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FI-AR: Credit Management

Purpose
You can use this business process to monitor the risk of losses on receivables from your customers and to restrict this
loss by means of a credit limit. Accounts Receivable Accounting (FI-AR) regularly provides SAP Credit
Management (FIN-FSCM-CR) with the current status of customer open items. When you receive and process new sales
orders in the sales and distribution system (SD), you can call up the credit check in SAP Credit Management. The
system checks whether the order is within the credit limit for the customer and also checks characteristics of the
customer’s score. This enables you to recognize very early that a customer is unlikely to be able to pay outstanding
receivables due to his weak financial situation. You can then hold back further deliveries to customers via SD so that
they are obligated to pay before deliveries can be resumed. You can also manually overrule the recommendation of the
system no longer to deliver to the customer if you think there are justifiable reasons for this.
You can also run the credit check when you create the delivery or the goods issue. Here you can also release blocked
deliveries or goods issues manually, or repeat a credit check.
For purposes of checking and auditing, you can document the credit checks of the system and the decisions of the credit
manager responsible in the system in detail.
In this business process, SAP Credit Management is the leading component. The Sales and Distribution (SD) system
and the Accounts Receivable Accounting (FI-AR) system provide the SAP Credit Management system with credit-
relevant customer data; you then update, check, and evaluate this data in SAP Credit Management.

Process Flow
1. Report open items
Accounts Receivable Accounting reports open items to SAP Credit Management per customer. Normally this
happens once each day after all incoming and outgoing payments have been processed in Accounts Receivable
Accounting; you can carry out this step as a batch run.
2. Update commitment
Via the XI interface, SAP Credit Managementreceives information about the open items for a customer
from Accounts Receivable Accounting. This information is stored in the credit account of the customer as
commitment; the credit exposure of the customer is updated simultaneously.
3. Report payment behavior summary
Accounts Receivable can report further credit-relevant data of a customer to SAP Credit Management. This data is
then used there for various different steps in the credit check. This is information about the dunning transactions,
the oldest open item, last payment, average days in arrears (with/without cash discount), cleared amounts
(with/without cash discount), total sales of the last 12 months, highest credit exposure of the last 12 months, and
the DSO (Days Sales Outstanding).
 With modification-free customer enhancements and BAdI implementations, you can transfer additional key figures
from Accounts Receivable Accounting to SAP Credit Management.
4. Update payment behavior summary
Via the XI interface, SAP Credit Managementreceives information about the payment behavior summary
from Accounts Receivable Accounting. This data is stored in the credit account of the customer and can be viewed
there or used for credit checks.
5. Create sales order
The SD employee creates a sales order in the SD system either direct or based on a previous offer that the
customer has agreed to.
This step runs independently of SAP Credit Management, but is the prerequisite for a subsequent credit check.
The order provides check-relevant information later, for example, customer, order value, and sales organization.
6. Call credit check
Before a sales order can be processed further, you must ensure that the customer has a sufficient score, and that
the credit exposure plus the order value does not exceed the customer’s credit limit. Once you have done this you
can process the order further in the system.
The credit check takes place in SAP Credit Management: The SD system calls up SAP Credit Management and
transfers the required data from the sales order.
7. Perform credit check
Via an interface, SAP Credit Managementreceives all data required from the SD system. The credit checks that
are executed depend on the check rules defined in the credit master data record of the customer.
Possible credit checks are:
○ Statistical check of credit limit utilization
○ 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 (as customer enhancement)
The results of the check steps carried out are summarized, forwarded to the SD system, and saved there in the
status of the sales order.
8. Block sales order automatically
The result of the credit check is negative: The credit limit is exceeded. The sales order is therefore blocked in the
system to prevent further processing (for example, delivery of goods).
The system stores the result of this negative credit check in SAP Credit Management, in the form of
a Documented Credit Decision. This also contains additional data for documentation, auditing and check
purposes.
○ Customer data that is relevant for credit management, such as score, risk class, and external score values
○ Details of the negative credit check

