Type of credit check

[Former Member]

HI,

Could anyone explain to me about type of credit check specially "Credit check on the basis of overdue open items" ?

Thanks & Best Regards,

Saiful arif

[Former Member · Accepted solution]

Hi,

There are 2 main types of credit check:

1. Simple Credit check

2. Automatic check

Simple credit check behaves in the same way for all the customers & hence is not used frequently.

Automatic credit check allows you to control different customers in different way with respect to their payment history (good payment master/bad payment master). The control is done for the combination of "credit control arearisk categorycredit group". You use transaction code OVA8 for the control.There are many types of automatic credit checks:

Before that I would like to explain some terms:

open sales orders: delivery not done for any item in the sales order

open deliveries: invoice not done even for a single item

open invoices: accounting document not yet generated

open line items: when the system generates an accounting document for an invoice, it generates a line item which is displayed in the transaction code FBL5N. Here you see against which invoice, how much is the A/R (accounts receivable) amount. Open line items means the payment has not been received for this line item.

Types of credit checks:

1. Static credit check = The customer's credit exposure may not exceed the established credit limit. The credit exposure is the total combined value of the following:

*Open sales documents

*Open delivery documents

*Open billing documents

*Open items (accounts receivable)

2. Dynamic credit check: 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, the system will 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.

3. Document Value: The sales order or delivery value may not exceed the maximum value that you specify in the adjacent field. The value is stored in the currency of the credit control area. 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.

4. Critical fields: The indicator controls the critical field check. If the field is selected, the system checks whether critical fields have been changed. The critical fields are as below:

*Payment terms

*Additional value days

*Fixed value date

Use this type of check for sales documents only.

5. Next Review Date: The next credit review date is stored in the credit data in the customer master record. When you process a document, the next credit review date must not be beyond the current date.

6.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.

7.Oldest open Item: 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.

8. 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.

Dunning means the follow up with the customer for receiving the payment.

9. User Specific: Used for user specific credit check if it is noe fulfilled through first 8 options.

Overdue Open Items: You enter a payment term in the customer master - sales area data - billing screen. The payment term is suppose "within 15 days" & the baseline date (date used by system to calculate due date) is say posting date.

If today, i.e on 21/08/2008, you create an invoice & accounting document also generated (which will generate a line item in FI-A/R statement), the system will determine the due date as 04/09/2008. If the payment is not received latest by 04/09/2008, the line item will automatically become overdue. In the first field the system asks for Maximum item percentage which is calculated as under:

"X" = (open items which are more than a certain number of days overdue / customer balance )

customer balance is according to me the adjacent field, i.e "Number of days for considering open items".

Say if "X" = 1 & after creating some time if the system calculates that the value has exceeded "1" then it will block the sales order for credit check.

Hope this gives you a clear idea.

With best regards,

Allabaqsh G. Patil.

[Former Member]

Hi,

Types of credit check

The following types of credit checks can be carried out:

Static credit limit check

Credit allocation depends on the total value of open orders, deliveries, billing documents and open items.

Dynamic credit limit check

The dynamic check includes both a static part which checks all open items, deliveries and billing documents and a dynamic part which checks all outstanding order values, that is, all orders not yet delivered or partially delivered. The value resulting from the checks is accumulated up to the shipping date in the information structure "S066" in freely definable time units or periods (day, week, month). This information structure is entered in Logistics Controlling and described in the section "Carry out default settings for credit management" under Basic functions.

To define the credit check, you specify a certain number of relevant periods from which a date in the future can be calculated (for example, 10 days or 2 months depending on the selected period). This ensures that sales orders which lie further in the future are not used to determine the credit exposure.

The total of the static and dynamic part of the check must not exceed the granted credit limit.

Credit check on the basis of the maximum document value

The sales order value or the value of goods to be delivered must not exceed a certain value defined for the credit check. The value is stored in the currency of the credit control area. In particular, this check is useful if the credit limit of new customers has not yet been specified. This check can be accessed explicitly by a risk class reserved for new customers.

Credit check when changing critical fields

The credit check is started when changes are made to credit-relevant document fields so that they differ from the default values proposed from the customer master record (terms of payment, value days and fixed value date).

Credit check at the time of the next internal check

The credit check is started automatically on a certain date. All sales orders entered up to this time are regarded as not critical.

Credit check on the basis of overdue open items

The ratio between open items, which are overdue by more than a certain number of days, and the customer balance must not exceed a certain percentage.

Credit check on the basis of the oldest open items

The oldest open item may only be a certain number of days overdue.

Credit check against maximum allowed dunning levels

The dunning level of the customer may only assume a certain maximum value.

Customer-specific credit checks

If you require further checks to those defined in the standard system, you can define them in the corresponding user exits ( LVKMPTZZ and LVKMPFZ1).

reg

Deepak

[Former Member]

There can be several criteria for credit check.

"Credit check on the basis of overdue open items" - For this you have to go for ABAP coding.

There is no standard option avialable for "overdue" open items.

By "Overdue" you must be refering to the fact that for each invoice and/or customer there is a particular due date. The open items not falling within the due date should only be considered for credit check.