White Paper. Credit Checking. Prepared By: Mohit

Transcription

1 White Paper on Credit Checking Prepared By: Mohit

2 Document Amendment Record * A- Added, M- Modified, D-Deleted Version no. Date Section no. A/M/D* Description of Change

3 Applicable Documents and References Oracle Order Management User Guide (Release 11i) Oracle Order Management Implementation Guide (Release (11i)

4 Table of Contents 1 OVERVIEW BUSINESS REQUIREMENT ORACLE FEATURES APPLICATION SETUP TRANSACTIONS ORACLE STANDARD REPORTS CONCLUSION... 29

5 1 Overview 1.1 Business Requirement The ultimate goal of Credit Management processes is to minimize the financial risk that your organization assumes as a result of day-to-day operations. Order Management s credit checking feature is the process by which orders are validated and released against your credit checking business rules. Using credit rules, system parameters, and credit profiles, Order Management credit checking verifies that your customer has sufficient credit availability with your organization to allow orders to be processed and shipped in advance of payment. Order Management enables you to perform credit checks on customer orders or order lines, and automatically hold orders or lines that violate your credit setup. Using Order Management credit checking effectively requires a complete understanding of the functional components as well as a careful consideration of timing and performance factors. For example, You can choose to perform credit checking automatically at pre-specified workflow events against real time transactional data or pre-calculated summary exposure amounts. Pre-calculated exposure amounts can be either: Exposure amounts imported into Oracle Order Management exposure tables. Real time transactional data summarized at a specific point in time plus exposure amounts imported into Oracle Order Management exposure tables. You can choose to perform credit checking across orders with different currencies within a single organization, specifying the currencies to include when calculating overall exposure amount. You can choose to perform credit checking at the customer account level, across all operating units within your system. You can choose to perform credit checking on external transactions utilizing the credit check processes and exposure balances maintained within Oracle Applications. 1.2 Oracle Features Order Management Credit checking includes: Validating orders and lines against existing credit limits to enable continued flow through order and line workflows. Placing credit holds at either the order or line level, including notifications to appropriate parties of credit holds. The functionality to either manually release or schedule credit reassessment processes for order or line credit holds. Approvals for orders that exceed credit limits. Reporting and querying tools to effectively manage your credit

6 1.3 Application Setup Credit Checking Components The Credit Check process can be performed for orders or order lines, and the determination on whether credit checking is performed is based upon all of the following: The credit check rule definition and order type the definition is attached to Order or line payment terms. Enabled credit profiles. Credit Checking will only occur for an order or line when all three levels enable credit checking. If one level disregards credit checking, credit checking does not occur for the order or line. Credit Exposure When you perform credit checking in Order Management, you determine what type of exposure to use when determining credit worthiness. Order Management enables you to perform credit checking against real time transactional data or current exposure amounts stored in exposure summary tables. Real time transactional data is all related transactions, which are summarized at the point credit checking, is invoked. Current (pre-calculated) exposure amounts can be either: Real time transactional data summarized at a specific point in time or Exposure amounts imported using the Credit Exposure Import concurrent program. Definition Credit Checking Rules within Order Management enable you to determine credit worthiness of orders when performing credit checking, and provide you with various options in determining your customer's credit exposure. Credit Check Rules are attached to Order Management Transaction Types. Within the Transaction Type window, credit check rules are assigned to pre-specified workflow events that trigger the credit checking process. Credit Check Level The Credit Check process can be performed at sales order header or sales order line level. Additionally, the payment terms used for orders and order lines must be enabled for credit checking to occur. 1. Order Header Level: Order Level credit check uses exclusively header level information ignoring different bill-to sites detailed at line level. Order level credit check uses the credit profile attached to the customer Bill-to site defined at order (header) level. Credit checking will use order totals and will evaluate credit exposure against the credit profile attached at header level, and holds are always applied at header level. 2. Order Line Level: Line level credit check uses data at the sales order line level. If you have sales order lines that are attached to different Bill To sites and if you want to use the specific credit profiles attached to those Bill To Sites, you should use Sales Order Lines level credit check. Additionally, you could use line level credit check when you have defined customer relationships in your system and you actively use them in Order Management. In this situation you are able to create a sales order whose lines

