Make SAP Automatic Credit Management Work for You, Without Damaging Supply Chain Efficiency

  • by Dr. Stef G.M. Cornelissen, MBA, SAP Business Consultant, Sperry Partners BV
  • July 1, 2006
SAP offers Automatic Credit Management to automate the risk check during order creation and delivery. Learn how to implement this tool without frustrating an efficient supply chain.
Key Concept
SAP Automatic Credit Management first became available with R/3 Release 3.0. Using settings in FI and Sales and Distribution (SD), it prevents the shipping or selling of goods to customers whose credit status is doubtful. Extensive reporting allows for in-depth analysis of current risk and payment history.
The good news is that SAP Automatic Credit Management aims to safeguard your business against bad credit risks. The bad news is that strict controls can damage the efficiency of your supply chain. This is the classic clash between logistics and finance in any implementation. To implement Automatic Credit Management in a sensible way, you need to strike a balance between these two business targets. It is important to have a clear understanding of this gray area between finance and logistics. At all times the logistics team should examine the configuration for its impact on the sales process.

I’ll explain the settings available for Automatic Credit Management in the sales process in all releases since R/3 3.0. With these settings you can control system behavior for customers whose credit status you no longer trust. The automatic process determines the system reaction each time you create or change a sales order or delivery. The system gives a warning, blocks the document, or allows further processing depending on the actual customer credit situation. It takes into account payment behavior, credit limits, and current total credit exposure (Figure 1). With each setting it is essential to weigh the gain in control against the effect on the logistic process

Figure 1
Credit management in the sales flow

In part 1 of this series, I’ll deal with the settings for automatic credit controls in the sales process. Part 2 will describe credit management organization, credit limits, credit exposure calculation, and customer groupings.

Automatic Credit Management Basics

When all the settings are in place, a document gets a credit block when a customer is past its credit limit. When you save the sales order/delivery, the system displays a message (Figure 2)


Figure 2
Example of a credit management warning message. The system saves the document with a credit block

Dr. Stef G.M. Cornelissen

Dr. Stef G.M. Cornelissen, MBA, is an experienced international SAP business consultant from the Netherlands with certifications in FI, CO, and SD. He took part in important international projects involving the large Dutch multinationals. Before specializing in SAP, he worked as a management consultant and was a senior advisor to the Board of Directors of the University of Nijmegen. Stef's academic background is in business administration, economics, and organizational science. He is the owner of Bowstring BV and principal partner at Sperry Associates.

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