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The Credit Management ES bundle gives companies the ability to efficiently determine the risk of losses on receivables from customers and business partners by integrating the flow of information between different departments within the enterprise, as well as through external third-party services such as credit agencies. The Credit Management ES bundle supports a heterogeneous and distributed system landscape and uses XML interfaces to connect with external and even non-SAP systems.

SAP Credit Management, which is part of SAP Financial Supply Chain Management, has been partially service-enabled since its introduction in 2004. This wiki explores the extensibility and reusability of these services in a way that will make it easier for SAP ERP 6.0 users to integrate SAP Credit Management with their current business processes and solutions.

SAP Credit Management enables a company to centralize credit management even in a distributed system landscape, and still take into account both internal and external credit information. The different business systems connected, such as Sales and Distribution, Logistics Execution, and Financial Accounting, report the commitment of a business partner to SAP Credit Management via XML. The system-independent interface also connects to external credit information providers. These reports are consolidated into the solution's automatic credit decision mechanism and might trigger an automatic recalculation of the current credit limit for the customer or partner. In addition to the credit limit check, the company can carry out other checks including oldest open item, maximum dunning level, and last payment. The analyses and results can be accessed through SAP NetWeaver Business Intelligence (SAP NetWeaver BI) or the Credit Manager portal.

Credit Management (click to enlarge)


There are several ways of using the consolidated data within the SAP Credit Management application. These features can be organized into four major areas:

  • Business Partner Credit Master Data
  • Business Partner Rating and Credit Information
  • Credit Limit and Credit Limit Check
  • Credit Decisions

Business Partner Credit Master Data

SAP Credit Management allows you to manage all credit-relevant master data about individual business partners. This includes data on current credit limit, externally determined rating values, risk class, and order limit. The change history of each master data field is tracked to show information about the time of the change, the user, and the old versus the new value. The credit analyst can also use a notepad function to enter additional information about each business partner. Additionally, the analyst can utilize the document storage function to save press articles, correspondence, and bank information. Finally, the analyst can define collateral for a business partner in the calculation of the credit exposure, which means that the company is better able to monitor its own risk.

Business Partner Rating and Credit Information

SAP Credit Management includes a Credit Rules Engine that can be used to automatically calculate ratings (scoring), make credit decisions, and calculate credit limits for both private customers and business partners. The information used to create this rating is gathered externally and can include data from several different third-party providers. The data from external providers can be seamlessly integrated or saved separately according to the source of the data.

The credit analyst can also determine a score based on internal data gathered from legacy systems and using the company's own credit rules. The score values can be determined using many factors, including:

  • Business partner master data (for example, country of origin)
  • Payment behavior (for example, average days in arrears)
  • Dunning history (for example, number of dunning notices in the last 12 months)

Both the external and internal credit information and calculations are stored in the master data for each business partner. The system periodically monitors the validity of the data, and the score data can be updated either manually or automatically. There is also a mass processing function that can be used to recalculate the rating value or change the rating procedure simultaneously for a large number of business partners.

Credit Limits

An analyst can determine and calculate the credit limit for a business partner automatically.

As of Enhancement Package 4, this ES bundle supports requests to change credit limits for customers. This is called a credit limit request. Using SAP Business Workflow, the company can implement an approval procedure to ensure that the appropriate supervisor checks and approves changes to a credit limit.

Credit Check

The most important aspect of credit management is the credit worthiness check or credit check.

The rules for determining which credit checks are carried out can be defined by the company. In addition to the credit limit check, other checks can be carried out such as maximum age of oldest open item and maximum number of dunning transactions. The consequences of a negative credit check can also be defined for different business partners to allow a company to block a single sales order, trigger a workflow, or block the customer's account.

Credit Decisions

To make credit decisions quickly, an analyst requires information from different systems. SAP Credit Management provides one view of data through SAP NetWeaver Business Intelligence and, optionally, the Credit Manager Portal.

Audience

Any industry, small or large, that is engaged in credit management with its private customers or business partners will find the enterprise services in the Credit Management ES bundle useful. This bundle is particularly recommended for companies that:

  • Have problems consolidating credit information for credit decisions because of a heavily distributed system landscape.
  • Have a large number of business partners and currently rely on manual credit management processes.
  • Want to combine internal and external credit data in a separate score or rating.

    For details on Service Operations, Business Objects and Process Components, please check the ES Workplace.


How to Use This ES Bundle

The goal of credit management is simple: to give a company the tools for determining whether or not to do business with a customer. But on top of that, today's enterprise must be able to assess its customer portfolio as a whole and segment them into different risk classes. Risk assessment is critical to a company's ability to meet Sarbanes-Oxley guidelines.

