SAP SD Configuration

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 INDEX

1. DEFINE CREDIT CONTROL AREA 3

2. ASSIGN COMPANY CODE TO CREDIT CONTROL AREA 8

3. ASSIGN SALES AREA TO CREDIT CONTROL AREA 9

4. TYPE OF CREDIT CHECK 10

5. DEFINE CREDIT GROUP 13

6. DEFINE AUTOMATIC CREDIT CONTROL 15

7. CREDIT MANAGEMENT OF THE CUSTOMER MASTER 21

8. TYPES OF CREDIT MANAGEMENT 27

 1. Define Credit Control Area

BACKGROUND

The purpose of credit management is to monitor credit status

of customer so as to take decision on continuing or reviewing
credit related decisions like increasing credit limit or blocking
delivery to the customer.

This is done with financial accounting integration as in most

of the companies, credit management is FI function.

Instructions

Pre-requisite

Company code is created in enterprise structure of financial

accounting.

Define Credit Control Area:

Menu path: Enterprise structure → Definition → Financial

accounting → Credit Control Area

Click

This is FI configuration and not part of SD configuration

Double click on credit control area, which you want to select
Key fields are as below.

Update group – It determines how credit value should get

updated at the time of order, delivery and billing.

If a document cannot be processed with the update group you

specify, the system determines the next possible update it can
carry out. For example, you select Update group 000012,
which, at delivery, reduces the open order value and increases
the open delivery value. Assume that one item in the order is
not relevant for delivery. In this case, the system automatically
determines Update group 000018 for this item. Update group
000018 increases the open delivery value for the order item.
The system uses the confirmed quantity of delivery-relevant
schedule lines to update the order value.

Risk category – Risk category entered in the related control

area of the customer's credit master record, which is
automatically created when a customer is created in a
company code.

The credit master record is automatically maintained when at

least one of the following fields is maintained for the
corresponding control area.

• Risk category – defined in FI accounting - Credit

Management--->Credit control account--->Define Risk
categories.

• Via the customer master record, you can allocate every

customer to a credit risk category. This is used if
automatic credit control is used.

• Menu path: Customer master - Environment – credit

management
Credit representative group

Credit limit - This credit limit is not a total credit limit for the
control area.

In this way you ensure that a credit restriction will be effective

for new customers, too, as soon as the customer has been
created.
If no credit master record has been maintained, there is no
credit limit.
 2. Assign company code to credit control area

Instructions

Menu path: Enterprise structure – Assignment – FI accounting

- Assign company code to Credit Control Area

Click

Company code 1000 is assigned to credit control area 1000 as

seen above.
 3. Assign Sales Area to Credit Control Area

Instructions

Menu path: Enterprise structure – Assignment – Sales and

Distribution - Assign Sales Area to Credit Control Area

Click

Deriving the Credit Control Area:

The credit control area is determined in the following sequence

as per standard configuration:

1. Sales Area (The sales areas can be assigned to a credit

control area in Customizing)

2. Customer master (payer’s sales area segment)

3. Company code for the sales organization

Example – In sales order created for customer 4999 using

sales area – 1000/10/00, credit control area 1000 is
determined as per credit control area assigned to company
code 1000 as no credit control area is assigned to sales area
and in the customer master.
 4. Type of credit check

BACKGROUND

There are major two types of credit checks can be performed.

They are

• No credit check
• Simple credit check or Dynamic check for a particular
order type.

Instructions

Menu path: SD – Basic Functions – Credit Management –

Assign Sales documents and delivery documents

Click

Pop-up as below
Select “Credit limit check for order types” and click

On the next screen, click and select order

type as “OR”

Simple Credit Check (Option A or B or C)

During the check, the SAP System totals the receivables (A

claim for payment on the recipient of goods or services
supplied.), the open items from special G/L transactions and
the net value of the sales order for every item of a sales
document.

