Is it time to implement SAP FSCM Credit Management?

10 December 2010

Mark Chalfen

Mark Chalfen

Former SAP S/4HANA Global Lead

Standard Credit Management has been around for a long long time. It is a stable solution that is widely used and provides a good tool for most clients that use it. The point people are missing is that the SAP FSCM solution takes Credit and Risk Management to another level. The benefits are so significant that I believe the product is a must have.

The main benefits can be broken down into three areas...

  1. Enabling you to make better decisions
  2. Full integration of the process
  3. Use of internal data for credit analysis

To fully understand the business benefits of SAP FSCM Credit Management, it is important to review how standard SAP Credit Management is used and the associated processes.

Common usage of SAP Credit Management

A common customer will load external data from credit rating companies into their Credit Masters. This will enable them to categorise the customer into a Risk Category. After this there will then be some manual work to derive a credit limit based. This process needs to occur at set intervals to ensure the customer has the correct Risk Category.

Aside to this, there are ad-hoc processes where a credit limit is reviewed, and the external credit rating company will re-classify the customer. Within SAP it is not easy to identify the number of times the customer went above its agreed credit limit, how many times the Credit Limit was changed and whom and when this was requested. 

Enabling you to make better decisions: This should be the key objective for a SAP FSCM Credit Management implementation.  Within SAP FSCM you have the ability to use actual SAP data to set credit limits for customers or to group your customer into a risk category.

Example - You may find that your external credit rating company has a good score, as the customer pays its other suppliers in 35 days. In isolation this would be used to provide a good credit rating for the customer and a good credit limit. However if you analysed your SAP data and saw that the same customer  was paying you on say 65 days, you would be less inclined to give them a good credit rating, you would give them a poor score, and would be hesitant to provide them with a good credit limit. Comparing actual payment terms against the terms supplied from external credit ratings could help you improve the relationship with the customer. You could share this information with the Collections team and the sales team to re-negotiate the agreed payment terms and try and reduce their average payment days down to align with that of your competitors. Remember, high levels of bad debt are really just an historic trend. No one knows what is round the corner and so implementing an enhanced solution with more accurate information allows you to make better decisions for your business.

Full integration of process - The traditional SAP Credit Management solution requires a high degree of manual processing.  A key benefit within SAP FSCM Credit Management is the ability to request a credit limit change from within SAP FSCM. This is a simple case that records the request for a new Credit Limit and is easy to approve. Further to this the process can be integrated to propose Credit limits based on both internal and external data. This removes the manual offline calculations and provides a consistent approach. Data from external credit agencies can be automatically uploaded into SAP, and interfaces can be built. The manual steps of combining many external credit agency scores into a single score is also removed within the new functionality.

Use of internal data for credit analysis - This is the most commonly used benefit for SAP FSCM Credit Management.  This is the most noticeable difference between the two solutions and the one that grabs the headlines and rightly so. The use of internal SAP data is a major step forward for both credit rating and credit limit proposals. A customer’s credit rating could change dramatically within SAP FSCM for late payments, high levels of credit exposure and high dunning levels, something is missed by external Credit rating agencies.


You can measure the benefit of reducing the manual effort of creating new credit limits and reviewing changes, however you cant see the full benefit around future bad debt.  Comparing your current bad debt for a fiscal year only indicates how you performed against a previous year. This cannot serve as an indication as to the future trends of bad debt.

Being able to quickly identify when a customer changes its payment behaviour, or repeatedly asks for a Credit Limit increase is something that you can track within SAP before the customer turns into a bad debt. It is also a recommended approach to analysis the customers that became a bad debt, to see if you can spot any trends and build warnings against these within your process. By changing your processes and using actual data will enable you to make better decisions and avoid potential bad debts.

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About the author

Mark Chalfen

Former SAP S/4HANA Global Lead

Mark tells it straight - as an ex-boxer, what else would you expect?  Both his knowledge and experience of SAP products allow him to cut to the chase dispelling myths and hearsay.

As a result of working closely with various SAP Finance Product Management teams on product development, Mark understands these products inside out. This depth of understanding has led to him become a ‘thought leader’ in his field; after all, it is not often SAP consultants have helped shape and develop the very product they are selling.

Having such a strong relationship with SAP alongside being an SAP Mentor and Moderator means that Mark has an extensive network within SAP. For clients, this relationship proves to be a huge advantage and leads to configuration issues being resolved rapidly.

Mark has worked on short proof of concepts through to year-long multi-million pound global roll-outs. However, no matter how large or small the project, the true value Mark brings to his work is in the guidance he provides to senior stakeholders. In essence, he assists them to implement more effective processes and drive better behaviours within their finance teams.

Helping organisations transform their business with SAP S/4HANA is Mark’s current focus. The benefits of S/4HANA are numerous, including the simplification of tasks, embedded analytics and improved user engagement. Whilst the eventual move from SAP Business Suite into S/4HANA is inevitable, the journey to it is not always clear. Mark’s ability to understand an organisation’s needs coupled with his deep understanding of S/4HANA provides clarity and eases their transition.

Bluefin and SAP S/4HANA - welcome to the one horse race

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