This is my attempt to understand and explain the basics of Credit Management.This,I hope, will especially be useful for beginners in SAP Sales of Distribution.
Credit Management in SAP SD
- Credit Management is an area of SAP SD which is tightly integrated with the FI module and is used to control and manage the credits given by the business to its customers.
- Credit Control Area is the organizational unit that is responsible for awarding and monitoring the credits to the customer.
- A company code(CC) can be assigned to only one Credit Control Area(CCA). However, one CCA can have many CCs assigned to it.Thus, there is a one-to-many relation between a CCA and a CC.
- The above assignment results in either a Centralized or a De-Centralized or an in-between implementation of the Credit Management System. Centralized Credit Management is whereone single CCA monitors the credit of customers assigned to all the Company Codes within the client. On other extreme is a fully de-centralized credit management system where one CCA monitors the credit in only one company code.
- Credit Limit is the maximum permissible limit up to which a customer’s credit exposurecan reach.If during Sales Order Processing the customer crosses this limit,depending upon the customisation settings,either a warning can be issued (with or without blocking further processing ) or else an error can be generated.
- The Credit Limit is assigned both at customer master level and credit control area level.This is done by creating Credit Master Data. One can distribute the maximum credit limit allowed to a customer into individual credit limits for various credit control areas.The total of these individual credit limits should not,however,exceed the Maximum Limit to the customer.
- The credit check happens in the currency of the credit control area.Thus different currencies of varying company code’s are converted in the currency of CCA for credit checks.
- Credit Exposure is a total of various components which depend on the type of check being performed.The credit exposure is checked against the credit limit of the customer.
- Types of Check : Based on customizing following checks can be performed
a)Simple Credit Check : A simple credit check takes place only in the sales order.Here the credit exposure is calculated as
Credit Exposure =Total receivables + Value of the Sales Document
If this value exceeds the credit limit as specified in CCA for this customer or error can be issued. This type of credit exposure is assigned to the Sales Document Type in T-Code OVAK as shown below :
b) Automatic Credit Control : It adds to the functionality of basic credit check in more than one ways. For Example, it can do the credit check based on the maximum order value so that if the value of the current order exceeds a specified limit , credit check blocks the document or it can do the credit check based on the oldest open item(receivable) .If this item is of date earlier than the date specified in credit control settings ,then the order is blocked.
Also the credit check can be performed during the order creation or delivery creation or during goods issue and warning or errors can be issued suitably(by default only errors are issued at Goods Issue whatever be the settings).
The Automatic Credit Control can further be :
i) Static Credit Check : Here credit exposure is defined as
Credit exposure = Open orders + Open deliveries + Open billing documents + Open
Open Order values –- Value of Orders not yet delivered.
Open Delivery Values –- Value of Deliveries not yet billed
Open Billing Document Values –- Value of billing documents not yet invoiced.
Open Item Values–- Value of invoiced items for which payment is to be received i.e the
ii) Dynamic Credit Check : Here credit exposure is broken down as
Credit exposure = Static part + Dynamic Part
Static Part is (Open Deliveries + Open Billing Docs + Open Items) Value
Dynamic Part : Open Order Values here contain all undelivered and partially
delivered orders along with a Horizon Period. All the deliveries scheduled after this horizon period, which is a future date, are NOT
included in the credit check.
10) The automatic credit check is controlled through a combination as:
Credit Control : CCA + Risk Category(of a customer)+ Credit Group(to
which the document belongs)
Thus each separate combination of the above may result in a different set of control elements values.
11) Credit Group : Groups the documents having similar credit control requirements e.g. all the sales documents are grouped in a credit group ‘1’ or deliveries belong to group ‘2’ and credit group ‘3’ is for Goods Issue etc.This is because one would want to control credit differently during Goods Issue than it does during sales order creation.
12) Risk Category : For grouping the customers based on their risk profile for example New High Risk Customers or Seasoned Low Risk Customers.
13) Deriving a Credit Control Area : A CCA in a sales document (VBAK-KKBER) is defaulted from the company code in the sales document owing to it being assigned only to one Credit Control Area.However one can overwrite this assignment and derive other credit control area in the sales document. The order(priority top to bottom) from which a CCA is derived in the document is
a) User Exit EXIT_SAPFV45K_001 – For Deriving from all the fields in Sales Order
b) From Payer’s Sales Area Data
c) From Sales Area of the Sales Document
d) From the Company Code
For assignments a) , b) and c) the relevant CCAs should be permitted for the Company Code in the
14) In pricing procedure value relevant for credit check is stored in Subtotal ‘A’.
15) Update Groups : The credit update controls when the values of open sales orders, deliveries, and billing documents are updated.Update group ‘0012’ has the broadest scope and functions as follows :
– Sales doc: increases order value
– Delivery: decreases order value & increases delivery value
– Billing: decreases delivery value & increases billing amount
– Invoice: decreases billing amount & increases open item value
16) For Credit update Item should be made relevant for billing and determine credit indicator should be set in transaction VOV7.
A) Creating a New Credit Control Area :
T-Code : OB45
a) Currency : Currency in which credit is checked.
b) Default Data: Any new customer created under this CCA (via Company Code) will automatically have this credit data in default.
c) All Co Codes indicator : Is used to represent that this credit control area is permitted for postings in every company code you have defined.
B) Assigning Company Code to Credit Control Area.
T.Code : OB38
C)Permitting CCAs in company code ( For derivation of CCA through Sales Area,Payer Master or User Exit)
D)Assigning CCA to Sales Area
E) Assigning CCA to Payer Customer Master :
N.B: CCA is derived from either one of the above maintained CCA’s in E) , D) or B) (listed in decreasing priority.Example if CCA is maintained in both E) and D) the CCA will flow from E).Similarly if its listed in D) and B) it will flow from D).It is defaulted from B) if its not maintained else where.
F) Defining Credit Management Type and credit group for Sales Order
T.Code : OVAK
* D is for automatic credit control.Rest are for Simple Credit Check.Credit group is used only for option ‘D”
G)Defining Credit Management for Delivery and Goods Issue
T.Code – OVAD
*If you want to deactivate credit check at any of these levels remove the credit group entry
from corresponding columns.
H) Risk Category
T.Code – OB01
I) Creating Credit Master Data
T.Code : FD32
a) Initial Screen
b) General data Screen :
- Total amount is maximum permitted limit for a customer inclusive of all CCAs.
- Individual Limit is maximum limit allowed in any one of the CCA.
c) Credit Control Data Screen
J) Automatic Credit Controll