant)

Dunning Process In Credit Management

Explain about dunning process in credit management?

Let me explain in simple terms:

1) You have a Customer which you had felt, he is doing good business and supplied material on Credit of 45 days.

2) Since this customer is good as you felt, you have not managed Credit Checks as well. So, he had comfortably reached to the fullest credit (or even more) which you can afford for any customer.

3) One fine day you got realised that, there is very bad debt with this customer and need to recover from him and till then, there will be no further supply to the customer.

4) Your company's legal department has laid a policy that, inorder to recover any bad debts, like: 
a) We will send a normal payment reminder. 
b) In case customer doesnt respond, we will send at least further reminder (dunning notice) may be 9 times  
    (9 reminders) (Dunning level) and what intervels of time (dunning frequency)  
c) Still if the customer doesnt resopond for the reminders, you will file a law suit against the customer for recovering 
    the Payments. 
d) Finally, after getting veridict, you may proceed for auction of his property or as per the order for Law.

Now in SAP, the definition of Dunning procedure is a pre-defined procedure specifying how customers or vendors are dunned.

For each procedure, the user defines 
- Number of dunning levels  
- Dunning frequency  
- Amount limits  
- Texts for the dunning notices 

In SAP, you will maintain the Dunning Procedure at customer master.  Referring to this your SD Team / FI Team (user team) will effect Dunning

PS: You might remembered the dunning procedure laid by Relaince Mobile, sometime back, sending street rowdies for recovering the bad debts from users. That is dunning. Remember Reliance, you will not forget dunning forever.