Tips, Tricks, and

Techniques to
Configure and Optimize
Your SAP Credit
Management System
Sharon (Qian) Tang
Applied Materials
© 2007 Wellesley Information Services. All rights reserved.
What We’ll Cover …

• What is SAP R/3 Credit Management?

• Key capabilities of Credit Management
• Credit Check vs. Credit Update
• Credit Management configuration
• Tables, user exits, and reports
• Troubleshooting techniques
• Wrap-up

2
SAP R/3 Credit Management Overview

• Helps you determine whether or not to extend credit to

your customers, and minimize your credit risk
ΠCategorize your customers by creditworthiness
ΠGroup sales transactions by relevance to credit control
ΠEstablish specific credit limit per Risk Category and
transaction type
f How much to sell on open account

ΠR/3 updates credit exposure, triggers automatic credit checks

during order and delivery processing
ΠIdentify early warning signs, and enhance your credit-related
decision making

3
SAP R/3 Credit Management – Why is It So Difficult?

• Credit Management adds value by letting you sell to

marginal customers “safely,” not by over-controlling
• SAP R/3 Credit Management is not an exact science,
rather an approximation
• Numerous scenarios of credit “checks and balances”
ΠInconsistent treatments for SD and Service Management, etc.
• Credit issues are often intermittent and hard to replicate

Client
Issue

4
Frequently Asked Questions About Credit Management

• Is Credit Management an SD or Finance function?

• How is a credit check different from a credit update?
• How to reconcile credit exposure with transactions?
• What kind of credit check should I adopt for various
types of business processes?
• Which credit update reports should I use, for what
purposes?
• What do I need to consider in order to enable credit
management globally?
• How to troubleshoot and reorganize credit data?

5
In This Session ...

• Key features of SD and A/R Credit Management in R/3

ΠSAP Financial Supply Chain Management is not in scope for
this session
• The difference between Credit Check and Check Update
• Intricacies of R/3’s Credit Check methods, e.g., dynamic
Credit Check
• Integration of SAP R/3 Credit Management with FI, SD,
and Service Management
• An SAP R/3 Credit Management configuration checklist
• A list of useful, time-saving Credit Management reports/
programs
• A step-by-step troubleshooting procedure
Tip
6
What We’ll Cover …

• What is SAP R/3 Credit Management?

• Key capabilities of Credit Management
• Credit Check vs. Credit Update
• Credit Management configuration
• Tables, user exits, and reports
• Troubleshooting techniques
• Wrap-up

7
Standard Sales Order Credit Cycle

Credit Management Sales and Distribution

Financial Accounting
Create Credit Account Enter Customer Order

Customer: ABC Co. Order 1001

Medium Risk Sold-to/Payer ABC Co.
Credit Limit: $10,000 Credit Value: $1,200
Credit Exposure: $9,000
Credit
Credit Limit
Limit Exceed
Exceed
Mailbox/ Order
Order Blocked
Blocked
Blocked Order Transaction Email
Email Credit
Credit Rep.
Rep. (Optional)
(Optional)

XYZ Co. $8,000

ABC Co. $1,200
Quantities
Quantities Confirmed
Confirmed
Investigate and Release Included
Included in
in Delivery
Delivery Proposal
Proposal

Credit Shipping, Billing

Credit Information
Information System
System
Contact
Contact Customer
Customer
Release
Release Order
Order Incoming Payment

8
Total Commitment

• Credit Limit – an upper limit for the total receivables and

the foreseeable receivables from the customer
• Credit Exposure Composition

Open sales orders

9
Internal View of Credit Management

• Credit Control Area and Credit Representative Group

ΠRepresents the area or group where customer credit is awarded
and monitored
ΠRepresents an internal organizational view
f Centralized vs. decentralized credit management

Global Credit
Total Limit

North America Europe Asia

Credit Control Area Credit Control Area Credit Control Area

Western Europe Eastern Europe

Credit Rep Group Credit Rep Group

Alex Summers

John Winters
10
External View of Credit Management

• Represents types of customers for credit purposes

• Captures an external view or customer characteristics
ΠRisk Category
f Controls the Credit Check function

ΠCustomer Credit Group or Customer Group

f Industry, product groups, geographical locations, etc.

