SAP Sales & Distribution

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S/4 HANA SD

Delivery Processing

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More Functions (8)

Credit and Risk Management

1. Overview of S/HANA Credit Management Process flow.
2. an Example of a Credit Limit possibility.
3. a Simpler example of Credit Limit setup.

Credit Limit for Customer

Incoming Sales Order

Exceed Credit Limit

Reject Sales Order

Create Sales Order with

Credit Blocked Status

Credit Analyst

Review Blocked Sales Orders

Approval Work Flow

Approve the Credit Limit and Release Credit Block

Reject and not allow Sales Order Creation

Reject

Accept

Accept

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an Example

Credit Management Process Flow in

S/4 Credit Mgmt

See step explanation in the next slide

• Credit Check can be setup with 2 checks
• by Evaluating Credit Worthiness of the Customer from Internal (History of Performance) or External Sources.(Credit Agencies) to determine the Credit Score of 0 - 100 and with to determine the Risk Class (eg: Risk Classification 90 - 100 = Low Risk Customer, 0 - 30 = High Risk Customer).
• by Credit Limit amount (this example will be overview the Credit Limit amount method of Credit Limit check)
• Incoming Sales Orders are subjected to Credit Limit Check + other information like Credit Score (Risk Class) and other information.
• The Result if Exceed Credit Limit is to either REJECT the Sales Order creation OR Allow Sales Order with Credit Block status.
• Credit Analyst performs an evaluation of the Sales Order with Credit Block to decide if to REJECT to accept the Sales Order for further processing.
• Step 4 is done with Approval Workflow in the Company.
• The Approval Workflow may result in either a final REJECT of the Sales Order or final APPROVAL (Release Credit Block) of the Sales Order for further processing.

CHECK RULES are configurable with single or multi-step check (or in this case Credit Score + Credit Limits)

• Overview of S/HANA Credit Management Process flow.
• an Example of a Credit Limit possibility.
• a Simpler example of Credit Limit setup.

Customer

Subsidiary 1

Credit Limit

$500,000

Customer

Subsidiary 2

Credit Limit

$300,000

Product Divisions 1

Credit Limit

150,000

Product Divisions 2

Credit Limit

200,000

Customer

HQ

Credit Limit

700,000

Sales Organization 1 DC 1

Credit Limit

400,000

Sales Organization 2 DC 2

Credit Limit

400,000

Product Divisions 1

Credit Limit

300,000

Product Divisions 2

Credit Limit

300,000

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2

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See step explanation in the next slide

• Customer Subsidiary 1 is given a Credit Limit of $500,000 where Sales Orders total for it cannot exceed that amount. However, at the same time Customer Subsidiary 1 is also being given (set) with Credit Limit for Sales Order from Product Division 1 and 2 respectively with $300,000 each. In this case if the Customer have Ordered $300,000 from Product Division 1, then the maximum amount allowed for Sales Orders from Product Division 2 can only be $200,000 (and not $300,000) as the max Credit Limit for that Customer is only $500,000.
• Another Customer Subsidiary 2 is given a Credit Limit of $300,000 of Total Sales Orders amount. AND with the same logic of this Customer Subsidiary 2 being given a separate Credit Limit of $150,000 from our Product Division 1 and $200,000 from our Product Division 2. IN this case, for example if Customer Subsidiary 2 already order $140,000 from Product Division 1 then oly a max of $160,000 is allowed for Sales Orders for Product Division 2.

• Customer Subsidiary 1 and 2 are branches of a Customer HQ, the Customer HQ can be set with a Global Credit Limit for eg: $700,000. In this case, if Customer Subsidiary 1 already issued Sales Orders of $450,000 then the maximum Sales Order from Customer Subsidiary 2 can only be $250,000 (and no longer $300,000 Credit Limit set for Customer Subsidiary 2).
• Another dimension of Credit Limit setup is at the Sales Organization + Distribution Channel Channel. Note Credit Limit for Customer HQ from Sales Org 1 DC 1 AND from Sales Org 1 DC 2 are $400,000 respectively. BUT since the Credit Limit (regardless of Sales Area) given to Customer HQ is only $700,000. Then both these Credit Limits will also be respected.

