It outputs a warning message, does not prevent from saving the order but blocks it.It outputs an error message preventing from saving the order.Take for instance a simple process flow through which the way credit management is handled by SAP can be understood:Īssuming that this sales order leads to the credit limit being exceeded for this customer, the system now responds in one of two ways ![]() The credit representative is automatically alerted to a customer’s critical credit situation as soon as order processing starts and he may be able to check a customer’s credit situation quickly and reliably, and, in line with the appropriate credit policy, to decide whether the customer should be granted credit.Automatic credit limit checks as well as the points at which they have to be carried out can be specified.Facilities like the credit master sheet or early warning list help you monitor the customer’s credit situation.This is especially important if we do business with customers in financially unstable sectors or countries, or trade with countries that are politically instable or that adopt a restrictive exchange rate policy.Īssuming that we already have SD and AR implemented, credit management can be broadly used to: Finally, contributing to maintaining healthy company profits.For this, we have to determine the financial situation of a customer or group of companies, recognize early warning signals, and make decisions more easily with reference to the credit assignment.Promoting good customer relations and prompt payment.Managing the company’s largest asset – Debtors.The various roles of this policy are:** Maintaining good cash flow This credit management forms a part of Sales and Distribution (SD) as well as Account Receivables (AR). For some customers, the risk perceived may be high such that we may demand payment in advance. So, according to the risk foreseen, the amount and time of credit granted changes. But, this payment at a future point of time involves risk. It is as important as the sales and profits on the P&L statement but should not deter excellent customer service.Ĭredit management is just like telling our customers that they need not pay immediately, they can pay at a future point of time after receiving the goods or services. ![]() Good credit management forms an essential part of the organization’s strategy. Organizations today are recognizing the importance of this aspect and hence, most of them have a dedicated system for this too. One aspect which goes a long way in helping to have well managed cash flows is credit management or credit policy towards customers. ![]() Outstanding receivables or bad debts can have a considerable impact on a company’s performance. Most businesses are closed down because they become insolvent due to improper management of cash flows. Regardless of the type of business involved in, one factor which is most important to keep it running is cash. The page explains the importance of credit management to a business and basic settings needed to be done to set up credit management in SAP. Please choose a title and click "Save" when you're done.
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