In addition to creating and managing the credit limit, credit management can also control the flow of orders during the posting process.
Overview of functions:
- Control credit limit information in customer master
- Risk assessment, risk classification and risk groups
- Setting automatic credit limits
- Manually adjust long-term or temporary credit limits
- Credit limit check
Control credit limit information in the customer master
In the customer master under the “Credit and collection” tab, all information about the credit limit is shown. These fields allow a much more accurate classification and grouping of customers and their creditworthiness.
In addition to the classic credit limit, a time-limited credit limit can now also be deposited. In addition, you can group and manage multiple customers in a credit group.
Note: If a customer is in a credit group, the credit limit of the group always applies first. If the test is passed here, the system checks the limit on the customer. At the customer level, the temporary credit limit, if any, is now checked first. This hierarchy allows you to set up different credit limit levels.
If a temporary credit limit has been created for this customer, this field is also displayed under “”. You can also find the temporary credit limit in the action bar.
Risk classification, risk assessment and risk groups
A risk assessment is calculated by comparing customer information with each scoring group. You can enter scoring groups of different types, whose risk value is calculated by the system over periodic tasks.
The following types exist:
- Average payment days
- Customer since
- In business since
- Duration of outstanding sales in days (12 months)
- Average balance (12 months)
- Credit management group
- Account status
- Country
In addition, custom groups and values can be created, but these must be maintained manually at the customer.
The setting up of the scoring groups is under the module “Credit and collection > setup > risk > scoring groups“.
The sum of each risk value per scoring group gives a risk value for the customer. This can be used to determine which risk group the customer belongs to.
Risk groups are created using the “Credit and collection > setup > risk > risk classification” module.
In order to have a better overview and withdrawal of the risk groups in evaluations, you can enter a colored indicator.
Automatic credit limits
Setting up the automatic credit limits saves you from setting up and managing the limits per customer or group. To do this, in the module “Credit and collection > setup > risk > automatic credit limits“.
Depending on which risk group a customer falls, the credit limit is adjusted accordingly. For example, you can ensure that the next overdue payment automatically assigns the next, lower credit limit to a customer.
Manual credit limit adjustment for long-term or temporary credit limits
Under “Credit and collections > Credit limit adjustment > Credit limit adjustment”, you can create and adjust long-term and temporary credit limits for customers.
Clicking “New” creates a new group with a credit limit adjustment number. Under Credit Limit Adjustment Type, you can choose between credit limit and temporary credit limit, and a description can be entered. If the “Posted” check box is selected, the credit limits have been applied.
The “Approval Status” field indicates the workflow status of the journal.
You can create a temporary credit limit if for example, you need to create a new customer who wants to place a purchase order today but has not yet set a credit limit. In order to still be able to process orders, a temporary credit limit can be created. Another example would be a customer with an existing credit limit whose risk has increased. In this case, the temporary credit limit can be created for a specified period of time until a new risk assessment occurs.
Under Lines, the related customer, limit, and period are now selected. If a credit limit already exists for that customer, it is displayed accordingly.
You can also select and customize a customer group.
Clicking “Generate” in the action pane automatically generates the credit limit adjustment.
Defining blocking rules
In addition to the credit limits as benchmarks, you also have the option to define blocking rules.
To do this, go to the module, “Credit and collections > Setup > Credit management setup > Blocking Rules.”
You can set up the blocking rules for all customers, customer groups, individual customers, and the risk groups. By setting up blocking rules, clear conditions and rules can be established that provide even greater security in order creation.
Credit limit check – setting in the parameters
The credit and collection parameters can, among other things, set credit management checkpoints.
Credit management checkpoints instruct the system when to run the credit check logic.
Based on the above settings, the system is instructed to perform a credit check,
- 1. when the order confirmation is posted
- 2. when a proforma confirmation is created
- 3. when the picking list is posted
- 4. when a packing slip is posted.
The number of grace days tells the system how long it must wait before performing another credit limit check on this sales order.
In the above example, 10 days of goodwill are set up for confirmation. After the confirmation is posted, there are 10 days to pick the purchase order and invoice the packing slip before the credit check is triggered again.
If no grace days are specified, an exam is performed after each document status.
Here you find more about the entire Microsoft Credit and collections module.
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