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questions about credit management

cathy_liang
Contributor
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Hi experts,

Pls help. Thx.

Q1: Is only static check proper for the below scenarios?

Scenario1: Customer pay deposit before production & pay the rest before delivery. The deposit always are entered in SAP system upon receipt of it.

Scenario 2: Customer need to pay before delivery. The prepayment may not be entered in SAP system immediately. In other words, it may await that billing document is created.

Q2: What are the meaning of "open receivables" as well as "net document value" in the below explanation from SAP ("check credit limit" in OVAK)? Appreciate illustrating.

"In static and dynamic credit checks, the credit exposure results from the total of open orders, open deliveries, OPEN RECEIVABLES and open items."

"In simple credit checks, the credit exposure results from the total of the NET DOCUMENT VALUE and the value of the open items."

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Former Member
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Hi Cathy.

Q2: What are the meaning of "open receivables" as well as "net document value" in the below explanation from SAP ("check credit limit" in OVAK)? Appreciate illustrating.

*Open items (accounts receivable)

The open order value is the value of the order items which have not yet been delivered (Sales orders being created).

The open delivery value is the value of the delivery items which have not yet been invoiced (Delivery orders are created).

The open invoice value is the value of the billing document items which have not yet been forwarded to accounting (Invoiced but but not posted to accounting).

The open receivables represent documents that have been forwarded to accounting but not yet settled by the customer (Yet to receive payment from customer).

Net document value is the total combined value of the following documents:

1 Open orders

2 Open deliveries

3 Open billing documents

4 Open items (accounts receivable)

Hope this is helpful.

Regards,

Arun.S

cathy_liang
Contributor
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Hi Arun,

So, open receivables means open items, right?

Former Member
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Dear Cathy,

No, Open Receivables is not Open items, It is the amount which we have to receive from the customer. For example : Customer has ordered 100 Qty of Goods and we have sent that to customer and generated the billing, but payment is yet to come. So that amount will be Open receivables.

For answering your Question number one for both the scenario , i will have to tell you the main difference between Static and Dynamic Credit check. And the only visible difference( though there are more) is the Credit Horizon and the dynamicity of Open Order Value.

Scenario1: Customer pay deposit before production & pay the rest before delivery. The deposit always are entered in SAP system upon receipt of it.

In this scenario Static Credit check can work not an issue, depends upon where you have put the credit check, i.e. At sales order, at Delivery or at PGI. If its at PGI, Then Static is only good. else you can use any.

Scenario 2: Customer need to pay before delivery. The prepayment may not be entered in SAP system immediately. In other words, it may await that billing document is created.

as per my understanding the difference between your scenario 1 and 2 is only the open order value i.e in Scenario 1 Customer has already paid the advance and in 2 customer is paying afterwards. You can here also use Static. It all depends on how you run your business.

Thanks,

Raja

cathy_liang
Contributor
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Dear Raja,

How nice to receive your advice! Pls help further. Many thanks!

Related to Q1: If using static credit check, which check credit is proper to use in OVAK (check credit)? U know, there're "simple credit check" & "automatic credit control" basically in OVAK. According to Arun's advice, it seems no difference between those two checks. What I mean is the check scope is the same for them, open orders, etc.

Related to Q2:

Open receivables mean billing documents have been posted to accounting. While open items mean billing document have NOT been posted to accounting. Pls correct my understanding if I'm wrong.

Former Member
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>

> Dear Raja,

>

> How nice to receive your advice! Pls help further. Many thanks!

> Related to Q1: If using static credit check, which check credit is proper to use in OVAK (check credit)? U know, there're "simple credit check" & "automatic credit control" basically in OVAK. According to Arun's advice, it seems no difference between those two checks. What I mean is the check scope is the same for them, open orders, etc.

It completely depends on how you run your business. For example if you just want to run the credit check and give Warning then select A, and if you want to do Delivery block then you can give C. There is slight difference and that is the Time Horizon.

for example : if i have given time of 30 Days to customer, in this time period Open orders value wont be consider in Automatic credit check and in other case it will be taken care of,

> Related to Q2:

> Open receivables mean billing documents have been posted to accounting. While open items mean billing document have NOT been posted to accounting. Pls correct my understanding if I'm wrong.

Yes you are correct....

Thanks,

Raja