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 worklist 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 over due 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.