The efficient determination of credit worthiness is also critical. A company needs the ability to check whether an order is within the credit limit for the customer and also evaluate the customer based on a rating or score based on customized parameters. This enables a company to recognize very early when a customer is no longer able to pay open invoices due to a weak financial situation. Faster and more accurate credit analysis, order blocking, and blocked order releasing can reduce costs and increase revenue.

This section will explore a series of use cases for the Credit Management ES bundle. The use cases covered in this wiki will focus on the primary credit check process along with the following business subprocesses:

  • Credit check on creation of a sales order (from SD, in SAP Credit Management)
  • Credit limit request from a composite application to SAP Credit Management
  • Liability Update (from FI-AR to SAP Credit Management)
  • Update of total liability (from SD to FI-AR and SAP Credit Management)

SAP Credit Management is the leading component in all of these use cases. The Sales and Distribution (SD) system and the Accounts Receivable Accounting (FI-AR) system provide the Credit Management system with credit-relevant customer data.

Each use will show how different outcomes can be achieved by using the enterprise services in different combinations. Note that these examples may refer to users directly invoking enterprise services. This illustrates the flow of the service operations; in fact, service operations are invoked by an application, by an application's user interface, or by another service operation.

While these use cases illustrate a few of the ways that this ES bundle could be used, the intention is to show the flexibility and reusability of these business objects and enterprise service operations so that you will have a clearer understanding of how to best deploy them in your own environment. This wiki is also a space for you to share knowledge and collaborate with others who are implementing the Credit Management ES bundle.

Use Case 1: Credit Check

A sales clerk or sales department employee creates a sales order in SAP Sales and Distribution (SAP SD) on behalf of a customer. Before the sales order can be processed further, the credit manager must ensure that the customer has a sufficient credit score and that the total liability plus the order value does not exceed the customer's credit limit, so the next step is to run a credit check.

SAP SD calls the credit check functionality in SAP Credit Management by invoking the Check Credit Worthiness enterprise service operation, which uses the Credit Management Account business object. It provides data from the sales order as input to the credit check, including the customer, the order value, and the sales organization. The credit check takes place in SAP Credit Management.

Types of credit checks include statistical check of credit exposure, dynamic credit limit check with credit horizon, check for maximum dunning level, check for maximum document values, check for age of oldest open item, check for payment behavior index (this check requires a customer enhancement). The results of the check steps carried out are summarized, forwarded to SAP SD, and saved there in the status of the sales order. Exactly which credit checks are executed via Check Credit Worthiness depends on rules defined in the customer's credit master data record.

If the Customer Fails the Credit Check

If the credit check has a negative response, the credit limit is exceeded. The sales order is therefore blocked in the system to prevent further processing (for example, delivery of goods).

At regular intervals, the credit manager checks for blocked orders in SAP SD and reviews the customers' credit limits. (Alternatively, the credit manager can be informed via workflow when a customer fails to pass a credit check.) The credit manager analyzes the credit profile of the customer and checks whether the current credit limit corresponds to the default risk. If the situation warrants changing the credit limit, the credit manager (or the salesperson) can request a change to the credit limit (see use case 2).

After increasing the credit limit, the credit manager calls up the list of blocked sales orders in SAP SD and selects the sales order to be checked again. The credit manager repeats the credit check for the sales order selected using the Check Credit Worthiness service operation. Since the result of this credit check is positive, the credit manager can save and release the sales order; SAP SD then sends an order confirmation to the customer.

If the Customer Passes the Credit Check

The customer passes the credit check, and the sales order can continue to be processed. A sales order that is accepted may trigger production or deliveries. This is a risk for the company since costs arise that customers pay later, possibly weeks or months later. The order value is therefore reported to SAP Credit Management as a liability. The Query Credit Commitment by Debitor service operation is invoked, which uses the Credit Management Account business object to provide SAP Credit Management with updated information about the customer's liability as a result of the accepted sales order. SAP Credit Management saves the order value in the line items in the credit account of the customer and updates the customer's total liability.

When Customers Are Nearing Their Limit

Using an early warning list (also known as a credit exposure list), a credit manager can identify customers whose credit exposure is approaching maximum. In SAP SD, the credit manager can block the acceptance of sales orders from customers thus determined as critical if these customers do not reduce their total liability via payment of open invoices.

The following table summarizes these steps and the associated enterprise services:

Step

Enterprise Service Invoked

Step 1: The credit manager runs a credit check

Check Credit Worthiness

Step 2: If the customer fails the credit check, a credit limit change might be requested (see use case 2) and then step 1 is repeated

(no enterprise service is invoked during this step)

Step 3: If the customer passes the credit limit check, the sales order continues to be processed, and the customer's liability must be updated

Query Credit Commitment by Debitor

Use Case 2: Requesting a Change to a Customer's Credit Limit from a Composite Application

For a variety of reasons, there may be reason to request that a customer's credit limit be changed. Perhaps the customer will be placing more orders and because of the payment terms, the outstanding balance may be higher at some point during the year. A composite application could be designed to allow any relevant employee to request an increase in the credit limit. The credit limit increase would then be forwarded for approval as usual.

