FSCM – Credit Management

FSCM Credit Management Features

FSCM Credit Management offers following advantages over traditional SD Credit Management:

- Automated calculations of Customer Credit Scores and Customer Credit Limits

- It is possible to interface with 3rd party Credit rating systems to get customer ratings and derive
Credit Score
- Record details of Customer Payment Behavior and History
- Use of Documented Credit Decisions to release Sales orders on Credit block

The Customer Credit master is maintained against Business Partner in role UKM000

In Architecture, SAP FSCM can exist as a separate system and can communicate with SD/FI systems via
WS / RFCs.

In simplistic architecture, FSCM/SD/FI shall reside in same system.

Snapshot of Core Process and Configuration

This considers internal calculation of credit scores, credit limits with no interface with external credit
rating systems and subsequent credit checks in sales orders.

Documented Credit Decision (DCD) is not considered and sales orders on credit block can be released with
t-code VKM4 as earlier.

(A) Configuration

FSCM Configuration

(i) SPRO – FSCM – Credit Management – Credit Risk Monitoring – Master Data – Create Credit Segments

Credit Segments are defined. These are analogous to Sales Credit Areas and will be linked later.

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(ii) SPRO – FSCM – Credit Management – Credit Risk Monitoring – Master Data – Define Formulas

Defined following formulas:

ZTEST1 - Calculation of Credit Score

ZTEST2 - Calculation of Credit Limit

ZTEST1

Created condition that if Customer Country = ‘GB, credit score = 80, else it is 60

ZTEST2

Created condition to derive Credit limit based on Risk Class

If Risk Class A, Limit = 100,000 GBP

If Risk Class B, Limit = 80,000 GBP

If Risk Class C, Limit = 60,000 GBP

If Risk Class D, Limit = 40,000 GBP

If Risk Class E, Limit = 20,000 GBP

If Risk Class F, Limit = 0 GBP

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(iii) SPRO – FSCM – Credit Management – Credit Risk Monitoring – Master Data – Create Rule for Scoring
and Credit Limit Calculation

Created Rule ZRULE1 encompassing Formula for Credit Score ZTEST1 and Formula for Credit Limit ZTEST2
created in previous step.

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These are setup with validity of 180 days, subsequent to which there should be review.

(iv) SPRO – FSCM – Credit Management – Credit Risk Monitoring – Master Data – Create Risk Classes

This gives relation between Credit Risk Class and Credit Score.

In our example, using formula for Credit score, we will derive Credit Score.

Based on Credit Score, we will arrive at Risk Class.

Then using formula for Credit Limit, based on the Risk Class, we will arrive at Credit Limit for the Customer.

Risk Class in FSCM is analogous to Customer Risk Category in SD and will be touched upon later.

(v) SPRO – FSCM – Credit Management – Credit Risk Monitoring – Credit Limit Check - Define Checking
Rules

Defined Rule ZRULE2.

This encompasses the types of Credit Checks which the Sales Transactions shall be subjected to.

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This is setup with the following Credit Checks:

(a) Statistical Check of Credit Exposure across open items

Dynamic Check of Credit Exposure which disregards open sales order items due for delivery beyond the
Horizon date is not considered here.

(b) Check for Maximum Document Value

This is at Credit segment level. In our example, if net value > 80,000 GBP, sales order shall go on credit
block.

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(c) Check for Maximum Dunning Level

(d) Check for Age of Oldest Open Item

In our example, if there is an open item for customer due for more than 180 days, sales transactions shall
go on credit block.

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(e) Check of Payment Behavior Index

In our example, if Day Sales Outstanding (DSO) for the Customer is more than 60 days, sales transactions
shall go on credit block. (DSO is Finance Calculation)

(f) Check for Overdue Open Items

This is at credit segment level. In our example if 30% of open Customer line items are overdue for more
than 90 days, the sales orders shall go on Credit block.

Configuration for integration with SD

(vi) SPRO – FSCM – Credit Management – Integration with Accounts Receivable Accounting and Sales and
Distribution – Integration with Sales and Distribution – Assign Credit Control Area and Credit Segment

This gives the correlation between FSCM Credit Segment defined in (i) and Credit Control Area as used in
earlier SD based credit management maintenance.

