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ASUG SAP HANA Platform ProgramThe ASUG SAP HANA Platform Program will focus on providing SAP HANA platform education, customerexperience, and knowledge sharing both from a business and technical perspective.Join the ASUG SAP HANA Platform Program:bit.ly/HANAPlatformSIG

S/4HANA FinanceSAP Credit MaangementKatharina Reichert, January, 2016Customer

Series on Receivables – Every other Thursday Jan 14 - Introduction to Receivables – high level overview Today– “The SD Credit Check is gone!” What is new inCredit Management in S/4HANA Feb 11 – Tools to Lower DSO Feb 25 – Deployment and Integration Options: DeeperDive on HANA Cloud Platform apps and Central Finance 2016 SAP SE or an SAP affiliate company. All rights reserved.8

A comprehensive Portfolio for the CFOCovering all business areas across all Finance rolesSAP S/4HANA Finance - delivers functional completeness across all financial rolesVP of FinanceHead of CorporateReportingCorporateTreasurerHead of FinanceOperationsChief FinancialOfficerChief ComplianceOfficerFinancial Planning &AnalysisAccounting &Financial CloseTreasury &Financial RiskManagementFinanceOperationsEnterprise Risk &Compliance ManagementStrategy Development andTranslationAccountingPayments and BankCommunicationsReceivables ManagementEnterprise Risk ManagementPlanning, Budgetingand ForecastingEntity CloseCash and LiquidityManagementInvoice ManagementControls and ComplianceManagementProfitability and CostManagementCorporate CloseDebt and InvestmentManagementTravel ManagementInternational TradeManagementMonitoring and ReportingReporting and DisclosureFinancial Risk ManagementReal Estate ManagementFraud ManagementFinancial Close GovernanceCommodity Risk ManagementFinancial Shared ServicesAudit Management 2016 SAP SE or an SAP affiliate company. All rights reserved.9

SAP Receivables Management is a portfolio of automation solutionsAccounts Receivable – standard process automationManage all financial accounting–related aspects of customer accounts receivable.Credit Evaluation and ManagementEmbed proactive credit management in transactional processes and portfolio analysis.Billing and E-InvoicingDeploy a customer bill payment portal or an e-billing process.Dispute ResolutionClarify and resolve customer payment disputes quickly and efficiently.Collections ManagementProactively manage customer collections and customer service. 2016 SAP SE or an SAP affiliate company. All rights reserved.10

SAP Credit Management – Balance risk andreturn with a unified global view of your customers Cross-enterprise and cross-systemcredit evaluation and managementprocess, including disputes anddunning information Customer scoring based on yourrules, including internal and externalfactors Easy access to credit information foryour sales team Workflow for faster decision-makingonce credit limits reached0.3%The amount of accounts receivable write-offs by the 25% top-performing companies (comparedto 3.1% for the bottom 25%)Source: ASUG Benchmarks 2016 SAP SE or an SAP affiliate company. All rights reserved.11

Challenges in managing credit Inconsistency in credit policy: a customer is treateddifferently in different business units within the same company;ineffective credit management in distributed sales systems Cross-department collaboration: information needed forcredit decisions is spread out all over the company; iommunicationbetween sales, credit, and finance departments is very timeconsuming Treatment of new customers: No credit history availablewhen doing business with new customers 2016 SAP SE or an SAP affiliate company. All rights reserved.12

Default probability determines customer treatmentDefault Probability30 %Cash on deliveryLetter of creditAdvance Payment20 %Risk Class IIICheck by ext. CreditAgency10 %Risk Class IIInvoiceVery Good 2016 SAP SE or an SAP affiliate company. All rights reserved.Risk Class I CustomerVery BadScore13

Credit limit managementFunctions Manages the credit profile of a customer Monitor credit exposure / limit in a central system Web-Based access to customer‘s credit profile Rules Engine for implementing own scoring and limit rules Scalable platform to use in B2B and B2C Scenarios Score customers and editExposureAprilBusiness Benefit Implement company wide credit policy Early identification of default risk Reduce processing costs by automating credit decisions 2016 SAP SE or an SAP affiliate company. All rights reserved.14

Credit caseFunctions Virtual Folder to track credit applications A credit case contains––––Major customer master data & credit profileStatusOrganizational dataDocuments– Orders– Notes– Inbox A credit case can be sent from user to user via SAP WorkflowBusiness Benefit Sales people can enter an application for credit limit change Track status of the application Inform sales when decision is made 2016 SAP SE or an SAP affiliate company. All rights reserved.15

