Credit and Receivables Risk Exercise

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Credit and Receivables Risk Management

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Exercise Introduction

You have decided to implement the Credit Management function in SAP to better manageAccounts Receivable to minimize the risk from customer default while making sure that the

impact on sales due to credit blocks is reasonable and minimized.

Some configuration settings have already been made to allow for credit management. Additionalsettings must be made, along with master data entries to complete the implementation of creditmanagement. We will make those entries for ##Health Express, then check to see that theyfunction.

1. Set Updating for Sales Documents

First, we need to define how different transactions affect what our customer owes us, or theTotal Commitment. To do this, follow the menu path:

ToolsZCustomizingZIMGZEdit ProjectClick on

Enterprise StructureZDefinitionZFinancial AccountingZDefine Credit ControlArea (click on the icon)

Select your credit control area, ##FS, then click on the details icon ( ) to get the followingscreen:

Select your credit control area,then click on the details icon


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Enter 000012 for the Update group andK1 for the FiscalYrVariant, then click on the save icon

( ). The update group defines how documents in the sales process change theTotalCommitment. With update group000012:

Sales orderso Increase the open order value

Deliverieso Reduce the open order valueo Increase the open delivery value

Billing documentso Reduce the open delivery valueo Increase the open billing document value

Financial accounting documentso Reduce the open billing document valueo Increase the open items

Click on the back icon ( ) twice to return to the SAP Reference IMG

( ).

Enter 000012 for Update group

Enter K1 for FiscalY rVariantThen click on the save icon


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2. Create Risk Category

The credit risk category will control the credit review process. Different credit risk categories

can be created so that different procedures can be used with different groups of customers. Tocreate a risk category, follow the menu path:


Financial AccountingZAccounts Receivable and Accounts PayableZCreditManagementZCredit Control AccountZDefine Risk Categories ( )

Which will bring up the following screen:

Click on theNew Entries icon, which will bring up the following screen:

Click on theNew Entries icon

Add the entry:Z## ##FS ##Standard Risk Category


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Add Risk CategoryZ##for credit control area##FS with name##Standard Risk Category.Click on the save icon ( ),then click on the back icon ( ) twice to return to the SAP Reference

IMG ( ).

3. Maintain Automatic Credit Control

With Automatic Credit Control, the SAP system can be configured to perform credit checks torun at different times during order processing. It is possible to define a system response for eachcredit check (for example, warning message). In the case of a warning message, a block can beset in the credit status of a document so that further processing cannot continue until the creditproblem is corrected.

To configure Automatic Credit Control, follow the menu path:


Sales and DistributionZBasic FunctionsZCredit Management/Risk ManagementZCredit ManagementZDefine Automatic Credit Control ( )

Which will produce the following screen:

Click on theNew Entries icon, which will produce the following screen:

Click on theNew Entries icon


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Make the following entry:

EnterCCA RkC CG Credit control##FS Z## 01 Standard Credit Check

Then click on enter icon ( ). The currency value will change toUSD:

To define the Automatic Credit Checking procedures, make the following entries:

EnterCCA RkC CG Credit control##FS Z## 01 Standard Credit Check

Then click on enter ico

Currency changes toUSD


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Make the entries shown above, then click on the save icon ( ),then click on the back icon ( )

twice to return to the SAP Reference IMG ( ).

Check Dynamic

Enter ReactionC (warning plus value by which credit limit is exceeded)Check Status/Block (block further processing)Enter 2 for Horizon (2 months for dynamic check)


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4. Set Customer Credit Limit

With the configuration of the Automatic Credit Check complete, the credit limit can beestablished for ##Health Express. Setting the credit limit for a company involves a change to

Master Data, which is done from theSAP Easy Accessmenu paths. Click on the back icon( ) until you reach theSAP Easy Accessscreen, then follow the menu path:

ZLogisticsZSales and DistributionZCredit ManagementZMaster DataZChangewhich will bring up the following screen:

To find customer ##Health Express, click on the customer field, then click on the search iconto call up the following search window:

Click on the customer field, thenclick on the search icon


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After entering##for the search term and clicking on the enter item, you should get a list ofcustomers:

Double-click on##Health Expressto select it, then make the following additional entries:

Enter ##for search term,then click on the enter icon

Double-click on##Health Expressto select it


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Make/confirm the entries shown above, click on the enter icon ( ) and the following screen willappear:

Confirm that the customer number hasbeen entered from the Search processEnter ##FS for Credit control areaSelect Status, then click enter


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Enter 1000 for Credit limit andZ##for Risk Category, then click on the save icon ( ). TheSAP ERP system should now be configured with a credit limit of$1,000for Health Express.Next, we need to test the configuration. Click on the back icon ( ) until you reach theSAPEasy Accessscreen

5. Create Sales Order

To test the credit check, first we will create a sales order that will be within the $1,000 creditlimit for ##Health Express. To create the sales order, follow the menu path:

ZLogisticsZSales and DistributionZSalesZOrder ZCreatewhich will produce the following screen:

Message notifying us that we have notmaintained a credit limit for ##Health Express,which is why we are in this transaction!

