ORDER MANAGEMENT CREDIT CHECK / EXPOSURE SETUP

Order Management Credit Check / Exposure Setup

This document describes setup and parameters used for Credit Checking within 
Order Management.

Solution

Question and Answer

WHAT IS CREDIT HOLD?

In the Customer Standard form when the 'Credit Hold' check box is checked, all orders for 

the customer will go on Credit Check Failure hold without going through the credit check logic.

 By checking the 'Credit Hold' check box,

 a hold source is automatically created to put all that customer existing and future orders on

 hold, regardless of the credit worthiness of the customer. Similarly when the 'Credit Hold' 

check box is unchecked a hold source is automatically released and all that customer existing

 orders that are currently on hold will be released from the hold and no future orders for this 

customer will be placed on the hold.

The 'Credit Hold check box can be enabled at the customer level, and site level (Bill to Site).
When the 'Credit Hold check box is enabled on customer level, the 'Credit Check Failure hold' is applied on the order

header as soon as order is saved, and will prevent the order from booking. The Credit Check Failure hold is a 

generic hold and will prevent the order from booking if applied on the order header before booking an order.
If the 'Credit Hold check box is enabled at site level (bill to site), the Credit Check Failure hold is applied on the 

order lines of an order using this bill to site, upon saving. Orders with such lines on hold can still be booked 

by setting the value of the profile option OM: Prevent Booking for Line Generic Holds to No.

WHAT IS CREDIT CHECK?

In Customer Standard form when the Credit Check check box is checked, the Credit Checking program applies

 the Credit Check Failure hold after checking the credit worthiness of the customer and applies the hold only from

 booking onwards.

In summary, the 'Credit Check Failure hold' can be applied by Order Management's Credit Checking program, 

as well as by putting a customer or site on hold by enabling the Credit Hold check box.
The difference is, if a customer or site is put on hold, a hold is applied on the order/lines as soon as the order

 is entered. Whereas the Order Management Credit Checking program applies the hold only from booking onwards

 after checking credit worthiness of the customer.

CREDIT CHECKING PARAMETERS
This section explains credit checking parameters and how they affect credit exposure and the application of 

credit check holds when placing orders.

TRANSACTION TYPE SETUP



Navigation:
Order Management Responsibility:
Setup -> Transaction Types -> Define
The Credit Check Rule defined must be included in the transaction type used when placing an Order. 

Main Tab > Credit Check Rule area
The Credit Check Rule can be used at the following points in the Order Life Cycle. The same credit check rule,

 or different credit check rules, can be defined for all four (4) of these phases:
1. Ordering
2. Picking/Purchase Release
3. Packing
4. Shipping

PAYMENT TERMS SETUP



Navigation:
Receivables Responsibility:
Receivables -> Setup -> Transactions -> Payment Terms

OR

Navigation:
Order Management Responsibility:
Setup -> Orders -> Payment Terms
The Payment Term used when placing the order must be credit check enabled. Modify the Payment Term

 so that Credit Check Attribute is selected.

CREDIT LIMIT SETUP



Navigation:
Order Management Responsibility:
Customer-> Standard
Enter customer number and click on Find
Click OK to open the customer
In the Addresses tab, select the address for the bill to and click open to enable credit checking
Profile: Transaction tab
Enable the attribute Credit Check
Set your Payment Term value to the one where you enabled credit check

Next, click on Profile Amounts tab to set up your currency and your credit limits

Navigation:
Order Management Responsibility:
Customer-> Standard
Enter customer number and click on Find
Click OK to open the customer
In the Addresses tab, select the address for the bill to and click open to enable credit checking
Profile: Transaction tab
Enable the attribute Credit Check
Close the address
Click on the Profile Transactions tab at the Customer level, enable Credit Check

Next, click on Profile Amounts tab to set up your currency and your credit limits
Credit Limits need to be set up for one or more of the following:
1. Item category level
2. Bill To Site level (see note:365866.1 and version of file OEXUCRCB.pls)
3. Customer level
4. Party level (This level is applicable only if Credit Management is installed 11.5.10 and higher)
5. Operating Unit Default level
Credit Checking processes these levels in the order displayed above and will decide which limit to use based on the criteria shown in the following Note 365866.1
Please note changes have been made that affect versions of 11.5.9 and 11.5.10.2. The changes implemented in these and future versions enforce the following: credit checking has to be set at site level to enable customer level credit checking (the credit limits must be null at site level for this to work). This is explained in Note 365866.1.


