SAP BusinessObjects Global Trade Services: Minimize Trade Risks with Letters of Credit

  • by Ravi Kalluri, SAP BusinessObjects Global Trade Services Consultant, Accenture Services Pvt. Ltd.
  • September 21, 2010
See how SAP BusinessObjects Global Trade Services handles letters of credit and understand the enhancements in the letter of credit functionality for faster and more efficient processing. Learn how this functionality is integrated with the logistics system. Find out how to configure letters of credit in SAP BusinessObjects Global Trade Services through a step-by-step configuration checklist.
Key Concept
The letter of credit processing service uses the data from the SAP feeder system (SAP ERP Central Component). It is integrated with the order-to-cash (in sales and distribution) and procure-to-pay scenarios (in materials management). This is applicable for both importing and exporting scenarios. Letter of credit functionality is a part of the Risk Management module in SAP BusinessObjects Global Trade Services.

The large physical distance between business partners and the underlying legal and political conditions in foreign trade pose a credit risk. Payment conditions between exporters and importers in the form of letters of credit can mitigate those financial risks and expedite transactions in international trade.

You can create letters of credit, which act as a guarantee, using SAP BusinessObjects Global Trade Services. It fetches data from SAP ERP Central Component (SAP ECC) documents and carries out electronic communication efficiently. Before SAP BusinessObjects Global Trade Services, businesses would encounter the following issues in the letter of credit process:

  • No automatic method of creation of letters of credit existed and there was no integration among different departments such as finance, sales, purchasing, and compliance
  • Third-party systems were used for the letter of credit process, raising the cost
  • Complex custom programming was required on the SAP R/3 side, consuming a lot of time and effort for maintenance
  • Much time was wasted in the communication process between banks and importers/exporters as there was no electronic mode of communication

SAP BusinessObjects Global Trade Services offers an improved way to process letters of credit. The letter of credit process involves integration of SAP ECC (mainly materials management and sales and distribution) with SAP BusinessObjects Global Trade Services. You can monitor the delivery dates and the receipt of documents for legal control more effectively. The letter of credit master data in SAP BusinessObjects Global Trade Services allows you to manage letters of credit that you receive from banks.

In the letter of credit, you can manage all data relating to shipping and document dates in the header data. The item data contains business partner data, values, and relevant bank data. The system recognizes that your particular export or import business partner requires a letter of credit. You can assign the letter of credit to export or import transactions through logistics integration. In SAP BusinessObjects Global Trade Services you can create, edit, and display letters of credit for exporting and importing purposes. You need to maintain letters of credit in the system when you notify your bank that your business partner requires one. Once a letter of credit is created, you can assign it to an export or import transaction.

SAP BusinessObjects Global Trade Services has also enhanced the communication process. It is possible to communicate electronically with other parties involved in a letter of credit process. The data exchanged electronically is stored in a letter of credit. It is also integrated with the logistics processes in the feeder (SAP ECC) system. The number of the letters of credit created in SAP BusinessObjects Global Trade Services is entered manually in the sales order. The letter of credit number is copied to both the delivery and billing documents. As a result, it is easy to track document flows through logistics processes. Let’s see the basic steps for letter of credit processing.

Ravi Kalluri

Ravi Kalluri is an SAP BusinessObjects Global Trade Services consultant at Accenture Services Pvt Ltd. His focus is on the entire global trade area, including Compliance Management, Customs Management, Risk Management, and Electronic Compliance Reporting. He has an excellent understanding of SAP ERP logistics processes and their integration to global trade in a supply chain environment. His interests are networking, participating in conferences, and writing articles.

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