7 Credit Hold Level You can choose to place credit holds for orders or lines that fail credit check validations at either the sales order or sales order line if you use order line level credit checking. Credit checking holds are automatically placed based upon your credit rule definition, and you can automatically release order or order line credit holds when a customer s credit exposure has been reduced to a point that enables credit checking validation to pass successfully. You automatically release credit holds by scheduling the Credit Check Processor concurrent program to run at specific intervals

8 Override Manual release You can now specify whether or not you wish to enable additional credit checking if an order or line credit checks hold was released manually. The Override Manual Release check box, 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

9 Days to Honor Manual Release This field, in conjunction with the Override Manual Release check box, enables you to define the duration (number of days) manually released holds will be honored and not overridden by additional credit checking processes. 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. However, if you ship after Day 15, then Order Management will enable the credit checking process to be invoked again

10 Conversion Type Conversion types for credit check rules enable you to model a fixed exchange rate between currencies or use an average exchange rate. When performing credit checking, the credit limit currency does not necessarily have to be the same as the functional currency. Conversion types are limited to the values you define within the Oracle General Ledger Conversion Rate Types window

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12 Exposure Tab Select the Use Pre-calculated Exposure check box for your credit rule if you wish to perform credit checking against pre-calculated exposure summary tables. When the first credit check rule that has the Use Pre-Calculated Exposure check box checked is successfully saved, the following message will display: This credit checks rule uses pre-calculated exposure. Please run the Initialize Credit Summaries program to update the pre-calculated data. If the Use Pre-calculated Exposure check box is checked and the Include Open Receivables balance check box is checked, then Open Receivables Days is protected against update and is NULL. 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. Select the Include External Credit Exposure check box if you wish to include external exposure details imported into Order Management during the credit checking process. When an Oracle Order Management sales order is credit checked, the exposure data from the external system is included in the overall exposure check. The default value for this check box is un-checked (exclude external exposure details when performing credit checking)

13 Select the Open Receivables Balance check box for your credit rule if you wish to include open receivables balances. You must enable either the Include Open Receivables Balance check box or the Include Uninvoiced Orders check box in your credit check rule. You can activate both, but you cannot toggle both off. If you select both the Pre-calculated Exposure and Open Receivables Balance check boxes, you are unable to specify Open Receivables Days. If you enabled Include Open Receivables Balance in your credit check rule, you can indicate whether to Include Payments at Risk when calculating a customer s outstanding balance. Receipts at risk are remitted receipts that have not been cleared, or discounted (factored) receipts that have not been risk eliminated. If the performance of credit checking requires improvement you can toggle off this option. If you enabled Include Open Receivables Balance, enter a value to indicate the range of dates for open receivables you wish to include for your credit check rule. 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. Select the Include Uninvoiced Orders check box if you wish to include uninvoiced orders for your credit rule. If you enabled Include Uninvoiced Orders: Indicate whether to include Freight and Special Charges for uninvoiced orders when performing credit checking. Note: If you do not select the Include Uninvoiced Orders check box, you cannot select any check boxes within the region

14 Select the Freight and Special charges check box to include Freight and Special Charges. 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. 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. For example, if you enter 45, the total exposure includes only uninvoiced orders scheduled to ship within 45 days of the current date. Orders scheduled to ship after 45 days are not included when calculating exposure. Indicate the Maximum Days Past Due. The Maximum Days Past Due field value specifies the number of day 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 such past due invoices, the order is placed on credit hold. Save your work

15 Credit Profiles Organization Credit Profiles are a set of criteria that define an operating unit s credit policy for credit control and order credit checking. Credit Profiles include the credit limit and pertinent data needed to determine total credit exposure for orders undergoing credit checking. Credit Profile Limits Hierarchy when performing credit checking: Customer Site Profile Customer Credit Profile Operating Unit Default Credit Profile Define Credit Profiles 1. Navigate to the Define Credit Profiles window. 2. Select a value for your Credit Profile Type in the Credit Profile Type field. Valid Values are Item Category Operating Unit Default Note: If Credit Profile Type = Operating Unit Default, the Item Category field is disabled. If Credit Profile Type = Item Category, the Overall Credit Limit field is disabled