The open items from special G/L transactions take into

account obligations bound by contract which are not recorded
for accounting purposes but which involve expenses through
diverse business transactions. Example - the value of
materials in the warehouse that have been reserved for an
order or project
The total is compared with the credit limit. If the limit is
exceeded, the system responds in the way defined by you in
the configuration menu.

If credit limit exceeds, system responds giving

A. Warning message in sales order.

B. Warning message and a delivery block (which will allow

order to be taken but blocked for delivery).

C. Error message that will not allow you to save the order.

Automatic Credit Check

Check credit has value “D”

Credit limit check can take place @

Sales order entry

Delivery

Goods issue

For this, Automatic credit control defines “Document Credit

Group” for each Sales Order, Delivery and Goods issue.
 5. Define Credit Group

BACKGROUND

Credit Group for Sales Order is assigned to Sales Order Types.

And
Credit group for Delivery and Goods issue each is assigned to
Delivery Types.

Credit Group together with Credit Control Area and Risk

Category defines how exactly Credit check will be carried out.

Instructions

Menu path: SD – Basic Functions – Credit Management –

Define Credit group

Click

Let us take customer 4999 to understand Automatic credit

control Risk category is 001 as below.
 6. Define Automatic credit control

INSTRUCTION

Menu path: SD – Basic Functions – Credit Management –

Define Automatic credit control

Click

Select credit control area – 1000, risk category – 001 and

credit group – 01

The details can be maintained as below.

Currency and update group are copied from Credit control
area, 0001

No Credit Check – Here you can assign a routine, which will

check conditions, under which credit check should not be
done.

Example (Routine 01) If there are no order items in sales

order, no credit check should be done OR no credit check
when due to some change order net value is changed but it is
not greater than the old net value.

Item check - Indicates that the system carries out credit

checks not only when you save the document but already
when you enter single items or header data.
Deviation in %: Deviation of document value by x %. You can
specify a deviation factor for documents that have already
been approved for credit.

Example

You set the deviation factor at 10%. An order for 20 pieces of a

material (price = 20 USD per piece) has a total value of 400
USD and is approved for credit. The customer then wants to
order more pieces. If this causes the deviation factor to exceed
10%, the system carries out credit check.

Number of days without check - Specifies the number of days

after which a changed document must be re-checked for
credit.

The system does not carry out another credit check if the
following conditions are met:

• The value of the changed order is not greater than the

value already approved for credit (inclusive of the
deviation factor),

AND

• The current date is not greater than the original release

date plus the number of days specified here.

Seasonal factor in %:

Specifies a percentage tolerance limit up to which a customer's

credit limit may be temporarily increased or reduced.

Example -
If you enter 10% in this field and select the minus check box,
a customer's usual credit limit of 5,000 USD is extended by a
further 500 USD.
As this is seasonal discount, enter validity dates for the
discount

Static Check

The credit exposure in this check is the total combined value

of the following:

Open sales documents - Order items that have not yet been
delivered.

Open delivery documents - Delivery items that have not yet

been invoiced.

Open billing documents - Billing Document items that have

not yet been forwarded to accounting.

Open items (accounts receivable) - Documents that have been

forwarded to accounting but are not yet settled by the
customer.

IMP - You can specify in the adjacent fields whether the

system takes into account only open orders or only open
deliveries or both open orders and open deliveries.

Open Billing docs and Open items will always be considered

for calculation.

Dynamic Check

This check has all checks of static check but only has an
attached time period (Credit Horizon). The customer's credit
exposure is split into a static part - open items, open billing,
and delivery values - and a dynamic part, the open order
value. The open order value includes all not yet or only
partially delivered orders. The value is calculated based on the
shipping date and the credit horizon you specify in the
adjacent field.

For the purposes of evaluating credit, you want the system to

ignore all open orders that are due for delivery after the
horizon date. The sum of the static and dynamic parts of the
check may not exceed the credit limit.

NOTE – Static and Dynamic checks are the main types of

check Following are the additional checks which can be used
on their own or in combination with Static or Dynamic check.

