Monitor Your Credit Accounts Effectively with SAP Credit Management

  • by Juergen Weiss, SEPA-Now Consulting
  • January 15, 2008
Become familiar with the concept of credit management hierarchies and how to set them up in SAP Credit Management. Learn how the assignment of credit rules and credit segments works and how these settings affect the credit limit utilization of business partners. Understand some of the key concepts of SAP Credit Management and their differences compared with the classic R/3 credit management.
Key Concept

SAP Credit Management is an application that allows you to detect credit risks in the sales process and to take all necessary actions to prevent your company from lost receivables. The system manages all credit-relevant master data and enables you to monitor multifaceted account hierarchies by assigning granular credit limits to them and using sophisticated credit rules.

Many corporations today are challenged by a growing uncertainty regarding the settlement of their outstanding receivables. Enterprises of every size use terms of credit as a way to substitute bank loans by vendor-financed trade credits — and often delay payments as long as possible. In some cases they don’t even pay at all, thereby jeopardizing the financial survival of their business partners. This behavior affects key performance indicators (KPIs) such as Days Sales Outstanding (DSO) and debts aging percentage.

SAP Credit Management is an application that enables corporations to implement a company-wide and consistent credit policy mitigating the risks associated with receivables management. Unlike in classic R/3 credit management, you can use this SAP ERP component to set up a central credit management within a distributed system landscape. This enables the monitoring of a customer’s credit exposure in one central system. Although Credit Management belongs to SAP ERP Financials, you can combine it with lower releases such as R/3 4.6C or higher. The system integration requires SAP NetWeaver Process Integration (SAP NetWeaver PI, formerly known as Exchange Infrastructure). With SAP NetWeaver PI, you can transfer documents between Sales and Distribution (SD) or FI and Credit Management.

I’ll describe one of the tricky topics during the configuration of Credit Management: the design of customer credit hierarchies. Credit Management allows you to set up complex relationships between credit accounts. It is essential for you to understand how they are correlated and influenced during certain business incidents. In addition, I’ll show you how you can use some core settings in Credit Management — credit segments and credit rules — to influence their impact on these business partner relationships. First I’ll go over some key differences between Credit Management and the R/3 credit management capabilities.

Juergen Weiss

Juergen Weiss works in the functional area of SAP Financial Supply Chain Management. As part of SAP’s product management team, he was globally responsible for the Financial Supply Chain Management applications, including Electronic Bill Presentment and Payment, Dispute Management, Collections Management, Credit Management, Treasury and Risk Management, Bank Relationship Management, and In-House Cash as well as Accounts Payable and Receivable.

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