Documented credit decision A sales order which is entered in SD gets credit checked In case of a negative credit check the sales order gets a status “credit block” In this case the system automatically creates a new object called “DocumentedCredit Decision” (DCD) which is linked to the credit blocked sales ordero Various attributes such as priority, responsible credit analysto A snapshot of the credit account in order to document the exact state of all attributes and valueso The log of the credit checko Notes & attachmentso An approval process is supported which describes who may approve the credit decision / releasethe respective sales orders DCDs can also be created for delivery documents (in addition to sales orders) 2016 SAP SE or an SAP affiliate company. All rights reserved.16

Credit analysisFunctions Company-wide monitoring of credit risk Analysis of customer payment and order behavior Alert on high risk customers Risk structure analysis of the customer base by country /business unit / customer groupBusiness Benefits Proactive credit management Identification of risks before customer becomes insolvent Hedging of high risk customers reduces unexpected losses Aim marketing and sales activities to low-risk customers Drive price policy by a customer risk category 2016 SAP SE or an SAP affiliate company. All rights reserved.17

Real-time processing and integration Credit limits checks carried out when entering orders,Automatic credit worthinesschecksUp-to-date credit exposure for allcustomersdeliveries, good issues Any system can be connected to SAP Credit Management Any system can be connected to SAP Credit Management Immediate exposure updates Integration with Accounts Receivable– Exposure– Payment behavior key figuresPermanent customer scoring Scores are always updated in real-time Recalculation of scoring event-drivenTraceability Change documents, various logs, 2016 SAP SE or an SAP affiliate company. All rights reserved.18

In releases before SAP HANA, Xcelsius dashboards visualize BWdataThis dashboard helps you to analyze / answerfollowing questions: What is the credit exposure to customers of various risk classes? What is the average credit limit utilization of customers of variousrisk classes? How do these figures look by country? How do these figures look by organizational entity ( creditsegment)?Based on this insight, following action might be taken(examples): Take provisions for anticipation credit default. Take measures to reduce overall credit exposure in critical riskclasses if respective exposure appears to be too high. Try to optimize customer portfolio considering risk profile. 2016 SAP SE or an SAP affiliate company. All rights reserved.19

With SAP HANA, Fiori analytics provide real-time insight withoutdata replication Cross-enterprise and crosssystem credit evaluation andmanagement process, includingdisputes and dunning information Customer scoring based on yourrules, including internal andexternal factors Easy access to credit informationfor your sales team Workflow for faster decisionmaking once credit limits reached 2016 SAP SE or an SAP affiliate company. All rights reserved.20

Business partner in SAP Credit ManagementScoring Rule:Rules that define howa customer is scored(e.g. industry, D&B,legal form, country)Credit Check Rule:External Rating from D&BRules that define how a customer iscredit checked (e.g. static / dynamiccheck, oldest open item ) 2016 SAP SE or an SAP affiliate company. All rights reserved.21

Concept of credit segmentsCreditProfileProfileCreditCustomer: 47110000Main Credit Segment0001BU1 Credit SegmentExposure HQ:Exposure BU1:Exposure BU2:100.000 30.000 20.000 Total Exposure:150.000 Limit:160.000 Exposure:Limit:Exposure:0002BU2 Credit Segment30.000 Limit:35.000 20.000 30.000 Customizing: Credit Segment 0001 0002Contribute to Main Credit Exposure 2016 SAP SE or an SAP affiliate company. All rights reserved.22

RelationshipsHigher-level credit management account of Business Partner 4711Segment 0000Credit Exp.: 1.000.000 Is the higher levelcreditmanagementaccount of Total Credit Exposure:3.100.000 Business Partner 4712Segment 0000Credit Exp.: 1.500.000 Is the higher levelcreditmanagementaccount of 2016 SAP SE or an SAP affiliate company. All rights reserved.Total Credit Exposure:2.100.000 Business Partner 4713Segment 0000Credit Exp.: 700.000 Total Credit Exposure:700.000 23

Credit rules engine Create a scoring formula and credit limit formula by using theformula editor. Parameters (for example, business partner data) andfunctions are used as input parameters. One scoring formula and several credit limit formulas (for each creditsegment) are assigned to the rule for scoring and credit limitcalculation, which is assigned to each customer in the credit profile.The risk class is determined directly from the score. In customizing, specific score ranges which do not overlap areassigned to each risk class. For the check rule, the systemdetermines the steps which are taken to check the creditworthiness ofa customer when a sales order is created. This may include the staticcheck of the credit limit or acheck of the highest dunning level. Customer-specific process chains in SAP Credit Management can bedefined through events which trigger follow-up actions 2016 SAP SE or an SAP affiliate company. All rights reserved.24