Enter 1000 for Credit limit andZ##for Risk Category, then

click on the save icon


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Make the following entries, then click on the enter icon ( ) and the following screen willappear:

Enter:Order TypeORSales organization##FSDistribution channel DIDivisionSBThen click on the enter icon


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Enter the information shown above, then click on the enter icon ( ). Next, follow the pull-

down menu pathEnvironmentPartnerDisplay credit account:

Search for ##Health ExpressEnter PO Number HXP##Search for ##NRG-BEnter 2 for Order quantityThen click on the enter icon


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From theCreate Sales Order screen, we can check the customers credit status:

Follow pull-down menupath to review credit limit


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Because we have not saved the sales order yet,##Health Expresshas all of its $1,000 creditlimit available. Click on the back icon ( ) to return to theCreate Sales Order screen, thenclick on the save icon ( ) to save the sales order. When the sales order has been saved, click onthe back icon ( ) until you are back at the SAP Easy Access screen.


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6. Review Customer Credit Limit

Now that the sales order has been saved, it should be reflected in the customers available credit.To check this, follow the menu path:

ZLogisticsZSales and DistributionZCredit ManagementZMaster DataZChangewhich will bring up the following screen:

Confirm the information required for##Health Express, then click on the enter icon ( ). Therevised credit limit data will be displayed:

The customer number for ##HealthExpressshould be entered as a defaultvalue by the SAP system. Confirm thecredit control area and status setting,then click on the enter icon


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Note that the sales order has used 59% of##Health Expressscredit limit. Click on the backicon ( ) until you are back at the SAP Easy Access screen.

7. Create Sales Order over the Credit Limit

If##Health Expressorders another 2 cases of NRG-B bars, this should trigger the AutomaticCredit Check logic as it would cause##Health Expressto exceed its credit limit. To checkthis, create another sales order as in Step 5. To do this, follow the menu path:

ZLogisticsZSales and DistributionZSalesZOrder ZCreateEnter the following information:

Then click on the enter icon ( ):

Note impact of sales order on customers credit

Order TypeORSales organization##FSDistribution channel DIDivisionSB


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Enter the information shown above and click on the save icon ( ), and the following messagewill pop-up:

This is a result of the settings we made for Automatic Credit Control in Step 3. We set thereaction toC, which meant that we would get a warning message plus information as to theamount by which the order exceeded the credit limit. Because we specified a warning message,we can save the sales order, but it will be blocked from further processing until the credit limitproblem is resolved. If we had specified an error message for the reaction, the order would notbe able to be saved. Click on the enter icon ( ) on the message to save the order, then click onthe back icon ( ) until you are back at the SAP Easy Access screen.

Search for ##Health ExpressEnter PO Number HXP##ASearch for ##NRG-BEnter 2 for Order quantityThen click on the enter icon


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8. Review Customer Credit Limit Again

Now that the second sales order has been saved, we should check how it appears in thecustomers available credit. The menu path for credit management is:

ZLogisticsZSales and DistributionZCredit ManagementZMaster DataZChangeAfter confirming the customer data, you can review##Health Expressscredit:

Note that the amount of credit used has not changed! While we saved a second order for ##Health Express, it is blocked, and as blocked orders cannot be processed further, the SAP ERPsystem does not count them against the customers credit limit.

9. Review and Release the Blocked Sales Order

Usually an important task in credit management is to review all blocked orders and decide howthey should be handled. In a reasonably large company, this might be a task performed everyfew hours.

