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Comparison for SAP S/4HANA Basic Credit Management and Advanced Credit Management

When we are talking about new SAP Credit Management solution in SAP S/4HANA, It is a system to implement a company-wide credit policy and it helps companies to run central credit management in a distributed system landscape. The Credit Manager can monitor a customer’s credit exposure in one central system. Normally it is comprised of three parts, Basic Credit Management, Advanced Credit Management, and SAP S/4HANA Cloud for Credit Integration. This blog is going to compare Basic Credit Management and Advanced Credit Management from process, operation and configuration aspects, you will also get to know how SAP S/4HANA Cloud for Credit Integration helps.

 

You must know before the content

  • The classic credit management(FI-AR-CR) is not available as part of SAP S/4HANA, The functional equivalent in SAP S/4HANA is SAP Credit Management (FIN-FSCM-CR). Using FSCM and classic credit management (FI-AR) in parallel is not supported.
  • You can activate/deactivate SAP Credit Management by implementing BAdI UKM_R3_ACTIVATE. Please note, for product versions of SAP S/4HANA 1610 and above, SAP Credit Management is implemented as standard, so deactivation will turn off the functionality completely. 2760814
  • In SAP Credit Management (FIN-FSCM-CR), customer credit master data is centralized managed by Business Partner(BP Role: UKM000 Credit Management). You can reach the data by running tcode BP then switch BP role to UKM000, or running tcode UKM_BP directly.
  • FSCM requires the configuration of the communication between the Sales and Distribution (SD) and SAP Credit Management (FSCM) system components. You need to activate the integration by BAdI BADI_SD_CM. 2315269

 

Basic Credit Management

Function Overview

  • Set credit limits for a business partner manually
  • Set the risk class for a business partner manually
  • Do credit checks on sales documents
  • Process credit blocked sales documents as documented cedit decision
  • Calculate payment behavior key figures
  • Define relationships for a business partner (like “in Credit Management is managed by…”, “Higher level Credit Management Account of…”)

You do not need additional license for above functions in SAP Credit Management.

Main process and Operations

The main process for Basic Credit Management(BD6)

The credit controller maintains customer score, risk class, check rule and credit limit manually by running tcode BP then switch BP role to UKM000 or running UKM_BP directly.

You can click Simulate button to simulate customer credit check. Then assign a credit analyst to a customer by click Relationships on top of the screen.

When you create a sales document for credit managed customer, credit checks can be executed for sales documents with different steps, depending the configuration of Credit Checking Rules.

If there is a credit check with negative outcome, the system triggers the creation of a ‘Documented Credit Decision’ (DCD) as per configuration. Credit analyst or processor can check the DCDs via tcode SCASE, UKM_CASE or UKM_MY_DCDS. They can recheck, release or reject the sales document, and leave note on DCD.

If your sales order or delivery is blocked but DCD is missing. Please refer to Note 2616393.

Configurations

  1. Activate BAdI UKM_R3_ACTIVATE and BADI_SD_CM

 

  1. Credit segment is the organizational unit of FSCM. it needs to be created and assigned to the equivalent credit control area. In FSCM you can use a ‘Main Credit Segment’ (0000) and flag the setting on the sub-segments to ‘Add. contribution to main segment’, so the liabilities of the sub-segments will be collected at the main segment level. Create credit segment, and assign to the equivalent credit control area.

SPRO -> Financial Supply Chain Management -> Credit Management -> Credit Risk Monitoring -> Master Data -> Create Credit Segments

SPRO -> Financial Supply Chain Management -> Credit Management -> Integration with Accounts Receivable Accounting and Sales and Distribution -> Integration with Sales and Distribution -> Assign Credit Control Area and Credit Segment

  1. Risk class is maintained for the whole business partner in UKM_BP on ‘General Data’ -> ‘Credit profile’ tab. A distinction is made between the risk category in classic CM and the risk class in SAP Credit Management (FSCM). For each risk category you need to define a risk class with the same ID. The risk class is directly mapped to risk category during the credit master data determination when creating sales documents.

