Describing SAP Credit Management Scenarios

SAP Credit Management in S/4HANA Cloud is an advanced solution designed to help organizations manage their credit risk more effectively by automating credit processes and providing comprehensive insights into customer creditworthiness. This solution integrates seamlessly with other SAP modules, ensuring a holistic approach to managing credit risk. By implementing SAP Credit Management, businesses can reduce the risk of bad debt, focus on profitable customers, and streamline the credit-checking process.

SAP S/4HANA Cloud for Credit Management is a tool that helps businesses handle the risks associated with lending credit to their customers.

Here's how it works:

• Consolidates data: It brings together important data from both inside the company and outside sources to evaluate how trustworthy a customer is when it comes to credit.
• Automates decisions: SAP Credit Management can automatically decide whether to approve or deny credit to a customer by looking at their credit score and other relevant details.
• Improves accuracy: By using data from credit agencies, the tool can make more accurate assessments of a customer’s credit risk.
• Centralizes credit management: Even if a company has various systems spread out, this tool allows them to manage all credit matters from one central place.

This makes it easier for companies to follow a consistent credit policy and helps them make better credit decisions.

Traditionally, credit management involved a lot of manual processes and trigger systems. Organizations often relied on spreadsheets and legacy systems, which could be inconvenient and prone to error.

In the past, SAP developed two different credit management solutions:

• The first solution, called FI-AR-CR Credit Management, relies on customer account records. This older system doesn't support automated customer scoring, so businesses had to perform many steps manually, outside of the software, to determine accurate credit limits and categorize customers based on risk. This is SAP's traditional method for managing credit.
• Later in 2004, SAP introduced a new credit management solution as part of SAP Financial Supply Chain Management (FSCM). This updated system aimed to handle the entire credit management process within SAP, eliminating most of the manual, offline tasks. It allowed for easier data integration, such as importing credit ratings from agencies like Moody’s or D&B, and financial information from customer accounts. This approach made credit assessment more accurate and comprehensive.

There are several typical scenarios where SAP Credit Management can be applied:

• Credit Risk Assessment: Continuously assess the risk associated with customer credit based on up-to-date financial and transactional data. Usually, the check is performed on the level of the credit segment. For example, the following credit segment data can be examined in the check steps: credit limit utilization, credit exposure, highest dunning level, and oldest open item.
• Credit Limit Management: Automate the process of setting and adjusting credit limits for customers based on their creditworthiness and payment history.
• Order Processing with Credit Check: Automatically perform credit checks during order processing to ensure orders are within approved credit limits.
• Collections Management: Proactively manage collections and follow-up processes to reduce overdue receivables.
• Dispute Management: Facilitate quick resolution of disputes to avoid disruptions in the order-to-cash process.

Advanced Credit Management in S/4HANA Cloud goes beyond the basics. It leverages cutting-edge technologies and features including

• Real-Time Credit Checks: Perform credit checks in real-time during order processing to minimize financial risk and quickly respond to changes in customer credit status.
• Credit Scoring: Use advanced algorithms and data from various sources to generate accurate credit scores for customers.
• Risk Classification: Classify customers into different risk categories based on comprehensive risk assessments.
• Integration with External Credit Agencies: Integrate with external credit rating agencies to incorporate external credit data into credit risk assessments.
• Advanced Analytics and Reporting: Utilize SAP's powerful analytics tools to gain deeper insights into credit exposures, trends, and potential risk areas with dynamic reporting and dashboards.
• Automation of Credit Management Processes: Automate routine tasks such as credit checks, risk assessments, and credit limit adjustments using predefined rules and workflows.
• Predictive Analytics: Use predictive analytics to anticipate changes in customer creditworthiness and adapt credit policies proactively.

The business benefits of Advanced Credit Management are a reduction of risk of bad debt, or the focus on reliable and profitable customers. Furthermore, you can easily check credit worthiness and thereby accelerate the process of checking a customer credit limit. You can also enter sales order and manage blocked orders.

Advanced Credit Management also does the calculation of a rating, risk class, and credit limit for new and existing customers.

The Advanced Credit Management is part of the overall sales cycle that ranges from sales, shipping, credit management through receivables processing. SAP Credit Management is integral part of the process and seamlessly integrated.

In contemporary finance management, credit management has emerged as a key domain that significantly benefits from the integration of SAP Business AI. This innovative technology facilitates a range of functions specifically tailored for finance operations, enhancing traditional processes through the application of intelligent technologies. These AI-driven tools can be seamlessly integrated with other technologies like situation handling and process automation, thereby streamlining workflows and increasing overall efficiency. The SAP Business AI portfolio encompasses various use cases designed to optimize credit management, including the approval of credit limit requests, documented credit decisions, and adjustments to credit limits, risk classes, and scores. By leveraging these advanced capabilities, organizations can achieve more accurate and efficient credit management practices, leading to improved financial decision-making and performance.

SAP Credit Management within the S/4HANA Cloud delivers a comprehensive, integrated solution to manage credit risk efficiently. It automates manual processes, integrates with other SAP modules, provides real-time insights, and offers advanced features like predictive analytics and integration with external credit agencies. This helps organizations mitigate credit risk, improve cash flow, and enhance customer relationships. By focusing on advanced credit management, businesses can stay agile and make more informed credit decisions.