why an organization might use a dynamic credit check

[Former Member]

Dear all experts' could you please explain why an organization might use a dynamic credit check as appose to a static credit check? Thanks a lot. lokisandra

[former_member648947 · Accepted solution]

Dear Lokisandra,

If you search the forum you will get enough info regarding your question.

Static,

As you are already aware in static check system considers all the open Orders , Deliveries , Billing docs in consideration.

Dynamic,

And in Dynamic Credit check system includes Static check as well as All outstanding order values and Partially delivered Orders, the credit check value is accumulated till the shippingd date, this is nothing but horizon date.

The Horizon is not maintained to give extended time to the customers.

If an order was created today with the delivery date after 2 months (lets assume the horixzon period is 2 months).

so taking this order in consideration during static credit check will reduce the customer's credit availability. so to insure customer can place orders either business will have to increase his credit limit or block the order and negotiate with customer to pay the previous dues, this option is risky as customer enjoys high credit limit and wouldnt like to be blocked for the business.

So due to horizon , this order will not be considered in the dynamic credit check as shipping is beyond the horizon, and customer can place new orders within his allocated credit limit. Ensuring for a business to keep credit limits to optimum level and continuous business.

I hope this explanation was helpful.

Please close the thread of resolved

Regards,

Paresh Kolte

[Former Member]

Hi

In dynamic Credt check, you need to create "Credit Group" and "Risk Category" through you can differentiate the customers.

One customer may purchase high quantities of goods , say Rs. 10,00,000/- a month from you, but getting Payment is a difficult task from him.

So, he is a high value customer (in terms of value /quantities purchased) but at the same time he is a High Risk Customer.

Therefore, in his case I may notbe interested to extend his Credit limit etc.

At the same time, another customer is there who purchases Rs.5-6 lakh rupees worth goods in a month (a medium range customer) and his payment etc are excellent.

So, he is a medium value customer but a Low risk Customer, therefore I want to have a different credit control for him.

That means, we should weigh all customer as the same.

Therefore, Credit control also should be different for different customer which we can implement through Automatic Credit control.

Automatic credit control is divided into two types,

- Static part

- Dynamic part

The Static part is , Open items, open billing and Open deliveries value.

Dynamic part is the Open order value.

The open order value includes all not yet or only partially delivered orders.

Thevalue is calculated based on the Shipping date and the Credit horizon as you have specified.

System ignores all the open orders that are due for Delivery after the horizon date.

Regards

[Former Member]

hi, you have a good explaination on credit & risk customers. But why using dynamic credit check is not explained clearly. could you please explain in more details why an organization using dynamic check? Is it because it gives extended time for those high risk and high value customers? lokisandra