CREDIT RULES SETUP



Navigation:
Order Management Responsibility:
Setup -> Rules -> Credit
Credit Check Rules defines how and when the credit rule is to be applied.
OPTIONS TAB
Choose the level of Credit Check; either sales order or sales order line
Choose the level of Credit Hold; either sales order or sales order line

CREDIT CHECK LEVELS: SALES ORDER LEVEL OR SALES ORDER LINE LEVEL

SALES ORDER
Order level credit check uses exclusively header level information ignoring different bill-to sites detailed at line level. Order level credit check is performed for the header 'Bill to Site'. When credit checking rules are defining using sales order as the credit check level, the credit check engine will examine order totals and evaluate credit exposure against the credit profile (Bill to Site) attached at header level. Holds will be always applied at header level.
Order level credit check is useful when order lines always have the same 'Bill To Site' as the order header.

SALES ORDER LINE
Line level credit check uses data at the sales order line level. If sales order lines are attached to different 'Bill to Sites' and the requirement is to use the specific credit profiles attached to those 'Bill to Sites', one should use sales order line level credit check.
The credit check engine will group all order lines belonging to the same Bill to Site and check available credit for each specific 'Bill to Site'.
When an order line fails credit check, any remaining lines grouped with the same 'Bill to Site' are also placed on hold.

Credit Check Holds can be placed at either the order or order line level when you use line level credit checking.
Additionally, use line level credit check when customer relationships are defined in the system and are actively used in Order Management. In this situation, we will be able to create a sales order whose lines could be attached to different Bill to Sites owned by different customers.

OVERRIDE MANUAL RELEASE
Decide if you are using Override Manual Release. If you are, choose the number of Days to Honor Manual Release.

The Override Manual Release checkbox controls whether the credit check process will be triggered even if holds were released manually or not.
The Override Manual Release checkbox, used in conjunction with Days to Honor Manual Release field, enables you to define the duration (number of days) you will forego additional credit checking if an order or line credit check hold is released manually. Manually released holds are honored only during processes that are performed after Booking such as Picking, Packing, and Shipping.

If Override Manual Release is enabled, the credit checking process will validate if the release date is within the interval defined by the value of Days to Honor Manual Release. If the value is within the range defined, then manually released holds will be honored and additional credit checking is not performed. If the value is not within the range defined, credit checking can occur again and credit check holds can be applied if the order or lines
fail the credit check process.

For example, suppose you have defined a Credit Check Rule in which you have enabled the Override Manual Release check box, with a value of 15 within the Days to Honor Manual Release field. Assume that this credit check rule is assigned to the transaction type as a Credit Check Rule for Booking and Shipping. If you manually release an order or line from credit check hold after Booking, and if you ship the order or order line within 15 days, Order Management will not enable credit checking to occur again during Shipping. However, if you ship after day 15, then Order Management will enable the credit checking process to be invoked again.

MULTI CURRENCY CREDIT CHECKING 
If you are using Multi Currency Credit Checking, decide which Currency Conversion Type you will be using.

EXPOSURE TAB



USE PRE-CALCULATED EXPOSURE
If Credit Check Rule is set at the Sales Order Level, the use of Pre-Calculated Exposure is optional and can be unchecked.
If Credit Check Rule is set at the Sales Order Line Level the Pre-Calculated flag cannot be unchecked, it is mandatory.

The use of Pre-Calculated Exposure was incorporated to improve performance especially when using the Line Level credit checking.
When using the Line Level credit checking, the credit check engine will evaluate the available credit for each specific Bill to Site on the order lines, group all order lines belonging to the same Bill to Site, then check available credit for each specific 'Bill to Site'.
In Order Level credit checking the credit check engine will examine order totals and evaluate credit exposure against the credit profile (Bill to Site) attached at header level only.

There are two options on how to perform credit checking:
On-Line Credit (Pre-Calculated = unchecked) Checking
and
Pre-Calculated Credit Checking

On-Line Credit Checking calculates total exposure by referring to the underlying transaction tables each time credit is checked.
Pre-calculated Credit Checking alleviates the performance burden associated with the On-Line method.
Accordingly, one table is used to summarize all relevant transaction events. When checking credit, the system needs only to refer to one table to derive all the information necessary to determine whether the order passes the credit checking procedure. In this way Pre-Calculated exposure saves lot of performance.
Having credit checking at Booking, Shipping and all the possible levels and at the same time trying to calculate the exposure at runtime will badly affect the order processing.

