Credit Management: A Comparison Of SAP FSCM Credit Management And Credit Management In S/4HANA

The choice between SAP FSCM (Financial supply chain management) and Credit Management in S/4HANA depends on a firm’s specific requirements, but both offer advanced features for managing credit risk, improving cash flow, and achieving corporate prosperity. Credit assessments are increasingly essential for modern company requirements, especially in transactions with customers from financially precarious industries or countries with political unrest or restrictive exchange rate policies. Creditworthiness assessments are vital in modern company operations.

Table of Contents

Challenges in Credit Management

Inconsistency in credit policy: no single source of truth, causing customer treatment varying across business units.
Cross-department collaboration: information required for credit decisions spread across departments, requiring time-consuming processing.
New customer treatment: Lack of in-house score for new customers.

The study compares SAP Financial supply chain management and S/4HANA’s credit management capabilities, focusing on reducing credit risk and ensuring punctual payments. Both solutions offer comprehensive solutions, but SAP historically had two solutions, while both provide effective solutions.

ECC FI-AR Credit Management
SAP FSCM Credit Management.

Legacy vs. Modern Approach:

SAP Financial Process Management for Supply Chains Credit Management is an independent product that helps with managing limits, risk assessment, and credit scores. Credit management in S/4HANA, however, is an updated method that incorporates credit management, thanks to the development of SAP’s flagship ERP system. By consolidating credit records and improving communication between the sales, credit, and finance teams, makes it easier for different departments to work together. S/4HANA’s Credit Management module integrates with other modules, improving decision-making processes and real-time data exchange.

ECC Credit Management vs FSCM-Credit Management

SAP Credit Management: Key Differences and Examples

FI-AR Credit Management: System checks against a limit determined.
FSCM Credit Management: Cross-system checks against calculated ratings and limits.
Migration required from FI-AR Credit Management to S/4HANA Credit Management Basic edition.
SAP Credit Management Config was created based on existing FI-AR Credit Configuration data.
BP role for Credit Management: Choose a rule for calculating score, risk class, and check rule.
FI Data FI-AR, FI-CA, and Other SAP Business Partner monitor credit exposure.
Automated Customer Scoring, Ratings, and Limits not available.
External Credit Information not available.
XML-based Credit Information Service not available.
HANA view reads AR Exposure in real-time on the fly.

SAP S/4HANA is a credit management solution that uses FSCM principles and does not require additional licenses. However, clients need to purchase additional functionality like scorecards, automatic limit determination, workflow automation, and integration of external credit information. S/4HANA features include integrating external credit information, scoring, risk class definition, credit limit calculation, and customer categorization. It also provides a robust credit scoring capability, allowing businesses to comprehensively assess potential, new, and existing customers and make timely decisions on terms and conditions. Business Partners (BPs) serve as de facto customer and vendor objects within S/4HANA.

SAP FSCM Treasury and Risk Management Module

Biller Direct Integration

Manages financial transactions and risk.
Provides a web-based invoicing and payments module.
Integrates with the accounting system for electronic payment and settlement processes.

Cash Management and Liquidity Management (FIN-FSCM-CLM)

Enhances Forecasting and Liquidity Position Analysis

Preconfigured for real-time reporting.
Enhances reaction to cash and liquidity positions.

SAP Collections Management (FIN-FSCM-COL)

Enhances collection productivity by identifying problem accounts or issues.

Credit Management (FIN-FSCM-CR)

Accelerates credit managers’ ability to extend or reject customer credit limits.

Dispute Management (FIN-FSCM-DM)

Provides 100% transparency for accounts receivable or debt department for customer invoicing and billing issues.

In-house Cash (FIN-FSCM-IHC)

Allows visibility of net accounts, group cash receipts and payments, and reduces transaction costs for intercompany payments.

S4HANA 1610, FSCM Credit Management

Credit Management Process-Credit Segment Overview

Calculates credit limit and conducts checks at business partner level.
Indicates current partner status.
Groups business partners based on user requirements.
Sets conditions for credit limit and score calculation.

Organization Structure in Credit Management

Credit Control Area: Organizational units responsible for granting and monitoring credit.
Credit Segment: Organizational units responsible for granting and monitoring credit.
Risk Class: Determines the risk class of a business partner from the partner’s score automatically.
Credit Segment: An authorization object allowing countries to define/control access to users by credit segment.

Credit Management Data

Scoring rule: Used to calculate the customer’s risk score.
Customer risk score: The result of the last scoring rule run.
Risk class: Derived from the customer’s risk score.
Credit Limit: The maximum amount limit offered to customers for credit service.

Credit Management Standard T codes and Reports

UKM_BP: Master data of Business Partner.
SCASE: Used to view disputes in Credit Management.
UKM_MASS_UPD1: Credit Rating can be maintained internally or externally.
UKM_MALUS_DSP: Used to know the credit exposure of many BPs at mass.
UKM_VECTORS: Knows payment behaviour summary.
UKM_COMMITMENTS and UKM_TRANSFER_ITEMS: Used to transfer open items from R3 system.

Credit Management Benefits

Supports collection and processing of credit exposure information from SAP and non-SAP systems.
Automatic updates of credit scoring information.
Automation of credit management processes through scoring and rating rules.
Supports integration of external credit information providers via standard XML interfaces.
Real-time integration with external information providers for accurate customer scoring and credit insurance requests.
Credit limit checks at various time points during sales and distribution processes.

Conclusion:

The choice between SAP FSCM Credit Management and Credit Management in S/4HANA depends on your firm’s unique needs. Both offer advanced features, but SAP FSCM provides tools to handle credit risk, improve cash flow, and achieve corporate prosperity. Adopting the right solution is crucial for financial stability and growth.

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Credit Management: A Comparison of SAP FSCM Credit Management and Credit Management in S/4HANA

Challenges in Credit Management

Legacy vs. Modern Approach:

ECC Credit Management vs FSCM-Credit Management

SAP FSCM Treasury and Risk Management Module

Cash Management and Liquidity Management (FIN-FSCM-CLM)