16 Enter remaining fields that require a value, or update any fields that contain a default value based upon the Credit Profile Type selected: Operating Unit: Select an Operating Unit name from a list of values if you are defining a Operating Unit Default Credit Profile. Item Category: Select an Item Category name from a list of values if you are defining an Item Category Credit Profile. Effective Date From/ Effective Date To: Select the Effective Date From and Effective Date To for your Credit Profile. Tolerance: Enter a numeric value in the Tolerance field. Tolerance values are used to calculate extended exposure limits during credit checking. For example, supposed you enter a value of 5 for Tolerance, and an Credit Limit of $10,000 USD. During credit checking, the exposure credit limit would actually be $10,500 USD. ((Tolerance + 100)* Credit Limit / 100). Currency: Select a value in the Currency field to limit the Credit Profile to a specific currency. Order Credit Limit: Enter a value in the Order Credit Limit field, based upon the Credit Profile Type. New orders may not exceed the value entered in the Order Credit Limit field if the checking processing defaults to the operating unit level. Overall Credit Limit: Enter a value in the Overall Credit Limit field for a Operating Unit Default Credit Profile Type. Total exposure within an operating unit for the particular customer may not exceed the value entered in the Overall Credit Limit field if credit checking processing defaults to the operating unit level

17 Values that are ignored during the credit checking process are: Credit Check Credit Hold Credit Rating Next Review Date If you wish to enable multi currency credit check, you must assign Credit Usage Rule Sets to your Credit Profile. Select the Assign Rule Set button. The Assign Rule Set button is only enabled for the following Credit Profile Types: Item Category Operating Unit Default To assign Credit Usage Rules to Customer or Customer Sites Credit Profile Types, you must use the Assign Credit Usage Rules window Credit Usage Rule Set The Define Credit Usage Rules window enables a user to create and maintain credit usage rule sets that can be assigned to Credit Profiles. Credit Usage Rule Sets define the set of currencies that will share a predefined credit limit during the credit checking process, and enable the grouping of currencies for global credit checking. Usage Rules Sets ensure that if credit

18 checking is enabled, that all transactions for specified currencies go through the currency conversion process and are summarized by currency prior to the credit checking process. You can define a usage rule set for a single currency or multiple currencies. You can choose to assign a global usage rule (all currencies) and then exclude one or more currencies from the rule set. You can choose to define multiple usage rules for multiple currencies within the usage rule set. You can choose to add or delete new Currency records for an existing Usage Rule Set. Usage rule sets consist of at least one usage rule/currency combination, and once a rule set is assigned to an Oracle Entity, the rule set provides processing defaults for determining credit availability during multiple currency credit checking processing routines. To define credit usage rule sets: 1. Navigate to the Define Credit Usage Rules window. 2. Enter a name for you rule set in the Usage Rule Set Name field. 3. Select the Global Exposure check box if you wish to enable the Usage Rule Set For global exposure (across operating units). The default value for this check box is un- checked (do not unable Global Exposure for the usage rule set). If you are unable to select the Global Exposure check box, submit the Credit Limit Usages Report. Review the report output and un-assign any usage rule sets with different Global Exposure options for the same credit profile. 4. Select the value Currency in the Usage Type field

19 5. Enter a currency in the Currency field. The Currency field can contain any Currency Code currently defined. The Currency field may also use the lookup All Currencies to indicate the usage rule is for all currencies defined. 6. Chose to exclude a specific currency for your usage rule by selecting the Exclude check box. The default is unchecked, or No. 7. Save your work. Assigning Credit Usage Rule Sets The Assign Credit Usage Rules form enables a user to assign credit usage rules sets for multiple currency credit checking to Credit Profiles. To assign credit usage rules: 1. Navigate to the Assign Usage Rules window. 2. The data appearing in the upper region of the window defaults from the Credit Profile you have queried. This information is protected against update. 3. The multi-row section of the Assign Usage Rules widow enables you to select Credit Usage Rule Sets to use with the credit profile. You select a Name from the List of Values, and the included and excluded currencies fields will display currencies that the usage rule set consists of. These values are protected against update from this window

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21 Deactivating Credit Checking There are three ways to deactivate Credit Checking on an order: Use an order type that does not have an assigned credit rule. Define the Customer Profile so that the Credit Check box is not checked. Use payment terms for which the Credit Check box is not checked. Deactivating Credit Checking does not automatically release orders previously on credit hold. However, the next time you attempt to Book, Pick Release or Purchase Release (for drop shipments), Pack, or Ship Confirm an order which utilizes a Order Management Transaction type that enables credit checking to occur at the specified order points, or you perform an order change that trigger credit checking in the Sales Orders window, Order Management will releases the credit check hold if the order or line meets the requirements for successful credit check

