Credit Management Documentation

Credit Management Definition

Most enterprises extend credit to their customers. This literally means, selling
their goods and collecting money at a later point of time. The amount of credit extended
is determined by the customers credit worthiness (customers credit limit). The number
of days for which credit is extended is based on the payment terms associated with that
transaction.
i.e.,If the customers credit limit is 20,000 and if he creates an order worth 16,000 with
payment terms of Net 45 2% i.e., if money is paid within 45 days of purchase, the
customer will get 2% discount),he needs to pay (16,000 2% = 15600).

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Purpose of Credit Management

Credit Management enables you to minimize the credit risk yourself by specifying
a specific credit limit for your customers. Thus you can take the financial pulse of a
customer or a group of customers, identify warning signs earlier, and enhance credit
related decision making.

Features
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 : sales order
entry, delivery, goods issue) the system carries out the checks.
During order processing the credit representative automatically receives
information about a customers 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.

Types of Credit Management

Static Credit Check
Dynamic Credit Check
Static Credit Limit Determination: - it is a Standard (T.code FD32)
Checking Group + Risk Category + Credit Control Area
Checking Groups:
Types of Checking Groups
01) Sales
02) Deliveries
03) Goods Issue
At all these 3 levels order can be blocked.
Risk Category: Based on the risk category the company decide how much credit has to
give to the Customer.
High Risk (001): Low Credit
Low Risk (002): More Credit
Medium risk (003): Average Credit

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Dynamic Credit Check:

is a Developed program (T.code ZCRLIMT)

Pre Requisites:
1. Policy to be defined based on the Customer type and type of incentive
which is to be deduced by the customer when the time of enrolling to be
maintained in the table ZCUST _POLICY.
2. Customer to be maintained in the table ZHEAD_POLICY.
3. Customers Basic Credit, Standard Deduction , Recommended Cycle time
for the credit calculation, Opening balance Dispute if any
Calculation for Credit Limit
Credit Limit = Policy Incentive for the Credit limit running period +
(Basic Credit Limit
Customer) +

No of Recommended Cycle time for the

(Standard Deduction if any X

No. of Report Running Days) +

Un settled opening Balance

Terms Used for Calculation

Policy Incentive = Agreed Deduction with the customer ( Based on the
Masters the incentives are calculated for the Respective Customers)
Basic Credit Limit (In Rs.)= Sale Value Per day X Variation Leverage
Recommended Cycle Time (in days) = Logistical Cycle Time + Credit
terms
Standard Deduction (in Rs.) = (i.e the approx. Sub dealer incentive / day)

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Screen Shots For Masters

1. Table : ZHEAD_POLICY

2. Table : ZCUST_POLICY

3. ZSTDAMT_POST

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Screen Shots For Transactions

T.code ZCRLIMIT

Report Screen

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