If the result of the credit check had not been negative, you could process the sales order further.
9. Report sales order value
A sales order created triggers, for example, 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 commitment. When you configure the application, you can decide whether a blocked order is
reported to SAP Credit Management as a commitment or whether it is reported when it is released.
10. Update commitment
The sales order value reported by the SD system is stored in the credit account of the customer as a commitment.
The credit exposure of the customer is updated at the same time.
11. Re-determine the customer score
At regular intervals, the credit manager checks whether there are blocked orders in SD.
Alternatively, the credit manager can be informed via workflow when the result of a credit limit check for a
customer is negative. However, this workflow does not form part of the process variant described here.
 The credit manager analyzes the credit profile of the customer and checks whether the current credit limit
corresponds to the default risk. To do this he revaluates the customer. The system supports this transaction with
automatic valuation rules. The result of these valuation rules is the score.
12. Change credit limit
From the score determined, you can automatically derive a credit limit corresponding to the default probability of
the customer. The credit manager decides whether to accept the credit limit proposed by the system or whether to
adjust it manually. If the score has improved since the last time the customer was valuated, the system proposes a
higher credit limit. This would enable you to release a sales order previously blocked.
13. Repeat credit check
The credit manager calls up the list of documented credit decisions in SAP Credit Management that are there for
the blocked sales orders. He selects the appropriate credit decision.
14. Perform credit check
The credit manager repeats the credit check for the sales order selected (see step 7: Carry out credit check).
15. Release sales order
If the result of the credit check is positive, the system unblocks the order and closes the documented credit
decision. You can see the corresponding timestamp and the user who triggered the new check in the documented
credit decision. The sales and distribution system then sends an order confirmation to the customer.
16. Create delivery
In business processes where the interval between order processing and delivery is quite long, you can run a credit
check again when you create the delivery.
17. Call credit check
See step 6.
18. Perform credit check
See step 7.
19. Block delivery automatically
If the result of the credit check at the time of delivery is negative, you can block the delivery here
automatically. No delivery is made to the customer until you are sure that he can pay the outstanding receivables.
A negative credit check of the delivery in turn triggers the creation of a documented credit decision in SAP Credit
Management.
20. Report delivery value
When you create the delivery, the corresponding delivery value is reported to SAP Credit Management.
21. Update commitment and credit exposure
Once a delivery has been created the current commitment results from the current delivery value and not from the
order value. In SAP Credit Management, the corresponding order value is calculated from the credit exposure and
the delivery value is added to the credit exposure.
22. Release delivery
If the delivery was blocked by a negative credit check, the credit manager can release the delivery for further
processing once the payment of the receivables has been ensured. He calls up documented credit decision
processing, selects the appropriate credit decision, and releases the related delivery. You can see the
corresponding timestamp and the user who released the delivery in the documented credit decision.
23. Create goods issue
The credit check at the time of the goods issue is the last chance to prevent delivery to the customer. Therefore,
the credit check should be run again for the goods issue to ensure that no further deliveries are made to
customers who cannot pay open receivables.
24. Call credit check
See step 6.
25. Perform credit check
See step 7.
26. Create billing document
After the goods issue, the SD employee creates the billing document and this is transferred to Accounts
Receivable Accounting automatically. At the same time, the system creates a message for SAP Credit
Managementthat reduces the credit exposure of the customer there by the value of the order.
27. Update commitment
 The transfer of the invoice to Accounts Receivable Accounting completes the processing of the sales order in
Logistics. The risk to the company is now reflected in the form of the invoice payable in Financial Accounting.
In SAP Credit Management, the credit exposure is therefore reduced by the value of the order reported.
28. Create open items
As a result of the transfer of the billing document to Accounts Receivable Accounting, the relevant open items are
created there in the customer account.
29. Report open items
At regular intervals, the open items for a customer in Accounts Receivable Accounting are reported to SAP Credit
Management.
30. Evaluate early warning list
With an early warning list (credit limit utilization list), you can identify customers whose credit limit utilization is
approaching 100%. In the SD system, the credit manager can block the acceptance of sales orders from
customers thus determined as critical if these customers do not reduce their credit exposure by the payment of
open invoices.

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