Credit check against maximum document value

This type of credit check makes sense, for example, if you
process orders for new customers whose credit limits have not
yet been defined. The check can be initiated by a risk category,
which is defined specifically for new customers.

Credit check against critical fields (fixed value dates)

The indicator controls the critical field check. If the field is
selected, the system checks whether critical fields have been
changed.
If a check is carried out, the following fields are relevant:
Payment terms
Additional value days
Fixed value date

Credit check against next customer review date

Indicates whether the system carries out a credit check based
on the date of the next credit review.
You can define a time buffer for this type of credit check. In
the adjacent field, you can specify the number of days that are
added to the next credit review date.
Credit check against overdue open items
Specifies whether the system carries out a credit check based
on open items.
This type of credit check works in conjunction with two values
that you specify in the adjacent fields:
Maximum % of overdue items in open items
Number of days, which the open items are overdue
The proportion of overdue open items (that exceed the
specified number of days) in the total of open items should not
exceed the percentage specified.

Credit check against oldest open item

Indicates whether the system carries out a credit check based
on the age of the oldest open item.

The oldest open item must not be older than the number of
days specified.

Credit check against highest dunning level allowed

Indicates whether the system carries out a credit check based
on the highest dunning level.

With this type of credit check, you specify the highest dunning
level you want to allow in the adjacent field. The dunning level
is tracked and stored in the credit data in the customer master
record. If this level is exceeded during order or delivery
processing, the system carries out a credit check.

For all checks, you can set message should be warning or

error and whether to set credit block in sales document
 7. Credit management of the customer master

BACKGROUND

CUSTOMER MASTER SETTINGS (FD33) – (Customer master

– Sales Area data - Environment – Credit management)

Creating Credit data for a customer – It is done in SAP menu.

INSTRUCTION
Menu path - Accounting --> Financial accounting --> Accounts
receivable --> Credit management --> Master data --> Change
(Transaction code- FD32)

Customer's credit limit

The amount entered here represents an upper limit for

Total receivables and
Foreseeable receivables from the customer.

The total receivables results from the open items (invoices

minus credit memos and payments) plus selected special G/L
transactions (for example, down payments).

The foreseeable receivables result from the values of orders

already accepted (open orders). Open orders + Open deliveries
+ open billing

Credit exposure

Credit Exposure Field is sum of

1. Receivables / open items – Invoices, which are not yet paid
- Credit Memos

2. Special Liabilities – Total of special G/L Transactions

(shown separately in G/L and sub-ledger – like Down
payments or Bills of Exchange or Guarantees)

3. Sales Value – Total of all order values, which are not yet
transferred to FI.
Credit exposure gets updated as and when documents are
saved. When a new sales order is created, order value is added
to credit exposure for that customer in credit control area at
that point of time. If the total is greater than the Credit limit
specified, then

Date of credit horizon

If this indicator is set, only the outstanding sales values,

which fall within the defined credit horizon, are taken into
account when calculating the credit limit used.
In above screenshot, the date shown is 11/07/2006, which is
180 days from 11/01/2006(current date). 180 days is the
credit horizon set in the configuration.
If a horizon has not been specified in Customizing, the system
defaults the current date, and all outstanding sales values are
taken into account for the credit limit used.

Credit representative group for credit management

A customer can be allocated to a credit representative group

for credit control. This credit representative group is copied
into the order and can be used as a selection criterion for
evaluations and release functions.

Blocked Checkbox

With this indicator, a customer is blocked for all credit

management business transactions (order acceptance,
delivery, and goods issue). You can still, however, post
invoices for goods, which were already delivered.

Credit representative can access list of blocked documents and

release them using following menu path.
SAP menu – Logistics –Sales & Distribution – Credit
management – sales and distribution documents

Transaction code – VKM1

VKM2 – Released SD Documents

VKM3 and VKM5 – To release SD Documents

VA14L – SD documents blocked for delivery

Other important transactions are as below.

Credit overview

Credit master sheet

Partner Determination - Create Partner functions credit

representative (KB) and credit manager (KM) allocated to
partner type PE so as to send messages regarding credit block
and status.