Credit rules engineApplication(e.g. Dispute)Credit ManagementCreditRulesEngineext. / int.CreditInformationExternalProviderCredit Limit /ScoringCreditLimitMgmt.SAPBusinessPartnerCredit CreditLimit ControlCreditLimitDefinitionApplication(e.g. CRM, SD,FI)Credit Limit Check /Open ItemsCredit AnalysisSales 2016 SAP SE or an SAP affiliate company. All rights reserved.Credit Management PortalCreditFinancial25

Calculate internal credit scoring (existing customer)CustomerAddressBirth DateRegion Age Group Profession.ATL e1718Credit InformationScore C: 17Score D: 3Credit Agency IIB Mapped Score A:AAA 50Mapped Score B:B 30PaymentsSales VolumeScore SV0 – 1000101 – 3005301 – 100010.CreditRulesRules EngineCreditEngineCredit Agency IAAADunningDunning0Score DU01IF (Black List Entry exists):IF (BlackList Entry exists):S0ELSES 0S (2*A 3*B 5*C 5*D) / 15ELSES (2*A 3*B 5*C) / 103.Paym. (days after Due)Score PY00 5 1048 2015.Black List 2016 SAP SE or an SAP affiliate company. All rights reserved. Score D SV – DU – PY 3Int.ScoringScoring SS 19.3Int.27.526

Scoring formula The scoring rules define the way a customer is scored – the result is ascore You define the scoring rules in the formula editor by using the followinginput parameters– SAP Business Partner – Master Data(preconfigured field selection)– Input parameters can be enhanced via BAdI implementation– Result of the scoring formula:o Score (numeric or alphanumeric)o “Valid to” datao Risk class determined– A valuation log is available to clarify the results 2016 SAP SE or an SAP affiliate company. All rights reserved.27

Credit limit formula The credit limit formula determines how the credit limit proposed by thesystem is calculated You define the credit limit formula in the formula editor by usingfollowing input parameters:– SAP Business Partner – Master Data(preconfigured field selection)– Input parameters can be enhanced via BAdI implementation– Result of the credit limit data:o Credit limit (numeric or alphanumeric)o “Valid to” data– A credit limit formula can be assigned for each rating procedure and credit segment– A calculation log is available to explain the creditlimit proposal 2016 SAP SE or an SAP affiliate company. All rights reserved.28

Credit checking rules The check rule determines the steps that are taken to check the creditworthiness of a customer when a sales order is created, and leads to acredit decision about the order Available credit checks:– Dynamic/static credit limit check– Check for collateral, credit insurance– Check for the Maximum dunning level– Check for the oldest open item– Check for an order block set centrally by credit management– Check for key figures for the customer’s payment behavior (e.g. DSO) 2016 SAP SE or an SAP affiliate company. All rights reserved.29

Credit eventingCredit ManagementCredit changedSAP Workflowcredit limitcheck 2016 SAP SE or an SAP affiliate company. All rights reserved.Credit limit exceededCredit master data changedScoring changedCredit limit changedExt. rating changedFollow-up ActivitiesTrigger int. workflowCredit EventingApplication(e.g. CRM, SD) e.g. call customer e.g. request cash/ downBillingFI paymentTrigger ext. applicationsLock customer accountDisable serviceCreate bill30

External Information Providers

Integration with external information providersProcess updates of credit reports for a business partner(business partner monitoring by provider)Search for business partners, determine unique identifier(like DUNS number)ExternalInformationProviderEHP1SAP CreditManagementEHP1Import credit reports for business partners Real-time XML integration of external information providers has been availablesince ERP 2004 The integration scenario is extended:– Search for business partner’s unique identifier– Process monitoring updates 2016 SAP SE or an SAP affiliate company. All rights reserved.Original XML Document is storedin the document managementsystem that isused by the SAP Business Partner32

Searching for the external ID1.2.The search for an external ID can be triggereddirectly out of the business partner maintenance inSAP Credit Management 2016 SAP SE or an SAP affiliate company. All rights reserved.33