11
Credit Master

• Payer partner function is subject to credit control

ΠAccounts Receivable protection
• Group multiple customers under a single credit account
ΠCredit limit shared
• Blocked by Credit Management
• Date fields
ΠLast internal review
ΠNext internal review
f Next check

12
Currency Considerations

• A centralized model can use another currency

(e.g., group currency) as the Credit Control Currency
• Credit exposure is
translated from local or
document currency into
Credit Control Currency
ΠSimplifies reporting at
the global level
ΠMakes it harder to
reconcile at a local level

Source: SAP
13
What We’ll Cover …

• What is SAP R/3 Credit Management?

• Key capabilities of Credit Management
• Credit Check vs. Credit Update
• Credit Management configuration
• Tables, user exits, and reports
• Troubleshooting techniques
• Wrap-up

14
Credit Check vs. Credit Update
• Credit Check • Credit Update
ΠAutomatic credit check ΠUpdates credit exposure
ΠAction-oriented ΠUpdates the database
f Induces credit block behind the scenes
Œ Blocked orders don’t count Œ Only approved open sales
towards credit exposure value constitutes credit
ΠService orders can subject exposure
to credit check
ΠOnly sales documents are
Π8 standard and 3 user-
defined methods to perform subject to credit update
credit checks Π3 major methods to update
credit exposure
• Credit Update is the foundation that enables Credit Check
Πi.e., credit checks are executed against the credit exposures
updated by Credit Update

15
Credit Check

• Credit checks are

action-oriented Sales Order
Credit Status: Blocked
ΠWarning, error, no message
ΠSet Check Status or block
• Credit block only makes
sense if there are Delivery
subsequent documents Credit Status: Blocked
or functions to prevent Tip
ΠSubsequent function(s)
exist: Sales Order and
Delivery Good Issue
Credit Status: Blocked
ΠNo subsequent functions
exist: Goods Issue and
Service Order
16
Credit Check Statuses

• Credit checks are

executed against open
and approved sales
values only
Πi.e., undelivered quantity
• Credit statuses include:
ΠNot performed
ΠApproved
ΠNot approved
ΠReleased
• Status for individual check
and overall credit status

17
Processing Credit Block

• Blocked documents can be viewed and reprocessed

from the Credit Blocked Order Worklist (VKM1-VKM5)
• Processing options
ΠRelease
ΠReject
f Specify a reason for rejection

ΠForward
f Transfer to another Credit Representative Group

ΠReassign
f Reset per the requested delivery date

18
Dynamic vs. Static Check

• Open Delivery, Open Billing, Open Item are always static

• Open Order can be set up as static or dynamic
ΠIf dynamic, it is subject to the Credit Horizon Calculation
f i.e., ignore credit exposure caused by future shipments beyond
the Credit Horizon, measured by Material Availability Date

Source: SAP 19
 Set Proper Credit Horizon
• Overall, consistency is the key
• However, longer Credit Horizons are harder to manage
ΠPotentially, more orders can be blocked
• Possibility of large order demands visibility
ΠLarge quantities of deliveries will be generated all at once
ΠDelivery with large $ value transaction will deplete available
credit all of a sudden
• Should approximate the order to cash cycle
ΠOn average, how much in advance are customers ordering
from us?
ΠHow long are our payment terms or how long does it takes for
customers to pay?

Current Order Delivery and Invoice Payment

Date Month 1 Month 2
20
Credit Update Group 000012

• Controls critical points in SD for Credit Checks (OB45)

• Update with Open Order Value: Group 000012
ΠApplicable for delivery-relevant schedule lines
ΠTesting steps by regular and exceptional scenarios
ΠReduce handoffs wherever you can (billing and accounting)

Credit Update Open Order Open Delivery Open Billing Open Item
Transaction S066 S067 S067
Sales Order Increase
Creation
Delivery Decrease Increase
Creation
Billing Decrease Increase
Release to Decrease Increase
Accounting
21
Credit Update Group 000015

• Update without Open Order Value: Group 000015

ΠOnly delivery and billing updates total commitments
ΠNo open sales order update
f No visibility to exposure caused by incoming orders

Credit Update Open Order Open Delivery Open Billing Open Item
Transaction S066 S067 S067
Sales Order
Creation
Delivery Increase
Creation
Billing Decrease Increase
Release to Decrease Increase
Accounting

22
Credit Update Group 000018

• Update for without Deliveries: Group 000018

ΠApplicable for order items not relevant for delivery
f Service sale, debit/credit memo request, etc.