CRM as Requesting System

Note that this use case for requesting a change to credit limit could also be driven by SAP CRM or another CRM or sales planning system.

To start, the salesperson selects an option to increase credit limit, either in a composite, a web-based UI, or in their own sales tool. The salesperson enters information such as desired credit limit, expected sales volume, reason for increase, notes about the request, attachments (for example, documents that substantiate the need for the increase or which show that the customer is eligible for the credit limit increase). The salesperson saves the request, which invokes Check Credit Limit Change Request. If any required information is missing, it returns an error to request it. Once all the information has been supplied, the salesperson saves again, which invokes Create Credit Limit Change Request. The credit limit request will pop up in the worklist of the credit manager, who will check the details. He might approve the request, send it back because he has additional questions, forward it to someone else (his boss), or reject it. If the credit limit request is approved, the credit limit of the respective business partner is increased, extending the credit line to accommodate future business.
To see if the credit limit request has been approved, the salesperson opens the composite application again. To display the list of requests, the composite application invokes Find Credit Limit Change Request, which returns the identification number for the credit limit request. The composite application passes that data to Read Credit Limit Change Request, which reads out the credit limit request. The composite then displays the results of the requests to the salesperson.

Step

Enterprise Service Invoked

Step 1: A salesperson or other professional requests a higher credit limit for a customer using a composite application

(no enterprise service is invoked during this step)

Step 2: The salesperson enters all relevant information for the request

(no enterprise service is invoked during this step)

Step 3: The salesperson saves the credit limit request, and SAP Credit Management validates the data

Check Create Credit Limit Change Request

Step 4: Once the data is complete, the credit limit request is created

Create Credit Limit Change Request

Step 5: The credit limit appears in the credit manager's worklist

(no enterprise service is invoked during this step)

Step 6: The credit manager approves the request or rejects it

(no enterprise service is invoked during this step)

Step 7: Later, the salesperson looks at his requests in the composite application to see if the request has been granted

(no enterprise service is invoked during this step)

Step 8: The composite application finds relevant requests for this salesperson

Find Credit Limit Change Request

Step 9: Using the ID number from the Find service, the composite application reads the credit limit change request

Read Credit Limit Change Request

Step 10: The composite application displays the status for the salesperson's credit limit change requests

(no enterprise service is invoked during this step)

Use Case 3: Updating SAP Credit Management with Liability Information

Open items in accounts receivable obviously impact a customer's available credit. Accounts Receivable Accounting reports open items to SAP Credit Management per customer. Credit managers also want the total liability of a customer updated (FIN-FSCM-CR). SAP Credit Management requests a credit commitment record notification, including information about open items, from Accounts Receivable Accounting (or other connected systems) using the Query Credit Commitment by Debitor service operation, which uses the Credit Management Account business object. sends to SAP Credit Management. This information is stored in the credit account of the customer as liability data; the total liability of the customer is updated simultaneously.

Step

Enterprise Service Invoked

Step 1: SAP Credit Management requests liability information from Accounts Receivable Accounting and other connected systems

Query Credit Commitment by Debitor

Use Case 4: Updating SAP Credit Management with Customer Payment History

Credit managers need to transfer customer payment history to SAP Credit Management (FI-AR) for further analysis. This can be done via a batch job on a periodic basis.

Accounts Receivable Accounting can report further credit-relevant data of a customer to SAP Credit Management. This data is then used there for various steps in the credit check. This could be information about dunning transactions, oldest open items, last payment, and so on. Via customer enhancements and BAdI implementations, you can also forward data about Days Sales Outstanding (DSO) or average days in arrears.

The FI summary for a customer (FIN-FSCM-CR) is gathered from Accounts Receivable via the Change Credit Management Account Behaviour service operation. This data is stored in the credit account of the customer as an FI summary and can be viewed there or used for credit checks.

Step

Enterprise Service Invoked

Step 1: Accounts Receivable Accounting sends credit-relevant payment history data to SAP Credit Managementd

Change Credit Management Account Behaviour

System Requirements

Related ES Bundles

End-to-end Processes Where This ES Bundle Is Used

1 Comment

  1. Former Member

    Can SAP provide reference clients in the Utilities Industry who have implemented SAP's Credit Management.  We are planning to implement "Credit Management" to leverage the out-of-the-box intergration with CRM for Utilities & FICA.  Also, SOA based integration with Credit Rating Agencies.  Any client reference will help us greatly.