22 1.4 Transactions Enter the Credit Checking rule in transaction type form for mixed order type

23 2 Enter the credit limit as well as credit order limit in Profile: Amounts tab

24 4. Enter a sales order with item defined in CorpSierra pricelist, Order Type: Mixed

25 5. When moving to Line items tab automatic hold is applied

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27 6. Press Book Order and a message pops up A hold prevents booking of this order

28 7. To Release the order from hold click on actions and release hold

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30 Oracle Standard Reports Credit Exposure Report The Credit Exposure report can be used to analyze your customers total credit exposure. The report can be run in either detail or summary mode and is dependent upon the value selected for the Report Type input parameter: The Credit Exposure Summary Report output details the credit limit, credit exposure and available credit for every customer, based upon the input parameters you choose The Credit Exposure Detail Report shows the credit limit, credit exposure and available credit for every customer, to include all Bill To sites, based upon the input parameters you choose The Credit exposure report includes detailed information for: Overall credit limits per customer and customer site Overall credit balances (exposure) per customer and customer site Remaining available credit for either customers or customer sites. The remaining balance is converted to the draftily functional currency (set of books currency of the current operating unit). Available credit is calculated by subtracting the total exposure from the overall credit limit. Remaining available balance currently not attached to a specific customer credit limit as reflected by transactions that have not undergone the credit check process Risks incurred by performing transactions in currencies that are not under credit limit control. These amounts are reported in the functional currency and they appear as unchecked balances. The report output includes both Order Management and Oracle Receivables balances, based on your Credit Check Rule definitions. Selecting a credit check rule for this report enables you to choose combinations of credit balance types to include when determining your customers overall credit exposure. Each credit check rule can enable or disable the following credit balance types: Exchange rate type Include open receivables balance Include payments at risk Include uninvoiced orders Include tax Include freight and special charges Include orders currently on hold If you wish to determine a customers existing credit exposure eliminating Order Management credit balances, submit the Oracle Receivables Customer Credit Snapshot report which does not include Order Management credit balances, which affect the current available credit exposure of your customers. Submission In the Order Management Reports window, select Credit Exposure Report in the Name field. Parameters When you request a Credit Exposure Report, Order Management provides you with the following parameters. If you leave any parameters blank, this report output includes all records that meet your other parameter criteria. In order to obtain a single credit exposure for a Customer, enter the same value in the Customer Names (From/To) fields or the Customer Numbers (From/To) fields Customer Profile Class (From/To) These fields are optional. Customer Names (From/To) These fields are optional. Customer Numbers (From/To) These fields are optional. Credit Check Rule This field is required Report Type Select from:

31 Summary Detail This field is required. Report Output Order Management displays all report input parameters and respective input values selected on the first page of the report output. If you choose to run the report in detail mode (selecting Detail for the input parameter Report Type) additional credit usage details by Customer Bill To site are included in the report output. Additional summary information is also provided Orders On Credit Check Hold Report The Orders On Credit Check Hold Report identifies all of the credit holds currently outstanding for a customer within a date range, or identify why a particular order is on hold. Order Management enables you to perform a credit check on customer orders and automatically places orders on hold that violate your credit checking rules. All balances are calculated as they are using the on-line credit check rule, including the factor for shipments and receivables for a certain number of days. Submission In the Order Management Reports window, select Orders On Credit Check Hold Report in the Name field. Parameters When you request an Orders On Credit Check Hold Report, Order Management provides you with the following parameters. If you leave any parameters blank, this report includes all holds that meet your other parameter criteria. In order to obtain a single hold, enter the same hold in the From/To fields. Customer Name Optionally, select the customer name that you want printed in this report. Customer Number Optionally, select the customer number that you want printed in this report. Order Type Optionally, select the order type that you want printed in this report. Order Number Optionally, select the order number that you want printed in this report. Hold Applied Date (From/To) Optionally, select a specific hold applied date or a range of hold applied date on which the holds were applied. Currency Code Optionally, select the currency code that you want printed in this report. Report Output The Orders On Credit Check Hold Report prints order information for orders on credit check hold and displays the following 4 report sections sequentially for each order selected. Customer Information Customer Credit Limit Information Customer Orders on Credit Hold Information Summary Information Customer automatically sorts the report. Within Customer, currency code, credit check rule name, and order number further sort the report. Order Management displays all report input parameters and respective input values selected on the first page of the report output. Additional summary information is also provided Lines on Credit Check Hold Report Submission In the Order Management Reports window, select the Lines on Credit Check Hold Report in the Name field. Parameters When you request a Line on Credit Check Hold Report, Order Management provides you with the following parameter. If you leave is blank, this report includes all order lines on hold that meet your other parameter criteria. Customer Name