ΠCan be automatically determined by system at time of sales

order creation
Credit Update Open Order Open Delivery Open Billing Open Item
Transaction S066 S067 S067
Sales Order Increase
Creation
Delivery
Creation
Billing Decrease Increase
Release to Decrease Increase
Accounting
23
Sales Information System (SIS) for Credit Update

• SIS contains two tables for credit exposure update

• S066: Open Order
ΠDay, week, month intervals
f Select the right interval

• S067: Open Delivery and Open Billing

ΠNo time interval

24
Automatic Credit Control Example

• Step 1: Display credit blocked order

• Step 2: Check scheduled line

25
Automatic Credit Control Example (cont.)

• Step 3: Display credit master – initial exposure

• Step 4: Release credit blocked order

26
Automatic Credit Control Example (cont.)

• Step 5: System updates released credit value

• Step 6: System confirms material

27
Automatic Credit Control Example (cont.)

• Step 7: Display credit master – after order release

• Step 8: Display credit master – after Delivery/PGI

28
Automatic Credit Control Example (cont.)

• Step 7: Display credit master – after billing

• Step 8: Display SD document flow

29
Automatic Credit Control Example (cont.)

• Step 9: Display credit master – after billing cancellation

30
Automatic Credit Control Example (cont.)

• Step 10: Change sales order – increase order quantity

31
Automatic Credit Control Example (cont.)

• Step 11: Release blocked order and system updates

released credit value

• Step 12: Display credit master – after order release

32
 Automatic Credit Control Example (cont.)

• Step 13: Set the reason for rejection

• Step 14: Display credit master – after rejection

33
Releasing and Rechecking Documents

• Only check released documents when necessary

ΠMain complaints of Credit Departments
• Credit Check loses some precision within a day
ΠRefer to SAP Note 718260 РReleased documents are not checked

Source: SAP
34
Work with Upstream Business Processes Closely

• Take into consideration all upstream business

processes in Sales and Distribution, or Service
Management for credit control purposes
• Reject the Sales Document Items
ΠDo not simply delete items
• Stock Transport Order
ΠNo credit management function possible
f Neither Credit Check nor Credit Update

ΠThink twice before using it with external customers

35
Example – Customer Consignment Process

• Customer Consignment Process

ΠConsignment fill-up, not relevant for billing
ΠConsignment issue, relevant for billing and credit management
f Customers consume inventory first, report usage after

f Credit Check is not real time

ƒ Helps to have customer report usage more frequently

ΠCredit Update should be turned on for consignment issue

Source: SAP
36
Examples – Service Management Process

• Service orders
ΠPlan Cost is used for credit check
Œ Credit update doesn’t take place until transferred to an SD
document; refer to SAP Note 555925
f Resource related quotation and billing

• Service contracts Warning

ΠStatic only, update Open Delivery value
• Value contracts
ΠPreferred option for contract
ΠOnly release order is subject to credit check

37
What We’ll Cover …

• What is SAP R/3 Credit Management?

• Key capabilities of Credit Management
• Credit Check vs. Credit Update
• Credit Management configuration
• Tables, user exits, and reports
• Troubleshooting techniques
• Wrap-up

38
Configuration Warning

• If you haven’t yet configured Credit Management,

be careful!
ΠConfiguration errors are the primary leading causes for
erroneous credit check
f It’s very hard to correct the data after-go-live

ΠInvest any extra time needed to test the relevant business

processes end to end for credit update and credit check both

Warning

39
 Enterprise Structure

• Define Credit Control Area

(txn OB45)
ΠAssign a default Credit
Update Group
ΠAutomatically sets up a Credit
Master when a new customer
is created
f Better option for control

• Assign Credit Control Area

ΠAssign a Credit Control Area
to a Company Code (txn OB38)
ΠAssign a Credit Control Area to
a Sales Area directly (txn OVFL)
40
Determine Credit Control Area

• Assign the permitted company

codes to a Credit Control Area
(txn OBZK)
• Other ways the system can
derive a Credit Control Area:
ΠCustomer master (txn XD02)
ΠCompany Code assigned
to the Sales Organization
(txn OVX3)
ΠUser Exits (txn SE37) to
determine Credit Control Areas
• Simplifying the process is key!

