SAP Receivables Management is a key part of an optimized order to cash process based on FI-AR. With the help of the automated process, Receivables Management delivers high-quality customer interaction reports.
Reporting allows operation teams to focus on key customer accounts. This indeed drives down bad debt write-offs by managing credit relationships.
It also improves DSO and working capital with tools to collaborate with your customers on payments.
Credit management is defined as a risk validation process. In this, a company sells products and services to a customer but collects money after a certain time.
Based on market research and reports from agencies, the company will fix some credit amounts for a customer. Hence, this is known as a Credit Limit.
Further, a customer can purchase or get services only within the credit limit. To clarify, if the customer’s Purchase request is more than the credit limit then the system either blocks it or sends a request for advance payment.
You can maintain the credit limit for a customer in SAP S4 HANA Finance using transaction code FD32. You can have different credit limits for different customers.
For example, you have a credit limit of 1, 00,000 INR set for a customer. Now customers can purchase products/services up to their credit limit.
Let’s say a customer placed their first order worth 60,000 INR. At this time this order is successfully placed as it is within the credit limit.
However, the next order is placed worth 50,000 INR. Now, this time the order will be blocked as it’s exceeding the credit limit.
So, to get the product, the customer has to pay some advance or purchase with only the available balance credit i.e 40,000 INR.
There are two types of Credit Management available in SAP S/4HANA Finance.
The system compares a customer credit limit with the total of all open item values and current sales orders. When the credit limit exceeds, the system sends a warning message to the customer.
Conclusively, in a simple credit check, the exposure of a customer is the sum of all open item values at any point in time. Likewise, it is the sum of the current sales order values.
This type of credit check provides extra credit facilities to the customer. In this type even if a customer exceeds his credit limit, he can still place an order. This is because of his good purchase/payment history.
There are two types of automatic credit checks.
We also have some important aspects of Credit Management. Like,
SAP S/4 HANA provides an integrated, automated, and collaborative environment for collecting all accounts receivables. This further gets complete with the integration of all relevant orders, invoice bills, and credit information. It falls under the collections management capability of SAP collections and Dispute Management.
It is a great benefit to be effectively integrated with the rest of the organization through S/4 HANA Finance. Implementation of SAP collections Management is as robust as any third-party A/R system.
Dispute Management helps in identifying and documenting disputes earlier in the payment cycle, and tracking and monitoring reasons that drive Sales Outstanding. This system is also fully integrated with SAP FI.
SAP Receivables Management is a key part of the S/4 HANA Finance architecture. It helps your finance operations team to be ready for the digital business resolution related to sales and accounts receivables. With the amalgamation of its efficient methodologies like dispute, credit, and collection you have a stronghold over the complete accounts receivables.
This, furthermore, gives better management of the financial obligations of the business.
Learning this topic is equally important for you as a finance person in SAP. This truly comes under the duties of an SAP S/4HANA Finance Consultant.
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