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.
1. Credit functionality checks the credit and applies or removes the hold automatically based on exposure availability. This credit limit is set at Bill To level.
2. Credit check functionality can work at any of the following stages –
- Order Entry
- Picking
- Packing
- Shipping
3. 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(credit check rule and credit usage rule), credit profiles and system parameters Order Management credit checking verifies that your customer has a sufficient credit availability with your organization to allow orders to be processed and shipped in advance of payment.
4. Business can give proper approvals to users and responsibilities to remove credit check holds manually.
Please note credit check functionality for automatic applying and releasing hold will not work in case the hold is removed manually.
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.
Credit Checking Components
Depending upon your business practices, you may not want to perform credit check for all orders, but rather only those orders that could pose a credit risk. Orders that could be exempted from credit check can be:
1. Orders of a given type. For example, you may want to exclude staff sales or internal sales orders from credit checks. Credit checking rules are assigned to order types. While setting up order types, if the credit check rule fields are left blank, this would automatically exclude orders of that type from credit check.
2. Orders for a given customer. For example, a manufacturer may wish to exclude all orders from its largest customer from credit check. With Order Management and Oracle Receivables, excluding a specific customer from a credit check can
be achieved by disabling the Credit Check flag for this customer in the individual customer profile.
Orders for a given class of customer. For example, a manufacturer may wish to exclude all orders from internal customers from credit check. You can group all your internal customers into one Customer Profile Class, and then set up credit
checking rules to exclude that profile class of customer. With Order Management and Oracle Receivables, while setting up a customer profile class, you can disable the Credit Check flag. Customers that have this customer profile class assigned to them would then be excluded from credit check.
Orders for a given customer billing address. For example, a manufacturer may wish to exclude orders that will be invoiced to one of its’ largest customer corporate headquarters from the credit check process. With Order Management and Oracle Receivables, the individual bill-to sites can have a different transaction profile from the parent customer. While setting up the bill-to site profile, enabling the Credit Check flag determines whether orders billed to that address will be credit checked.
3. Order lines with a given payment term. For example, order lines with a cash on delivery payment term can be excluded from the credit checking process. With Order Management and Oracle Receivables, the payment terms also have a Credit Check flag. Disabling this flag will automatically exclude order lines with that payment term from the credit evaluation. Only those lines that have Manual payment terms with credit checking turned on are compared against the credit limits.
Order lines that are paid via Commitments. These lines are in effect prepaid, so you do not need to credit check them.
Orders with payment type = Credit Card. These orders will have credit card authorization in place of credit checking.
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 the order type of which the definition is attached
- Enabled credit profiles – customer
- Order or line payment terms
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.
When defining your Credit Check rules, you specify the type of exposure to utilize when performing credit checking.
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 check box is not checked.
- Use payment terms for which the Credit Check 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
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