credit check

[Former Member]

Dear all experts, It is possible to set a credit check based on the percentage of receivables that are beyond a certain number of days. So why whould the credit check based on the total receivales rather thatn the customer's credit Thanksyou. Regards, lokisandra

Edited by: lokisandra on Aug 9, 2009 5:49 PM

[Former Member · Accepted solution]

Hi,

Credit check on the basis of overdue open items This credit check is based upon

the ratio of open items that are overdue by a certain number of days to the

customeru2019s balance, which must not exceed a certain percentage.

Regards,

venkataswamy.y

[Former Member · Accepted solution]

could you please explain clearly of the question "_why whould the credit check based on the total receivales rather thatn the customer's credit_" ?

[Former Member · Accepted solution]

Dear Lopasundra,

> could you please explain clearly of the question "_why whould the credit check based on the total receivales rather thatn the customer's credit_" ?

Before answering and explaining in detail i would rather want to ask you one question...... Just imagine, You have bought 1 LCD television at 5000$ and paid 2000$ and remaining 3000$ is your credit. Again after few days you went to the shop and want to buy one Music System which was about 3000 $. And your credit limit as per the Store owner is 5000 $, Whether the shop keeper will give you the music system without paying anything or not?

Based on your response i will try to explain this.

Thanks,

Raja

[Former Member · Accepted solution]

hi, i guess the store may ask for paying $1,000 . Regards, lokisandra

[Former Member · Accepted solution]

>

> hi,

>

> i guess the store may ask for paying $1,000 .

On some extent You are right, again we have the flexibility of increasing and decreasing the credit based on customers previous credit history.

Now let me tell you how the full credit cycle works, as i have seen so many questions of yours.....

For this we will take yours example only .....

Customer : Mr XYZ

Credit Limit : 5000 $

Open Order : 2000 $

Open Delivery : 1000 $

Open Billing : 1000&

Out of these, there are two parts : 1 static parts which are open Item, open delivery and open billing

and dynamic part is Open sales order, The open order value includes all undelivered or only partially delivered orders.

Now the total value i.e Static + Dynamic should not exceed the total credit limit, it means if you have delivered the goods till the credit limit of the customer then the next order will either give warning or error or block the order based on your configuration

Now how the system calculates this......

This is rather comes from the CREDIT EXPOSURE and not the only the receivables and credit limit.

CREDIT EXPOSURE is calculated based on

Receivables

Special liabil.

Sales value

Now customer can be liable to take credit till the Credit limit - Credit Exposure.

So if Credit limit is 10000$ and credit exposure is 8000$ then customers current limit is 2000 $

Now how credit exposure is calculated?

Credit Exposure is sum of ( Receivable - Special Liabilities + Sales Value ).

Please go to FD32 and read the help by pressing F1 these all terms has good explanation there.

Hope it makes you somewhat clear.....

Thanks,

Raja

[Former Member · Accepted solution]

hi Raja, thank you very much. loki

[Former Member · Accepted solution]

hi there, i could understand what you said. here is my new question: suppose: Customer A's horizons max. open items:20% horizon period: 30 days credit limit: $100,000 total commitment: $40,000; Customer A's receivables within horinzon days: $15,000 why we calcute if we should open depends of $15,000/_$40,000_=37.5% > 20% instead of $15,000/_$100,000_=15% <20% regards, loki