KRML in output procedure V10000 is the output type used for

credit message processing
 8. Types of credit management

BACKGROUND

r
Define 1 credit control area for different company codes.

Define credit data for customer for each company code or each
group of company codes.

Centralized credit management - Define one credit control

area for all company codes.
Credit Control Area 1
 Company Code 1 Company Code 2
Sales Org. 1 Sales Org. 2
CUSTOMER 1 CUSTOMER 1
Credit Limit 50000 EUR

Decentralized credit management - Define credit control areas

for each company code.
Credit Control Area 1 Credit Control Area 2
Company Code 1 Company Code 2
Sales Org. 1 Sales Org. 2
CUSTOMER 1 CUSTOMER 1
Credit Limit 50000 EUR Credit Limit 100000
EUR

Let us have 1 customer 110012 defined under 2 different

company codes – 1000 and 3000.

Now if we have Centralized organization for credit

management, then there will be only 1 credit control area
under which credit limit is set for customer. But in our
example, we have decentralized organization wherein credit
limit for 110012 is set with credit control area 1000 under
company code and with 3000 under company code 3000.
Credit limit is set here as 45000 EUR.
110012 is defined in 2 sales areas

Sales AreaCredit control area

1000/12/00 1000
3000/10/00 3000

Above screenshot shows central data for customer.

In Section Current credit limit assigned

Total amount – Total of credit given for the customer in both

credit control areas 1000 (45000 EUR) and 3000 (49000 EUR).

Largest individual limit – It shows the maximum credit that is

currently given to the customer among all credit control areas.
For 110012, 49000 EUR is the maximum credit limit given
and that is in CCA, 3000.
In Section Maximum permitted credit limits

Total amount - Total credit limit allowed for this customer

across all credit control areas.

Individual limit - Maximum credit that is allowed for a

customer in a single credit control area. It means if I try to give
customer credit of >50000 EUR in credit control area then
system will give error.

Therefore, largest individual limit in credit control area 3000 is

maintained as 49000 EUR.

Let us have Simple credit check run. The setting done for this
done in Sales document type definition or same setting in (SD
– Basic Functions – Credit Management – Assign Sales
documents and delivery documents)
Sales value – 24150 EUR is the value of the sales order
created. This is sum of Net value + Tax. There is condition
formula “4” for this.

Condition subtotal for this Total is “A” i.e. price is copied over
to KOMP-CMPRE (credit price) and so seen in sales value /
credit exposure.
Now, when we add 1 more item in SO, wherein order is for 4
pieces, then the value of the order is more than 45000 EUR –
this is the credit limit for this customer under credit control
area 1000, so it gives the following message.

System sets a credit block at header level of the order though

it allows saving the item.
Credit block defined in IMG – SD – Basic Functions –
Availability check and transfer of requirement – Transfer of
requirement – Block Quantity confirmation in delivery blocks.

Pop-up appears

Select “Deliveries: Blocking Reasons/Criteria” and Click

This block blocks delivery creation and also blocks
confirmation of order quantities at schedule line level. If,
before you save a sales order, you look at the schedule line
overview, you can see what the system would confirm, if the
block were not set.

However, as soon as you save the sales order, the confirmed

quantities are automatically reset to zero. This is because of
the setting in the same IMG transaction in the same pop-up

Blocked document List can be accessed from VKM1 or setting

can be done to send mail to credit representative or Credit
manager.

Setting –

Order output procedure; V10000 has KRML as output type.

This requirement “9” is met if the sales order has been blocked
for credit and the order is due for shipping activities within 2
days.

This requirement can be assigned to a sales document output

condition type, such as the R/3 delivered output type KRML to
control when a mail should be sent to the credit representative
(KB) and Credit Manager (KM).

This requirement can only be used with sales documents.

Release the sales order (Transaction code - VKM3)

Once it is released, credit data gets updated and shows the

credit exposure for 110012 in CCA, 1000.