Customer

Subsidiary 1

Credit Limit

$500,000

Customer

Subsidiary 2

Credit Limit

$300,000

Product Divisions 1

Credit Limit

150,000

Product Divisions 2

Credit Limit

200,000

Customer

HQ

Credit Limit

700,000

Sales Organization 1 DC 1

Credit Limit

400,000

Sales Organization 2 DC 2

Credit Limit

400,000

Product Divisions 1

Credit Limit

300,000

Product Divisions 2

Credit Limit

300,000

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2

3

3

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Customer HQ

XD01

Customer Subordinate

XD01

Don’t set Credit Limit BUT enter the Main Credit Account which is the Customer HQ

Customer HQ

XD01

Set CREDIT Limit $$$$

Credit Master

FD32

Credit Master

FD32

In ECC, trx code FD32 is used to set the Credit Limits,

in this case for the Customer Subordinate's FD32 will NOT set the Credit Limit BUT will enter the Customer HQ as the Credit Account.

BUT on the Customer HQ’s FD32 Credit Master will set the Credit Limit amount.

In this case, when create Sales Order for Customer Subordinate, due to the above setting, the Credit Limit of the Customer HQ will be used as a reference Point for the Credit Limit check for the Customer Subodiate’s Sales Order.

(there are limitations in ECC)

in S/4HANA, FD32 Credit Master for Customer based on CCA (Credit Control Area) is NOW obsolete

Customer

Subsidiary 1

Credit Limit

$500,000

Customer

Subsidiary 2

Credit Limit

$300,000

Product Divisions 1

Credit Limit

150,000

Product Divisions 2

Credit Limit

200,000

Customer

HQ

Credit Limit

700,000

Sales Organization 1 DC 1

Credit Limit

400,000

Sales Organization 2 DC 2

Credit Limit

400,000

Product Divisions 1

Credit Limit

300,000

Product Divisions 2

Credit Limit

300,000

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2

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S/4 config for Credit Check

Customer

HQ

BP

Credit Check Logic is via CHECK RULE

Customer Subordinate

BP

BP Role

UKM000

Credit Limit $$$$

Credit Segment

0001

BP Role

UKM000

Credit Check RULE

Credit Segment

0001

Set Relationship

S/4 config for Credit Check

Customer

HQ

BP

Credit Check Logic is via CHECK RULE

Customer Subordinate

BP

BP Role

UKM000

Credit Limit $$$$

Credit Segment

0001

BP Role

UKM000

Credit Check RULE

Credit Segment

0001

Set Relationship

In S/4HANA

XD01 is replaced with BP

FD32 is obsolete

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To setup Credit Check Logic, there is now a configurable CHECK RULE.

Check rule settings is where the system determines the steps which are taken to check the creditworthiness of a customer when a sales order is created. This may include the static check of the credit limit or a check of the highest dunning level, some check steps provided in standard SAP are

• 010: Statistical Check of Credit Limit Utilization
• 020: Check for Maximum Document Value
• 030: Dynamic Limit Check with Credit Horizon
• 100: Check for Maximum Dunning Level
• 110: Check Age of Oldest Open Item
• 120: Check Payment Behavior Indexes
• 130: Check for Overdue Open Items
• Etc. where SAP Add-on in future versions.

S/4 config for Credit Check

Customer

HQ

BP

Credit Check Logic is via CHECK RULE

Customer Subordinate

BP

BP Role

UKM000

Credit Limit $$$$

Credit Segment

0001

BP Role

UKM000

Credit Check RULE

Credit Segment

0001

Set Relationship

In S/4HANA

The Credit Control Area Org Unit is still valid BUT the Main Credit Limit and Check RULES setting is not at the new Org Unit called “CREDIT SEGMENT”.

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The credit segment is an organizational unit of SAP Credit Management whose attributes can be freely defined, for example, by product types or business areas. Example. Subdivision of the relevant business transactions in a telecommunications company according to the following credit segments: Landline. Internet. Mobile.

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The Credit Control Area is still the MAIN Org Unit that LINKS the

• Credit Segment
• Sales Area
• Business Partner

Main Credit Segment 0000

Credit Segment 1020

Credit Segment 1030

Credit Control Area

1020

Credit Control Area

1010

Sales Order #2

Sales Order #1

Sales Order #3

Sales Order #4

Credit Mgmt Data

Credit Mgmt Data

Credit Mgmt Data

Credit Mgmt Data

Company Code 1000

Sales Area�

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Distribution Channel

10

Sales Organization

1010

Division

00

Material

Credit Segment 1010

Credit Control Area

1011

Credit Control Area

1030

1:n

n:1

1:n

S/4 same as ECC where the Credit Control Area is assigned to the Company Code

“Credit Segment” is a new user-defined Segment that can be assigned to 1 or more (1:n) Credit Control Area.