32 Optionally, select credit order lines on hold for a specific Customer Name you want printed in this report. Customer Number Optionally, select credit order lines on hold for a specific Customer Number you want printed in this report. Order Type Optionally, select credit order lines on hold for a specific order type you want printed in this report. Line Type Optionally, select credit order lines on hold for a specific order line type you want printed in this report. Order Number Optionally, select credit order lines on hold for a specific order number you want printed in this report. Item Display Optionally, determine how you wish to display items on hold for the report output. Select from: Both: Order Management will print both the Internal Item name and the internal item description (item as defined within the Master Items window) Description: Order Management will print only the Internal Item description Flexfield: Order Management will print only the Internal Item name Item and Description: Order Management will print both the ordered item name and the associated ordered item description Ordered Description: Order Management will print only the ordered item description Ordered Item: Order Management will print only the ordered item The default value is Description. Hold Applied Date (From/To) Optionally, select a specific hold applied date or a range of hold-applied dates for credit order lines on hold. Currency Code Optionally, select credit order lines on hold for a specific currency you want printed in this report. Report Output The Lines On Credit Check Hold Report prints order information for orders on credit check hold and displays the following 3 report sections sequentially for each order selected. Customer Order Information Order Line Credit Limit Information Summary Information Customer automatically sorts the report. Within Customer, currency code, credit check rule name, and order number further sort the report. Order Management displays all report input parameters and respective input values selected on the first page of the report output. Additional summary information is also provided Outstanding Holds Report The Outstanding Holds Report reviews order holds for the customer or customers you select. This report displays the order number, order date, ordered items, and order amount for each order line on hold for each customer you select. Customer, order number, order line, and then order line detail automatically sort it. Hold Comment are listed in the report output, if available. This report lists only orders on hold, not orders that have been released from hold. Submission In the Order Management Reports window, select Outstanding Holds Report in the Name field. Parameters When you request an Outstanding Holds Report, Order Management provides you with the following parameters. If you leave any parameters blank, this report includes all outstanding holds that meet your other parameter criteria. In order to obtain a single outstanding hold, enter the same outstanding hold in the From/To fields. Customer Name (From/To) Optionally, select a specific customer name or range of customer names on orders you want printed in this report. Hold Name (From/To)

33 Optionally, select a specific hold source name or range or hold source names you want printed in this report. Item (From/To) Optionally, select a specific item or range of items you want printed in this report. Item Display Determine how you wish to display item information for the report output. Select from: Both: Order Management will print both the Internal Item name and the internal item description (item as defined within the Master Items window) Description: Order Management will print only the Internal Item description Flex field: Order Management will print only the Internal Item name Item and Description: Order Management will print both the ordered item name and the associated ordered item description Ordered Description: Order Management will print only the ordered item description Ordered Item: Order Management will print only the ordered item The default value is Description. This field is required. Mixed Precision If you are printing this report in multiple currencies you can use Mixed Precision to ensure that all currency values align at the radix character for easy readability. Mixed precision is the distance between the radix (the decimal, or any dividing symbol between the whole and parts of the currency) and the right side of the column. It is right padded if the currency s standard precision is less than the mixed precision. Order Management defaults this report parameter from the system profile option Currency: Mixed Currency Precision. This field is required. Report Output Order Management displays all report input parameters and respective input values selected on the first page of the report output. Conclusion Order Management enables you to perform credit checks on customer orders or order lines, and automatically hold orders or lines that violate your credit setup. Using Order Management credit checking effectively requires a complete understanding of the functional components as well as a careful consideration of timing and performance factors