Credit and Risk Management Overview and Configuration in SAP SD

In SAP SD, credit and risk management is a key process that helps businesses control the credit limits extended to customers, manage risks, and ensure that customers are paying for goods and services on time. This module allows businesses to set up credit limits, monitor credit exposure, and take appropriate actions if customers exceed their credit limits.

What is Credit and Risk Management in SAP SD?

Credit Management: Credit management in SAP SD ensures that customers do not exceed their assigned credit limit. It is used to monitor the customer's creditworthiness and assess whether they are allowed to continue purchasing goods or services on credit. SAP provides functionality to define credit limits, evaluate credit exposure, and take actions based on credit risk.

Risk Management: Risk management in SAP SD focuses on identifying, analyzing, and mitigating potential risks associated with a customer’s payment behavior. This includes analyzing overdue invoices, monitoring the customer’s financial stability, and taking corrective actions to reduce potential losses.

Step-by-Step Configuration of Credit and Risk Management in SAP SD

Step 1: Define Credit Control Area

The credit control area is a key element in credit management. It defines the organizational unit responsible for managing customer credit. A credit control area can be assigned to one or more company codes.

To define a credit control area, follow these steps:

  1. Go to transaction OVFL (Define Credit Control Area).
  2. Click on New Entries to create a new credit control area.
  3. Enter the credit control area code (e.g., 1000) and provide a description.
  4. Assign the company code(s) to this credit control area.
  5. Save the credit control area.

Step 2: Define Risk Categories

Risk categories define how customers are classified in terms of their risk. Risk categories allow businesses to group customers according to their credit risk level.

To define risk categories, follow these steps:

  1. Go to transaction FD32 to maintain customer credit management information.
  2. Click on Risk Category to define risk categories.
  3. Enter a risk category code (e.g., R01) and provide a description (e.g., Low Risk, High Risk, etc.).
  4. Save the risk category.

Step 3: Set Up Credit Limits

Credit limits are set for each customer, and they determine the maximum amount of credit a customer can use before further sales orders are blocked. Credit limits can be defined based on various criteria such as customer, sales area, and credit control area.

To set up credit limits, follow these steps:

  1. Go to transaction FD32 (Maintain Customer Credit Management).
  2. Select the customer for whom you want to define the credit limit.
  3. Enter the credit control area (e.g., 1000) and select the appropriate risk category.
  4. Enter the credit limit amount in the Credit Limit field (e.g., $10,000).
  5. Save the customer credit limit information.

Step 4: Set Up Credit Exposure

Credit exposure refers to the total value of open orders, deliveries, and invoices that a customer has, which count toward their credit limit. Managing credit exposure ensures that customers do not exceed their available credit.

To monitor credit exposure, follow these steps:

  1. Go to transaction FD33 (Display Customer Credit Management).
  2. Select the customer and credit control area.
  3. In the Credit Exposure tab, you can see the total open orders, deliveries, and invoices that are part of the customer’s credit exposure.
  4. Monitor if the credit exposure exceeds the credit limit and take appropriate actions (e.g., block further sales orders).

Step 5: Define Automatic Credit Check

Automatic credit checks can be configured to check a customer’s credit status during sales order creation or delivery processing. If the customer exceeds their credit limit, the system can block the order or alert the user for further action.

To set up automatic credit checks, follow these steps:

  1. Go to transaction OVAK (Define Credit Control Area for Automatic Credit Check).
  2. Define the check type for the credit control area (e.g., A for automatic credit check).
  3. Specify the credit check criteria, such as whether the check should be based on the order value, delivery value, or open invoices.
  4. Set the credit check priority and the actions to take if the credit limit is exceeded (e.g., block the order or issue a warning).
  5. Save the configuration.

Real-World Example of Credit and Risk Management

Let’s consider a real-world example where a customer places an order, and the credit check is performed automatically based on the configuration.

  • Step 1: Customer C1001 has a credit limit of $10,000.
  • Step 2: Customer C1001 places an order for $8,000 worth of goods, which is within their credit limit.
  • Step 3: The system performs an automatic credit check and confirms that the order is within the credit limit.
  • Step 4: Customer C1001 places another order for $4,000, which exceeds their credit limit of $10,000.
  • Step 5: The system blocks the order due to the exceeded credit limit. A credit controller is notified to review and release the order manually.
  • Step 6: The credit controller reviews the customer’s payment history, decides to extend the credit limit, and manually releases the order.

Conclusion

Credit and risk management in SAP SD are essential to protect a business from financial risks associated with unpaid orders. By configuring credit control areas, risk categories, and credit limits, businesses can ensure that they do not extend too much credit to customers. Automatic credit checks, credit exposure monitoring, and manual intervention for exceptional cases help maintain a balance between customer satisfaction and financial risk.




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