SPRO -> Financial Supply Chain Management -> Credit Management -> Credit Risk Monitoring -> Master Data -> Create Risk Class

If you need to create a new risk class, then you should create the equivalent risk category as well and assign it to the relevant credit control areas.

SPRO -> Financial Supply Chain Management -> Credit Management -> Integration with Accounts Receivable Accounting and Sales and Distribution -> Integration with Sales and Distribution -> Define Risk Categories

  1. Credit checks are executed on three levels: sales order, delivery and post goods issue. This is controlled the same way as in classic CM.

SPRO -> Financial Supply Chain Management -> Credit Management -> Integration with Accounts Receivable Accounting and Sales and Distribution -> Integration with Sales and Distribution -> Assign Sales Documents and Delivery Documents

  1. In order to perform the automatic credit check you need to maintain the relevant CCAr – Risk cat. – Credit Group combination in OVA8 transaction. 2207394

SPRO -> Financial Supply Chain Management -> Credit Management -> Integration with Accounts Receivable Accounting and Sales and Distribution -> Integration with Sales and Distribution -> Define Automatic Credit Control

Credit control is defined by control area/risk category/credit group in classic CM for sales documents credit checking criteria. It performs like a trigger between SD and FSCM, to enable credit check rule maintained in FSCM for sales documents credit checking.

  1. Flag the item category type “credit active” by OVA7 or VOV7.

In the pricing procedure, subtotal ‘A’ must be entered in a line for determining the credit value (VBAP-CMPRE), it’s the same with classic CM.

  1. FSCM is using the liability categories to distinguish between the credit value of sales orders (100), deliveries (400), billing documents (500) and FI documents (200).

SPRO -> Financial Supply Chain Management -> Credit Management -> Credit Risk Monitoring -> Credit Exposure Update -> Define Liability Categorie

Advanced Credit Management

Function Overview

  • All capabilities of Basic Credit Management plus:
  • Calculate the internal credit score of a business partner automatically
  • Derive the risk class automatically from the internal score
  • Store external credit information like a rating from credit agencies on the business partner or to integrate credit agencies in another manner
  • Import credit score, credit risk class or credit limits from 3rd party systems and assign it to a business partner
  • Automatically calculate credit limits
  • Work with credit limit requests
  • Work with documented credit decisions (DCD) that are not automatically generated by the system for a sales document
  • Use the credit event / follow-on process functionality
  • Setup a central Credit Management in a multi-system landscape

You need additional license for above functions in SAP Credit Management. SAP note 2696793.

Main process and operations

Main process for Advanced Credit Management(1QM)

In Advanced Credit Management, it is possible to calculate the internal credit score of a business partner automatically, then derive the risk class automatically from the internal score, and calculate credit limits automatically using credit rule engine and formula editor.

Note The credit limit currency in all company codes is set to use the group currency, which is defined when the solution is activated.

Credit Limit and Risk class can be automatically calculated based on internal and external rating. You can define own calculation logic for internal rating, either import the rating from external 3rd party agencies.

For the link to an external credit agency, an xml formatted file can be added as project work or the data can be input manually on the Business Partner as a part of the base license. An additional license is required for using SAP S/4HANA Cloud for credit integration, access the Configure Credit Agency Integration app and go to Credit Rating under the Maintain Mapping section. The cloud-based service provides about 20-30 credit agencies such as Dun & Bradstreet right out of the box. (SAP Blog: SAP Credit Management in S/4HANA 1909)

Also, additional role authorization may be required for the Credit Controller role to provide access to the credit integration solution app. For more information, see the SAP Help Portal.

The sales representatives are able to access the web-based customer credit information via Display Credit Master Data app(tcode UKM_BP_DISPLAY).

Then they can request a new credit limit for the business partner. The request can be documented as Credit Limit Request in Manage Credit Cases app(tcode SCASE or UKM_CASE).

The credit controller will review the request, monitor customer exposure/limits in a central system, then determine to approve or reject the request with comments.

Configurations

The credit rules engine helps you automate the processes within your credit management. It provides rules for:

  1. Credit Scoring Rule: automatically calculate the scoring and the Risk Class of your customer. Please check 2803189 for customer credit score calculation.