Using the Pre-Calculated exposure option, credit checking will validate exposure against balance information stored in a summary table. The summary table is updated by submitting the Initialize Credit Summaries concurrent program. Order Management enables you to periodically rebuild a credit exposure image (orders, invoices and payments) for all customers or customer sites for all possible credit rule definitions.

When you submit the Initialize Credit Summaries table concurrent program, changes to customer or customer site credit exposure are calculated and updated, based upon your exposure setup for each credit check rule defined. Exposure information is stored in a summary table so that the credit check process can refer to summary credit data as opposed to having real time transactional data, reducing the effort needed to evaluate credit standing.

The frequency with which you run Initialize Credit Summaries will be based on ones business need. If the requirement is to have customer's credit exposure to be very close to the online credit exposure calculation, then one can run it frequently considering that one of the parameters for Initialize Credit Summaries is to Lock Tables. The tables to be locked are AR tables, so one has to make this decision wisely, as running Initialize Credit Summaries may impact AR application users.

Since this prevents the exposure from being calculated in real time, the Initialize Credit Summaries process must be run on a regular basis to obtain latest account balances from Accounts Receivable.

For Example:
The Initialize Credit Summary Process has been run.
The Credit Exposure Report shows that the Customer has an available balance of <$50> (i.e. this amount is owed) and has an overall limit of $100 at the site level. Orders booked for this customer will be placed on Hold.
The customer now makes a cash payment of $75 which is recorded and cleared in Receivables.
At this point a new order is created and booked. This new order is place on credit check hold. Why? Running the Credit Check Exposure report for the customer and credit rule shows that no change has been made to the available amount. If at this point you then run the Initialize Credit Summaries report followed by the Credit Exposure Report, you will see that the balance Will change. And in this example, a credit amount of $25 is available. The Initialize Credit Summary process has updated the credit tables in Order Management and the newly calculated balance will be used to determine if an order should be placed on hold.

INCLUDE EXTERNAL CREDIT EXPOSURE
When Include External Credit Exposure is checked in the Credit Check Rules form, the imported exposure amount is always included in the overall exposure even if the Scheduled Shipping Horizon Days are specified. If you want to consider Scheduled Shipping Horizon Days for the imported credit exposure, you will need to consider the Scheduled Shipping Horizon Days in the exposure calculation before importing it.

INCLUDE OPEN RECEIVABLES BALANCE / INCLUDE UNINVOICED ORDERS
Either one or both of the attributes must be selected (the application will ensure that at least one of these is chosen).
*Negative Number: Includes past due, current, and future open receivables up to X days beyond the current date.
*Positive Number: Includes open receivables with invoice dates X days earlier than the current date.
*No Value: Includes all open receivables.

INCLUDE OPEN RECEIVABLES BALANCE
The Open Receivables balance will be used to calculate the credit amount available to the customer. The balance used is the customer balance taking into account any cleared payments. If Pre-Calculated flag is set, the receivables balance used will be the balance of the account when the Initialize Credit Summary process was last run.

INCLUDE PAYMENTS AT RISK
Selecting this attribute will make the system also include in the customer balance, payments that are at risk, i.e. payments that have not yet been cleared.

OPEN RECEIVABLES DAYS
The Open Receivable Days field indicates the range of dates for open receivables
that will be considered in this credit check rule.

INCLUDE UNINVOICED ORDERS
If selected, the un-invoiced orders will be included in amount of credit that is available. For example, un-invoiced orders that have been Booked will reduce the amount of credit available.
Including un-invoiced orders in credit checking includes the order that have been Booked, Picked, Shipped, Interfaced to AR, and Closed from Order Management but not Invoiced from AR.
If an order line has been interfaced to the Receivables interface table but has not been invoiced yet, the Order Management credit check engine will include this line amount as part of the un-invoiced order amount. On 11.5.10 one must have patch 6359269, the 30 NOVEMBER 2007, ORDER MANAGEMENT (11.5.10) ROLL UP PATCH or higher, for credit check program to consider the order lines that have been interfaced to the Receivables interface table but have not been invoiced yet.

INCLUDE FREIGHT AND SPECIAL CHARGES
If you enabled Include Uninvoiced Orders, you must then indicate whether to include Freight and Special Charges for uninvoiced orders when performing credit checking.
Select the Freight and Special charges check box to include Freight and Special
Charges.

INCLUDE TAX
If you enabled Include Uninvoiced Orders, you must then indicate whether to include Tax information for uninvoiced orders when performing credit checking. Select the Tax check box to include Tax information for uninvoiced orders. Credit checking calculations on open receivables always include tax amounts and are not affected by the Include Tax option. If the performance of credit checking requires improvement you can toggle off this option.

