Credit and Risk Management in FI/SD

Credit Management

Purpose

Outstanding receivables or bad debts can have a substantial effect on the success of your company, but with the aid of Credit Management you can minimize your credit risk by defining specific credit limits for your customers. Thus you can take the financial pulse of a customer or group of customers, identify early warning signs, and enhance your credit-related decision-making. This is particularly useful if your customers are in financially unstable industries or companies, or if you conduct business with countries that are politically unstable or that employ a restrictive exchange rate policy.

Integration

If you are using the Accounts Receivable (FI-AR) component to manage your accounting and an external system for sales processing, Credit Management enables you to issue a credit limit for each customer. Every time you post an invoice (created in FI-AR), the system then checks whether the invoice amount exceeds the credit limit. Information functions such as the sales summary or early warning list help you to monitor the customer’s credit situation.

If you are using both the Accounts Receivable (FI-AR) component to manage your accounting and the Sales and Distribution (SD) component for sales processing, you can also use Credit Management to issue credit limits for your customers. You can make settings in Customizing to decide the scope of the check and at what stage in the process (for example, order entry, delivery or goods issue) a credit limit should take place. General information functions are also available for use with credit checks.

Features

If you are using both the SD and FI-AR components, Credit Management includes the following features:

• Depending on your credit management needs, you can specify your own automatic credit checks based on a variety of criteria. You can also specify at which critical points in the sales and distribution cycle (for example, order entry, delivery, goods issue) the system carries out these checks.
• During order processing, the credit representative automatically receives information about a customer’s critical credit situation.
• Critical credit situations can also be automatically communicated to credit management personnel through internal electronic mail.
• Your credit representatives are in a position to review the credit situation of a customer quickly and accurately and, according to your credit policy, decide whether or not to extend credit.
• You can also work with Credit Management in distributed systems; for example if you were using centralized Financial Accounting and decentralized SD on several sales computers.

You can find information about where to make Customizing settings for Credit and Risk Management in Settings for Credit and Risk Management

Risk Management for Receivables

See Risk Management for Receivables in SD for information about managing risks for receivables.