How Time Horizon works

[former_member217082]

Hi Experts

In credit management, for dynamic check , we give time horizon . if we give time horizon ,on what basis how the system takes values for open orders, open deliveries, open line items

In my requirement the time horizon is 1month, customer's credit limit is 2lacs. and payment terms are 0002(30 days credit). so how the system takes the credit limit and when the system will throw the error message that credit limit has exceeded.

I have maintained automatic credit check at order level only

Customer's 4 sales orders details :

if that customer has given an order on 15-04-2008 for 1 lacs , billing is done (sales order no 1001)

if that customer has given an order on 20-04-2008 for 0.50lacs , only PGI is done and not billing (sales order no 1002)

if that customer has given an order on 25-04-2008 for 0.25lacs only delivery is done but not PGI (sales order no 1003)

if that customer has given an order on 30-04-2008 for 0.75lacs and just an order has been made (sales order no 1004)

How the system checks the credit check . now as the payment terms are 0002(30 days credit)

My second query is

how the payment terms affect the credit management in dynamic credit check ?

Regards

Srinath

[Former Member · Accepted solution]

Hi,

If u specify horizon preiod then system considers open order, open delivery and open billing docs only with in that peroid..

For ex:

One customer has credit limit of 2 lakhs and already customer has another open order which is to be delivered in June month..and its value is already 1.5 lakhs..

But now if u create an order of 1 lakgh for the todate then it will not consider that open order which is to be delivered in June because it is out of horizon period and system will not blcok this today order..

I hope u under stand..

Regards

Sankar

[former_member217082]

Closing the Thread as inputs helped me to understand little bit how it works , Thanks a lot for giving the inputs to all the contributed members

[Former Member]

Hello Srinath,

If a horizon date is set, only the outstanding sales values, which fall within the defined credit horizon, are taken into account when calculating the credit limit used. The date defaulted in this field is the smallest horizon specified for the customer and the risk category in Customizing for credit control. 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.

In other words, it a date set to restrict the system in checking the credit limit. That is, the system only takes in account the open orders (accepted orders), open deliveries (deliveries that fall with in the date and not billed), open receivables (invoices sent to customers before that date), open items (unconfirmed items in sales order before that date) that occur within that target date.

Horizon period: horizon period is a period allocated to a customer in the customer credit master record (FD32), where in the system calculates the credit exposure or credit used against the given credit limit taking into account the outstanding sales values within that fixed period (i.e. current document processing date to the date mentioned in the horizon field).

The horizon period is fixed depending on the risk category of the customer. It is always good to have small horizon period in view of a customer, as it does not take the open items beyond the horizon period.

REWARD POINTS IF HELPFUL

Regards

Sai

[former_member184555]

Hi

Please post the error message displayed in the above scenario.

Thanks,

Ravi

[former_member184555]

Hi Srinath,

As per my knowledge, in credit management there is link between the open items and the payment terms.

System doesn't consider those open items (while doing credit check) which are still having time for clearing the open item, as per their payment terms. eg., if the open item has 30 days as payment terms, only after 30 days that amount will be considered as open item for calculation in credit management.

I guess this is true and looking forward for others' inputs also.

Thanks,

Ravi

[former_member217082]

Hi

But if the open line item is 1lakh and the new order value is 1.5lacs where the credit limit is 2lacs and the time horizon is 15days and the payment terms are 0002(30days credit) then customer will clear the amount only after 30 days only till then it will be an open line item . that means system should show an error . plz correct if i am wrong ?

How payment terms are linked in this credit management

how system will check then if payment terms are linked?

Regards

Srinath

Edited by: sri nath on Apr 16, 2008 10:16 AM

[former_member217082]

Hi all

Experts can i get answers

Regards

Srinath