41
FI Settings for Credit Management

• Create and read an A/R

summary
ΠPerformance optimization
ΠReporting
ΠDistributed scenario
• Define and assign risk
categories (txn OB01)
ΠLow, Medium, High,
Very High, and New

42
 Additional FI Settings

• Configure Special G/L

(transaction OBXY)
ΠRelevant for Credit
Management
f Down payment
f Down payment
request
• Alternative
Reconciliation Account
Œ “Safe” Receivables
in Japan
ΠDeferred Revenue

43
SD Settings for Credit Management

• Mostly located under

Basic Functions of SD
configuration in the IMG
• Additional configurations
are found elsewhere in SD

44
Automatic Credit Control

• Define Credit Groups

ΠSales Order, Delivery,
Goods Issue, etc.
• Assign Sales Document
Type (OVAK/OVAD)
ΠRelevant for automatic
credit control
ΠAssign credit group
• Assign Sales Document
Item Category (VOV7)
ΠCredit active
ΠRelevant to Billing

45
Automatic Credit Control (cont.)

• Define Automatic Credit Control (txn OVA8)

ΠBy Credit Control Area, Risk Category, and Credit Group
ΠUser exit to control transactional credit check
f Credit card transactions, prior to version 4.7

ΠReleased document is rechecked if:

f Current value greater than approved value + deviation %, or

f Current date later than prior release date + tolerance days

ƒ This improves system performance and efficiency

46
Automatic Credit Control (cont.)

• Define Automatic Credit Control (txn OVA8) (cont.)

ΠType of Checks: Static, dynamic, document value, etc.
ΠSystem Reaction: No message, warning, error
ΠStatus/block: Controls follow up actions
ΠCredit Horizon by month can deviate exposure by up to 30 days

47
Additional SD Settings

• Set up SIS Info Structure S066 Update Parameters

(txn OMO1)
ΠSynchronous update, by certain time intervals
f Any other update will lead to errors

• Calculate credit price

ΠDefine SD pricing procedures (V/08)
f Subtotal “A” to determine the Credit Price (KOMP-CMPRE)

f Credit Price = Net Value plus Sales Tax

f Updated in field VBAP-CMPRE

48
Subsequent Functions for SD Documents

• SD Requirements and Formulas (VOFM)

• Requirements were passed for MRP-controlled materials
Œ Set “Fixed date and qty” – refer to SAP Note 744305

Don't
Forget

Source: SAP
49
Credit Check for Service Orders

• Credit Limit Checks for Service Orders (txn OIOL)

ΠSales Document Type and DIP Profile
ΠType of checks and Credit Group
f No check
f Manual check by function key
f Automatic check
ƒ At release of Service Order, or input of Sold-to

50
What We’ll Cover …

• What is SAP R/3 Credit Management?

• Key capabilities of Credit Management
• Credit Check vs. Credit Update
• Credit Management configuration
• Tables, user exits, and reports
• Troubleshooting techniques
• Wrap-up

51
Tables and User Exits

• Tables
ΠKNKK Customer master credit control area data
ΠV_VMVAH Credit blocked/released SD documents
• User Exits
ΠEXIT_SAPFV45K_001 Determining the credit control area
ΠLVKMPFZ1 Subroutines for user credit check user exit 1
ΠLVKMPFZ2 Subroutines for user credit check user exit 2
ΠLVKMPFZ3 Subroutines for user credit check user exit 3

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Reporting

• R/3 provides a large number of reports and tools that

contain a wide range of information
ΠCredit Management Reports
ΠOthers from related areas
• Master Data
ΠRFDKLI41 Credit master list (single customer)
ΠRFDKLI43 Credit master list (multiple customers)
ΠRFDKLI10 Customers with missing credit data
ΠRFDKLI30 Credit limit overview (short)
ΠRFDKLI40 Credit limit overview (extensive)
ΠRFDKLI50 Credit limit data mass change
ΠRFDKLIAB Display changes to Credit Management

53
Transaction Data

• RFDKLI42 Early warning list

• RVKRED01 SD documents worklist
(blocked/released: VKM1 ~ VKM5)
• RVKRED06 New credit check for blocked SD docs
ΠSchedule to run after incoming payment program
• RVKRED08 Check sales orders that reach horizon
ΠSchedule to run at the start of a credit period
• RVKRED09 Check SD documents in background
ΠReorganize after Risk Category has been changed
• RFDKLI20 Recreation of credit data after
organizational changes
ΠEvery time organizational elements have changed

54
What We’ll Cover …

• What is SAP R/3 Credit Management?