INCLUDE ORDERS CURRENTLY ON HOLD
If you enabled Include Uninvoiced Orders, you must then indicate whether to Include Orders Currently On hold. Select the Include Orders Currently On hold check box to include orders on hold within the exposure calculation for your credit rule.

INCLUDE RETURNS
If you enable Include Uninvoiced Orders, you must then indicate whether to Include Returns. Select the Include Returns check box to include returns within the exposure calculation for your credit rule.

SCHEDULED SHIPPING HORIZON DAYS
Indicate the number of scheduled shipping horizon days for your credit rule for uninvoiced orders to be included in your total credit exposure when performing credit checking.
Note: If the Use Pre-calculated Exposure check box is checked and the Include Uninvoiced Orders check box is checked, then Shipping Horizon Days is protected against update and is NULL.

CREDIT EXPOSURE REPORT

The following are examples of how credit rule setups impact exposure as shown in the Credit Exposure Report.
The receivables balance for the customer is <5.61> - credit
Value of Orders Booked but not Invoiced is $405 - this includes a single order for $45 that is on credit check hold. The credit holds have been cleared for the other orders.

MAXIMUM DAYS PAST DUE
If Credit Checking rule has a maximum days past due = 0, then orders entered for customer with invoices due on day 0 (sysdate) will fail in credit checking and will be held by Credit Check Failure hold.
The Maximum Days Past Due field value specifies the number of days that you will allow an invoice to be past due - before holding the customers orders. During the credit checking process, Order Management will verify that no invoices for the customer have been past due beyond the number of days you specified with this field. If there are any past due invoices, the order is placed on Credit Hold.

EXAMPLE 1.
==========
Do NOT Use Pre-Calculated Exposure
Do Not Include Open Receivables Balances
Include Uninvoiced Orders
Do Not Include Orders Currently On Hold
| |---------------Credit Limit Currency ---------------|
| Overall Limit Exposure Available
--- --------------------- -------------------- -------------------
USD 47.00 360.00 <313.00>


EXAMPLE 2.
==========
Do NOT Use Pre-Calculated Exposure
Include Open Receivables Balances
Include Uninvoiced Orders
Do Not Include Orders Currently On Hold

| |---------------Credit Limit Currency ---------------|
| Overall Limit Exposure Available
--- --------------------- -------------------- -------------------
USD 47.00 354.39 <307.39>


EXAMPLE 3.
==========
Do NOT Use Pre-Calculated Exposure
Include Open Receivables Balances
Include Uninvoiced Orders
Include Orders Currently On Hold

| |---------------Credit Limit Currency ---------------|
| Overall Limit Exposure Available
--- --------------------- -------------------- -------------------
USD 47.00 399.39 <352.39>


EXAMPLE 4.
==========
Use Pre-Calculated Exposure
Include Open Receivables Balances
Include Uninvoiced Orders
Include Orders Currently On Hold
At the point a number of orders have been created and booked in Order Management. The following demonstrates how the Initialize Credit Summary process impacts Credit Exposure.
1. Value of orders created in OM, but not interfaced to AR is $225.
2. Initialize Credit Summary process is executed
3. Credit Exposure report shows exposure as $219.39 ($225 less $5.61 credit balance in AR)
4. New Orders created in OM to the value of $180
5. Credit Exposure Report re-run and this still shows the credit exposure as $219.39
6. Initialize Credit Summary Process is executed
7. Credit Exposure Report re-run and this now shows the credit exposure as $399.39 ($225 + $180 less $5.61 credit balance in AR)

CREDIT EXPOSURE PRIOR to Initialize Credit Summary Process
| |---------------Credit Limit Currency ---------------|
| Overall Limit Exposure Available
--- --------------------- -------------------- -------------------
USD 47.00 219.39 <172.39>

CREDIT EXPOSURE AFTER Initialize Credit Summary Process
| |---------------Credit Limit Currency ---------------|
| Overall Limit Exposure Available
--- --------------------- -------------------- -------------------
USD 47.00 399.39 <352.39>

=============================

REPORTS / PROCESSES

Initialize Credit Summaries Table Concurrent Program
Order Management enables you to periodically rebuild a credit exposure image.

Credit Check Processor Concurrent Program
The Credit Check Processor program can be run on demand to re evaluate Booked orders that have not been shipped yet.

Credit Exposure Report
The Credit Exposure Report can be used to analyze your customers total credit exposure.