1 or more Sales Area can be assigned to a Credit Control Area

Credit Control Area (CCA)

1010

Credit Mgmt Data

$$$$

Company Code 1000

Sales Area�

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Distribution Channel

10

Sales Organization

1010

Division

00

Credit Segment 1010

BP

Sales Order

Sales AREA

Sales Area�

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Distribution Channel

10

Sales Organization

1010

Division

00

1:n

n: 1

1:n

The Credit Segment assigned to the BP is where the Credit LIMIT to set in S/4HANA

BUT because the Credit Segment is assigned to the CCA and subsequent selected Sales Areas are also assigned to the CCA.

Therefore, when a Sales Order is created for the BP for a particular Sales Area, the BP’s Credit Segment Credit Limit can be checked if applicable for checking for that Sales Order’s Sales Area !!!! (this can be quite complicated and careful assignment relationship between Credit Segment -- CCA -- Sales Area to achieve the desired Credit Limit check case for what Sales Areas).

S/4 config for Credit Check

Customer

HQ

BP

Credit Check Logic is via CHECK RULE

Customer Subordinate

BP

BP Role

UKM000

Credit Limit $$$$

Credit Segment

0001

BP Role

UKM000

Credit Check RULE

Credit Segment

0001

Set Relationship

In S/4HANA

The Credit Control Area Org Unit is still valid BUT the Main Credit Limit and Check RULES setting is not at the new Org Unit called “CREDIT SEGMENT”.

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The credit segment is an organizational unit of SAP Credit Management whose attributes can be freely defined, for example, by product types or business areas. Example. Subdivision of the relevant business transactions in a telecommunications company according to the following credit segments: Landline. Internet. Mobile.

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The Credit Control Area is still the MAIN Org Unit that LINKS the

• Credit Segment
• Sales Area
• Business Partner

the BP Role UKM000 for the Credit Segment’s Credit Limit

Credit Segment

Check RULE

Credit Limit

S/4 config for Credit Check

Customer

HQ

BP

Credit Check Logic is via CHECK RULE

Customer Subordinate

BP

BP Role

UKM000

Credit Limit $$$$

Credit Segment

0001

BP Role

UKM000

Credit Check RULE

Credit Segment

0001

Set Relationship

In S/4HANA

• Of course, the example depicted is not necessarily applicable as the Credit Limit maybe just to a Customer only AND not necessarily checking Credit Limit set in another Customer (eg: Customer HQ) in the left panel example.
• But this is possible is S/4 where the Credit Limit is set is Customer HQ so that Customer Subordinates Sales Order’s check against that Credit Limit at the Customer HQ.
• the BP for customer achieve this via the feature “Set Relationship “ between the Customer HQ to the Customer Subordinate.

Credit Segment

In BP, via the Relationship Category “TUKM001”, the Customer Subsidiary can be set as a “Subordinate Credit Account” the the Customer HQ

• Overview of S/HANA Credit Management Process flow.
• an Example of a Credit Limit possibility.
• a Simpler example of Credit Limit setup.

Credit Control Area

1010

Credit Limit

$ 50.000

Sales Area 1

Credit Segment 1010

Sales Area 2

BP

Credit Control Area

1020

Credit Segment 1020

Sales Area 3

Sales Area 4

Credit Limit

$ 100.000

This example is simpler with the Credit Limit for just the BP (not HQ), but for 2 Credit Segments with the intention to check Sales Orders for different Sales Area combinations

Credit Control Area

1010

Credit Limit

$ 50.000

Sales Area 1

Credit Segment 1010

Sales Area 2

BP

Credit Control Area

1020

Credit Segment 1020

Sales Area 3

Sales Area 4

Credit Limit

$ 100.000

Any Sales Order for the BP for Sales Area 1 and Sales Area 2 will be checked against Credit Limite $50,000 at Credit Segment 1010 in the BP Role UKM000

Credit Control Area

1010

Credit Limit

$ 50.000

Sales Area 1

Credit Segment 1010

Sales Area 2

BP

Credit Control Area

1020

Credit Segment 1020

Sales Area 3

Sales Area 4

Credit Limit

$ 100.000

Any Sales Order for the same BP for Sales Area 3 and Sales Area 4 will be checked against Credit Limit $100,000 at Credit Segment 1020 in the BP Role UKM000