Credit Management in SAP S/4HANA

By Dan Magni

Credit Control Areas in ECC are called Credit Segments in S/4HANA.

Credit Segment Definition

With the Manage Credit Accounts app, you have a 360-degree view of credit for a business partner for every credit segment they conduct business in.

How Segments Are Organized
The purpose of credit management in an organization is to reward good business partners as well as to manage external risk.

In doing business with partners, one of your major considerations is the transaction currency. If you are a USD-based company and sell to a EUR-based company, you will need to exchange currencies. If the trade is performed on a credit basis, the seller may wish to hedge the foreign currency transaction to assure they maximize profit in the deal.

One approach for segments is by currency. The base segment for the entire system is 1000 – and the currency is set to your group currency. All customers are attached to this main segment.
To manage risk for the company, you may have additional segments, usually one per currency for which you intend to trade. For example:

• Segment 1100  for USD
• Segment 1200 for CAD
• Segment1300 for EUR

This structure allows you to see the ‘total exposure’ group-wide using Segment 1000 and individual exposure by currency using the individual segments.

When you elect to use credit management in SAP S/4 HANA you are required to carry a main credit segment. This is where all credit is focused in Credit Management.

Figure 1 displays what is delivered with SAP Best Practices activation. 

Figure 1 SAP Credit Management Segment Data Details

Note the checkbox for Main Credit Segment. Also, notice: Case Type (for Credit Limit increase Requests), due date and overdue grids. The grid in days is used by the key reporting apps. We will cover these in follow up blog posts.

In multinational environments, it is typical to see trade in currencies other than your home currency. Consider the case where an MNE is US-based, reports group as USD, and owns businesses in other countries.

In North America, it is customary to see US entities trade with Canada and Mexico. If you want to extend credit to customers in those regions, then you would typically manage credit in the local currency. Consider Canada CAD. You would create a credit segment for CAD currency, but you may also wish it to roll up to group in the respective group currency. This can be achieved.