SAP Credit Management Tutorial: OVA8

Credit Management is a process in which Company sells a product / service to customers on credit basis. The company collects payments from customer at a later time , after sale of product. The amount of credit  fixed  by a company for a customer is  called credit limit. The customer can Purchase the product from a company within the credit limit, and when the credit limit is crossed, order is blocked by the system.

Example- Consider a Company creates a credit limit for Customer of  200,000. Customer can purchase the product from the company on credit till the credit limit  200,000 is reached.Customer gives an Order # 1 of amount  100000. Again Customer gives an Order # 2 of the amount 1,50000. Now, the  total open order crosses credit limit of a customer.Order 2 is   blocked by the system due to credit limit reached.

  Here customer ordered a total of Rs. 2,50,000,while a customer credit limit is Rs. 2,00,000.Here order 2 is over to the credit limit of a customer. So the order 2 will be blocked by the system.Credit limit can be different for each customer .

Types of credit checks:

1. Simple credit check:  Simple Credit Check = Value of all Open Items + Value of the Current Sales Order. Note: Open Items are invoices for which company has not received payment.

 2. Automatic Credit check - Automatic credit check allows  you to  evaluate a transaction based on the credit rating of the customer, and ensures appropriate further processing of the transaction document. The credit limit check starts either automatically when you save a document or by selecting Check Credit. Automatic credit checks are of 2 types-

1. Static Credit Check (Check for  credit limit against total value of open sales order  + open delivery not invoiced + billing value of open billing document  not passed at accounting).
2. Dynamic Credit Check (Check for credit limit against open sales order not yet delivered + open delivery not invoiced + billing value of open billing document  not passed at accounting + passed but not paid bill amount).

Step 1) Set Credit Check

1. Enter T-code OVA8 in command field.
2. Click On New Entries button.

 Step 2)

1. Enter Credit Control.
2. Check credit Check option.
3. Enter Credit limit validity period.
4. Check Static option .
5. Check open orders and deliveries.

Step 3)

Click on save Button.