HCP Credit InformationOn PremiseXMLSAP ERPCurrentSituationSAP CreditManagementSAP PIAgency 1 Integration of external credit agencies done by thecustomer / during the implementation projectAgency 2 Significant implementation effort per interfaces ( peragency)Agency 3Agency 4HCPSolutionOn PremiseXMLAgency 1 Maintenance of interfaces to credit agencies done byHCP service provider ( SAP) Bulk of external credit report data remains in HCP appSAP ERPSAP CreditManagementHCP App Credit RiskInformationAgency 2 Target data fields (external rating, foundation date, )transferred to Credit Mgmt for use in scorecardAgency 3 SAP customers have a broad choice of external creditagenciesAgency 4 Reduced TCO and faster ROI for Credit ManagementprojectsAssumptions Customer must sign contracts with credit agency directly SAP roles remains purely technical; SAP does not own the data; SAP will not use this data for own purposes. The HCP Credit Information shall be able to connect to SAP Credit Management releases (down to ERP 6.0) 2016 SAP SE or an SAP affiliate company. All rights reserved.34

What’s new in S/4 with SimpleLogistics?

Historically, SAP had 2 solutions for credit management“FI-AR” Credit ManagementSAP Credit ManagementMaster DataFI-AR AccountSAP Business PartnerFI DataFI-ARFI-AR, FI-CA, othersMonitor Credit ExposureOnly for simple system-landscape (1xFI,1xSD); SAP system onlyDistributed system-landscape (multiple FI,SD and CRM systems); SAP and nonSAPAutomated Customer Scoring, Rating,and LimitsNot availableCredit Rules EngineExternal Credit Information(e.g. D&B)Only through partner productsAny XML based credit information serviceWorkflowOnly in SDAny credit event, documented creditdecisions, credit limit requestsAnalysisCustomer fact sheetFiori Smart Business / HANA Live;OLAP/OLTP (incl. BW Content)“Single-system credit checksagainst a limit you determine”“Cross-system credit checks againstcalculated ratings and limits” 2016 SAP SE or an SAP affiliate company. All rights reserved.36

Beginning with the simplified logistics processes in S/4HANA, FIAR credit checks done by base edition of SAP Credit Management*Basic S/4HANA CreditManagement – technicalfoundation is SAP CreditManagementSAP Credit ManagementMaster DataSAP Business PartnerSAP Business PartnerFI DataFI-ARFI-AR, FI-CA, othersMonitor Credit ExposureDistributed system-landscape (multiple FI,SD and CRM systems); SAP and nonSAPDistributed system-landscape (multiple FI,SD and CRM systems); SAP and nonSAPAutomated Customer Scoring, Rating,and LimitsNot availableCredit Rules EngineExternal Credit Information(e.g. D&B)Not available in standardAny XML-based credit informationserviceWorkflowDocumented credit decisionsAny credit event, documented creditdecisions, credit limit requestsAnalysisFiori Smart Business / HANA LiveFiori Smart Business / HANA Live;OLAP/OLTP (incl. BW Content)*No additional license required for this basic functionality; if additional functionality required (scorecards, automatic determination of limits, workflow,integration of external credit information, customers must license SAP Credit Management 2016 SAP SE or an SAP affiliate company. All rights reserved.37

SummaryIf you have not licensed SAP CreditManagement:If you have licensed SAP CreditManagement:You can still do a credit check for sales ordersif you migrate to the business partnerNo changesYou still have to determine what the limitshould be in an “offline” process 2016 SAP SE or an SAP affiliate company. All rights reserved.38

Migration is required from FI-AR credit management to newS/4HANA Credit ManagementTechnical implicationsSAP migration reports**Transaction FD32 (“customercredit master”) will not workanymoreMigrate credit accounts from FD32 Easier upgrade from basic creditmanagement functionality to advancedto UKM BP (business partner)Deleted tables include S066 /S067SAP Credit Managementconfiguration is automaticallycreated based on existing FI-ARcredit configuration dataCustomers wanting credit checksin S/4HANA must migrate to SAPCredit Management**planned functionality 2016 SAP SE or an SAP affiliate company. All rights reserved.Credit exposure in FSCM is rebuildDocumented Credit Decision(DCD) created for credit blockedsales ordersBenefits to SAP Customersautomated credit managementprocessesHANA-based reporting and analyticsFuture Fiori apps for CreditManagement**Principle of one: unified SAP solutionmeans improvements can focus onsingle product39

Orchestration of messagingSAP Credit Management before S/4HANA OP 1511SAP Credit Management was technically decoupledfrom SAP ERP XML messages are exchanged to update creditcommitments (exposure) or to do credit worthinesschecks This can be facili