• Key capabilities of Credit Management
• Credit Check vs. Credit Update
• Credit Management configuration
• Tables, user exits, and reports
• Troubleshooting techniques
• Wrap-up

55
Errors and Likely Causes

• Incorrect credit update leads to incorrect credit

check results
ΠSIS information structures capture unrealistic values
ΠProblem is intermittent, exact cause is unknown
Œ Can’t replicate the error in development
• Likely cause
ΠNewly introduced or changed business processes
f Incorrect or inadequate configuration
ΠNewly implemented or changed SD user exits Caution
f Subsequent functions and copy control
ΠChanged credit update methods
f Order-based (group 18) to delivery-based (group 15)
ΠChanged SD documents in unacceptable way
56
Do Your Due Diligence

• Check your configuration

ΠRefer to last section on configuration
ΠRefer to SAP Note 18613, Checklist for Credit Management
• Consider all possible business scenarios relevant to
Credit Management
• Test each scenario and analyze the results
ΠDeactivate and reactivate SD user exits to compare the results
• Follow the sequential troubleshooting procedure
shown on the slides that follow

57
Sequential Troubleshooting Procedure

Execute RVKREDSP to lock key SD tables

Random
against transactions: VBAK, LIKP, and VBRK
Update
Errors
Execute nightly RVKRED07 or RVKRED77
to reorganize SD data after update errors

Continue
Continueto
toobserve
observethe
thedata
data
Execute
ExecuteRVKRED88
RVKRED88totosimulate
simulatedata
datareorganization
reorganization
Compare
Comparewith
withactual
actualcredit
creditexposure
exposuredata
data

Yes Issue
More
Discrepancies? Contact SAP
Yes

58
Sequential Troubleshooting Procedure (cont.)
Execute RVKREDH1 to capture documents
changed/created since reorganization
that may be the source of error

Execute program CHECK_CM to analyze

credit management process
for problematic SD documents

Execute transaction MCVR to check

SIS updates (S066 and S067)

Deactivate and reactivate

SD user exits to compare the results

Configuration User Exits SAP Bug

59
A Great Program for Troubleshooting: Check_CM

60
A Great Program for Troubleshooting: Check_CM (cont.)

61
What We’ll Cover …

• What is SAP R/3 Credit Management?

• Key capabilities of Credit Management
• Credit Check vs. Credit Update
• Credit Management configuration
• Tables, user exits, and reports
• Troubleshooting techniques
• Wrap-up

62
Resources

• Help.sap.com (ECC 6.0)

ΠFollow Financials > Financial Accounting > Accounts
Receivable > Credit Management/Risk Management (FI-AR-CR)
ΠFollow Logistics > Sales and Distribution > Credit and Risk
Management (SD-BF-CM)
• SAP Notes
Π18613 - Checklist for Credit Management
Π425523 - Collection of consulting notes: Credit update
Π425483 - Consulting note collection: Credit checks
Π396338 - Problems in credit management: Analysis help
Π381685 - Analysis of the credit-relevant data of a document
Π377165 - Update open credit values for credit management

63
7 Key Points to Take Home

• SAP Credit Management is both an FI and SD function

• Credit Update <> Credit Check
• Grasp how Credit Management should influence
subsequent functions
• Credit Management is for much more than just regular
SD processes – consider opportunities with customer
consignment and service management, etc.
• Periodic house cleaning activities are important
• If you’re just starting your Credit Management
configuration, take your time
Œ It’s very difficult to correct the data after go-live
• Contact SAP, but do your due diligence to troubleshoot
64
Your Turn!

How to contact me:

Sharon (Qian) Tang
Sharon.Q.Tang@Gmail.com
65