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(vii) SPRO – FSCM – Credit Management – Integration with Accounts Receivable Accounting and Sales and
Distribution – Integration with Sales and Distribution – Assign Sales Area to Credit Control Area

Sales Area is assigned to Credit Control Area

(viii) SPRO – FSCM – Credit Management – Integration with Accounts Receivable Accounting and Sales
and Distribution – Integration with Sales and Distribution – Determine Active Receivables per Item
Category

Sales order item category is marked as relevant for credit exposure update

(viii) SPRO – FSCM – Credit Management – Integration with Accounts Receivable Accounting and Sales
and Distribution – Integration with Sales and Distribution – Define Credit Groups

Credit Groups are defined for Sales orders / delivery documents

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(ix) SPRO – FSCM – Credit Management – Integration with Accounts Receivable Accounting and Sales and
Distribution – Integration with Sales and Distribution – Assign Sales Documents and Delivery Documents

Credit Group “01” is assigned to Sales order type.

With FSCM integration, the Credit check type is always “D” i.e. Automatic Credit Control

(x) SPRO – FSCM – Credit Management – Integration with Accounts Receivable Accounting and Sales and
Distribution – Integration with Sales and Distribution – Define Risk Categories

Risk Categories are defined.

Pls. note these are analogous to FSCM Risk Classes defined in (iv) and hence must be defined with the
same nomenclature.

(xi) SPRO – FSCM – Credit Management – Integration with Accounts Receivable Accounting and Sales and
Distribution – Integration with Sales and Distribution – Define Automatic Credit Control

Credit control check is defined based on combination of Credit Control Area, Customer Risk Category
(Class) and Credit Group.

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With FSCM credit check, the individual checks (static / dynamic check, maximum document value, oldest
open item, etc) do not appear here as they used to appear in erstwhile SD credit management, since these
have already been defined under FSCM in (v) under Check Rule.

“SAP Credit Management” box indicated check with FSCM

Reaction “A” means issue warning message is credit check fails.

“Status/Block” ticked indicates to block the sales order if credit management is exceeded.

You will find all the configurations under “Integration with Sales and Distribution” are identical with SD
Credit Management. However individual checks/controls are not defined here since they integrate with
FSCM.

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(B) Master Data

Created BP # 1002031 in 00000, FLCU00 and FLCU01 roles.

Now extended this BP for UKM000 role.

In UKM000 role, under General Data section, in “Credit Profile” tab:

Entered Rule ZRULE1 for Credit Score and Credit Limit Section as defined in Configuration item (iii).

On entering this, system derived Credit Score “80” with validity upto 30.03.2020 (180 days validity as per
configuration).

Credit Score 80 was derived as per formula ZTEST1 defined in this rule in Configuration item (ii) for this
customer belonging to Country GB.

System derived Risk Class “A” based on Credit Score 80 as per Configuration Item (iv).

For Check Rule (type of checks the BP should be subjected to), entered ZRULE2 which will encompass
checks defined in Configuration item (v).

On scrolling below, there are rating procedures / controls for integration with External credit rating
systems. These are not explored at the moment.

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Also note tab Creditworthiness data which contains finer controls; these are not explored at the moment.

Now navigate to Credit Segment Data

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Details are maintained for Credit Segment 0000 setup for Credit Control Area A000 as per configuration
item (vi)

On pressing the “Calculate” button, system derived Credit Limit of 100,000 GBP for customer as per
formula ZTEST2 setup in Configuration item (ii) for customer with Risk Class “A”.

Validity of this limit is 180 days as per configuration item (iii).

There are other tabs “Payment Behavior Key Figures” and “KPI Payment Behaviour” giving details of
customer parameters like oldest open item, dunning level, DSO figure, etc. These are not explored in detail
here.

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(C) Process Flow

Created SO # 3267 for Customer # 1002031 and Sales Area 0186/01/01 corresponding to Credit control
area A000 and Credit Segment 0000.

Order Value is 72,000 GBP (Price 60,000 GBP + tax 12,000 GBP)

The credit exposure of 72,000 GBP is less than the defined credit limit of 100,000 GBP.

Also the amount is less than the defined maximum document value of 80,000 GBP, as in Configuration
item (v). Also there are no overdue items for the customer.

Hence the Credit Status of the sales order is “Approved”.

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Under Business Partner Credit Segment Data, the credit exposure is updated as 72,000 GBP which is 72%
of defined credit limit of 100,000 GBP.

Now created 2nd order for the same customer with order value of 36,000 GBP (Price 30,000 GBP + 6,000
GBP)

Here total credit exposure is becoming 108,000 GBP which is more than set limit of 100,000 GBP.

Hence during save, system issues warning message and sets the Sales order on credit block.

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After review, the sales order will need to be released using the Documented Credit Decision (DCD)
approach. If same is not implemented, earlier approach of using t-code VKM4 can be used.

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