To review the blocked sales order, follow the menu path:

ZLogisticsZSales and DistributionZCredit ManagementZExceptionsZBlockedSD documents


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which will produce the following screen:

Make sure that at least##FS is entered for the Credit control area, then click on the execute icon( ). This will produce the following report:

We will release this sales order for further processing. To do this, select the order by clicking thecheck box, then click on the release icon ( ), then click on the save icon ( ). This willproduce the following message:

Credit control area##FS and the accountnumber for ##Health Expressshould beentered by default. Only##FS is required tofind the blocked sales order.Click on the execute icon to list the blockedsales orde

Select blocked sales order, click on release,then click on the save icon


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Use the back icon ( ) until you are back at the SAP Easy Access screen, then recheck the creditlimit using the menu path:

ZLogisticsZSales and DistributionZCredit ManagementZMaster DataZChangeThe just-released sales order is now reflected in the Customers credit limit status:

Click on the back icon ( ) until you are back at the SAP Easy Access screen


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10. Create Delivery

As a sales order is processed, its changing status is visible in Credit Management. To see this,we will process one of the sales orders further. To create a delivery for one of##Health

Expressssales orders, follow the menu path:

LogisticsZSales and DistributionZShipping and TransportationZOutboundDeliveryZCreateZSingle DocumentZWith reference to Sales Order


Enter ##SP for shipping point and enter a sales order, then click on the enter icon ( ) to producethe following screen:

Enter ##SP for shipping pointand either use the default order orsearch for a##Health Expresssales order, then click on enter


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Note that the sales value of $1,180 is made up of an open sales order and an open delivery. Clickon the enter icon ( ) to close this window, then use the back icon ( ) until you are at the SAP

Easy Access screen.

11. Pick Order and Post Goods Issue

To further process the sales order, we can perform the picking and post the goods issue in onestep. To do this, follow the menu path:

LogisticsZSales and DistributionZShipping and TransportationZOutboundDeliveryZChangeZSingle Document


Verify that the delivery number is entered, then click on the enter icon ( ) to get the followingscreen:

The sales value is madeup of an open sales orderand an open delivery

The delivery number shouldbe entered automatically. Ifnot, use the search to find it.Then click on the enter icon


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Enter 300 for SLoc (storage location), 2 for Picked Qty, then click on thePost goods issueicon

( ).

12. Create Billing Document

To create an invoice for the sales order, follow the menu path:

LogisticsZSales and DistributionZBillingZBilling DocumentZProcess BillingDue List


Click on thePickingtab,Enter 300 for SLoc (storage location)Enter 2 for Picked QtyThen click on thePost goods issue icon.


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Enter ##FS for the Sales Organization, then click onDisplayBillL ist:

Click on block at end of line to select the delivery, then click on Collective billing document.When processing the delivery is complete, the color of the line will change:

Enter Sales Organization##FSClick onDisplayBillL ist

Click on block at end of line to select, and then click on Collective billing document


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Use the back icon ( ) until you are at the SAP Easy Access screen, then check##HealthExpressscredit status using the menu path

ZLogisticsZSales and DistributionZCredit ManagementZMaster DataZChange

As one of##Health Expressssales order has now been processed and invoiced, it shows up inthe Accounts Receivable category.

Processed sales order isnow in the receivablescategory


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13. Receive payment from the Customer

When we receive payment from the customer, it should free up some of the credit limit. To testthis, receive payment from the customer by following the menu path:

AccountingZFinancial AccountingZAccounts ReceivableZDocument EntryZIncoming Payments

Which will produce the following screen:

Enter the information shown above, then click on Process open items. This will produce thefollowing screen:

Enter todays datefor document dateMake sure##FS is entered for companycode andUSD is entered for Currency/rateEnter 100000 for Account under bank dataEnter 590 for AmountSearch for ##Health ExpressThen click onProcess Open I tems


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Double-click on theUSD Grossamount to assign the payment to the open invoice, then click onthe save icon ( ) to post the payment.

Double-click on theUSD Grossamountuntil theNot assigned quantity is zero.

This assigns the payment to the openinvoice. Click on the save icon


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Click on the back icon ( ), which will produce the following pop-up window:

ClickYes, and you will return to the SAP Easy Access screen.

Check ##Health Expressscredit status one last time using the menu path

ZLogisticsZSales and DistributionZCredit ManagementZMaster DataZChangeClick on the enter icon ( ) to get to the following screen:

Note that paying the invoice has cleared the Receivables item.

To generate a report on this customer, follow the pull-down menu path:

EnvironmentReportingCredit overview

ClickYes


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Click on the execute icon ( ) to generate the overview report:

To complete this assignment, you need to print a copy of this report to hand in. To do this, clickon the print icon ( ) and you will get the following screen:

Click on the execute icon to generate the overview report


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After clicking on the continue icon you should be returned to the Document flow screen and amessage like the following should be displayed at the bottom of the screen:

The SAP ERP system will also open window that will contain details of the print job:

Be sure to neatly print your name on a printoutof the Credit overview report to hand in.

Click on theEnter (continue) icon

Credit and Receivables Risk Exercise

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Transcript of Credit and Receivables Risk Exercise