SPRO -> Financial Supply Chain Management -> Credit Management -> Credit Risk Monitoring -> Master Data -> Create Rule for Scoring and Credit Limit Calculation

  1. Credit Limit Rule: automatically propose a credit limit

SPRO -> Financial Supply Chain Management -> Credit Management -> Credit Risk Monitoring -> Master Data -> Create Rule for Scoring and Credit Limit Calculation

  1. Rating procedure selection:

SPRO -> Financial Supply Chain Management -> Credit Management -> Credit Risk Monitoring -> Master Data -> Create Rule for Scoring and Credit Limit Calculation

  1. Credit Check Rule: which credit check steps should be applied for a customer when an external system calls the credit check (e.g. dynamic credit limit check, static credit limit check, oldest open item…) See note 2761313 and 2926009

SPRO -> Financial Supply Chain Management -> Credit Management -> Credit Risk Monitoring -> Credit Limit Check -> Define Checking Rules

The following check steps are delivered in the standard FSCM:

  • 010 Statistical Check of Credit Exposure
  • 030 Dynamic Limit Check with Credit Horizon
  • 020 Check for Maximum Document Value
  • 100 Check for Maximum Dunning Level
  • 110 Check for Age of Oldest Open Item
  • 120 Check of Payment Behavior Index
  • 130 Check for Overdue Open Items

The following five parameters can be maintained on segment level:

  • CREDIT_HORIZON      –     Credit Horizon in Days
  • MAX_OVDUE_PC         –     Percentage Overdue
  • MAX_OVDUE_DAYS    –     Number of Days
  • PAY_HIST_LIMIT          –     Limit for Amt from Payment Behavior
  • MAX_DOC_VAL            –     Maximum Doc. Value
  1. Define formulas for scoring rule, credit limit calculation and risk class determination.

SPRO -> Financial Supply Chain Management -> Credit Management -> Credit Risk Monitoring -> Master Data -> Define Formulas

  1. Credit Check Workflow: which follow up activities should be triggered after a credit check has been executed (e.g. trigger workflow, block customer account)

SPRO -> Financial Supply Chain Management -> Credit Management -> Credit Risk Monitoring -> Processes -> Define Events and Follow-On Processes

Reporting

Display Credit Data – Segment

Display Credit Exposure

Analyze Credit Exposure

Display Credit Log

Display Credit Limit Utilization

Credit Limit Utilization (SAP S/4HANA)

 

Summary

This blog compared the Basic Credit Management and Advanced Credit Management in SAP S/4HANA from process, operations, and configurations aspects. You may find that the Advanced Credit Management is more flexible and automatic to manage customer credit info, you will get to know the status of your customer at early stage then reduce the risk of financial losses. Advanced Credit Management supports your company with making an early determination of the risk of losses on receivables from your business partners and with efficiently making credit decisions.

 

Other Fiori Credit Management Apps

What’s New in SAP S/4HANA 2020

Find more innovations in What’s New Viewer – SAP S/4HANA

 

References

Blogs in SAP community:

https://blogs.sap.com/2019/11/06/sap-credit-management-in-s-4hana-1909/

https://blogs.sap.com/2018/03/30/s4-hana-credit-management-configuration-process/

https://blogs.sap.com/2020/04/17/conversion-of-credit-management-to-sap-s-4hana/

https://blogs.sap.com/2020/05/13/3ws-of-credit-management-high-level-comparison-of-fscm-with-ecc-credit-managment-and-baseline-s-4-cm-configuration/

https://blogs.sap.com/2020/04/30/list-of-s4hana-credit-management-reports-tables-some-issues-we-faced-in-our-recent-s4hana-implementation/

https://sap4tech.net/sap-fscm-credit-management-tables/

SAP Notes

2270544 – S4TWL – Credit Management

2788718 – Configuration checklist for SAP Credit Management (FSCM)

SAP Help

SAP Credit Management Configuration Guide

What’s New Viewer – SAP S/4HANA

 

9 Comments
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  • Dear Miaomiao,

    Great blog, gives a good overview.

    Can you elaborate some more on the assignment of the TUKMSB0 relationship category ("in Credit Managament is managed by")? Is this the replacement for the concept of credit representative and credit representative group as we have in the classic credit management FD32?

    I am looking for possibilities to link these persons maintained in the relationships to the 4 roles for for approving/rejecting the DCDs - credit analyst, person responsible, approver 1 and approver 2.

    Any hints are much appreciated.

     

    Thanks,

    Alex

    • Dear Alex,

      SAP Credit Management (FSCM) is a completely new application, thus there is no strict 1:1 correspondence between the old and the new functionality.

      The classic concept of credit representative (T024P) and credit representative group (T024B, field SBGRP) has changed in the new credit management. The SAP Credit Management is using the so called 'Credit Management is managed by' (TUKMSB0) and 'is in Credit Analyst Group' (TUKMSBG) as 'Relationship category' and is stored in BUT050 table. Refer to KBA 2656921 for further information.


      UKMBP_CMS-CREDIT_GROUP is not taken over to VBAK-GRUPP with S/4HANA FSCM and VBAK-SBGRP is also not getting filled. This happens as these fields are no longer supported with FSCM and there is no corresponding coding in the standard BAdI to fill the header data with these values. Refer to KBA 2706489 for more information.

      If you are looking for suggestions on converting classic credit management to SAP S/4HANA FSCM, you can refer to another SAP blog:

      https://blogs.sap.com/2020/04/17/conversion-of-credit-management-to-sap-s-4hana/

       

      Hope it helps!

       

      Best regards

      Miaomiao

      /
  • Dear Miaomiao,

     

    Thanks for sharing for my knowledge.

    My company has activated FSCM dispute and collection module, now in the midst of exploring the FSCM credit.

    I would like to seek your advice, recently my company IT colleague informed that if were to move the FSCM credit module development environment into QP3 sap to do testing, then it will block the old SD-AR for all countries.

    Currently my company (shared service) structure on order release for all countries are not fully migrate to shared service yet, meaning some countries order release still remain with local.  As we were informed that if activated the FSCM credit module, then no longer can use the traditional credit mgmt.  i would like to seek advice:

    1. what if those other countries not migrate to shared service yet, can local continue to use the traditional SD credit mgmt? or must also change to use FSCM credit?
    2. can the activation of fscm credit be done by country segregation?
    3. Can we proceed to do testing first on the FSCM credit in QP3, without moving to production, will it also impact the old SD AR credit mgmt in QP3?

     

    Thanks & regards,

    Cherish

    • Hi Cherish,

      It would be very helpful if you can explain more about the background. What product of QP3? ECC or S/4HANA any version? Is your company using traditional credit management for all countries in ECC, then trying to enable FSCM in the same product and migrate credit management business to FSCM gradually?

       

      In general, ECC Credit Management triggered through SD using FI-AR is obsolete and no longer supported in S/4HANA. If you are going to move to S/4HANA any version, it is impossible to use the traditional credit management. The most customer I know migrated SD CM to FSCM when converting ECC to S/4HANA.

       

      Best regards

      Miaomiao

      • Hi Miaomiao,

        My company is a shared service based using traditional credit management via FI-AR, but not all subsidiaries are migrated to shared service.

        My company is in process to migrate the FI-AR to FSCM for those countries migrated under shared service, but i was informed this will impact other countries not migrated for the traditional FI-AR such as tcode vkm1,  so the next action is to request/propose all subsidiaries to use the FSCM.(rather than some countries use FSCM or some countries use FI-AR, right)

        for S4 Hana the company is also in planning stage (in next 2 years probably)

        Cheers,
        Cherish

        • Hi Cherish,

          SAP Credit Management(FIN-FSCM-CR) and the classic credit management(FI-AR-CR) are different design for customer credit management. Above ERP 6.0, the classic credit management(FI-AR-CR) is replaced by SAP Credit Management(FIN-FSCM-CR) once the BADI UKM_R3_ACTIVATE has been activated.  The credit checks in OVA8 are changed, as well as some tables. Please refer to SAP KBA 2207394 & 2706489

           

          Best regards

          Miaomiao