Financial Supply Chain Management

  • By Saurabh Bapat
  • May 24, 2024
  • SAP
Financial Supply Chain Management

Financial Supply Chain Management

FSCM stands for Financial Supply Chain Management. Within FSCM, credit management refers to the functionalities offered by SAP to manage a company’s credit risk associated with customers. Here’s a breakdown of how FSCM credit management works:


Core Functionalities:

  • Customer Risk Assessment: FSCM credit management helps assess the creditworthiness of customers by analyzing various factors like payment history, credit score (internal or external), and purchase volume.
  • Credit Limit Setting: Based on the risk assessment, credit limits are assigned to each customer. This determines the maximum outstanding amount a customer can have before triggering credit control actions.
  • Order and Delivery Control: The system integrates with sales and distribution modules to control order processing and delivery based on creditworthiness. For high-risk customers, it might require advance payment or credit limit checks before order fulfillment.
  • Collection Management: FSCM facilitates efficient collection of outstanding receivables by sending reminders and managing dunning processes.
  • Reporting and Analysis: The system provides comprehensive reports on credit risk exposure, overdue payments, and overall credit management performance.


Benefits of FSCM Credit Management:

  • Reduced Bad Debt: By effectively assessing and managing credit risks, companies can minimize bad debt and improve cash flow.
  • Improved Profitability: Smarter credit decisions and efficient collection processes lead to better financial health.
  • Enhanced Customer Relationships: Clear communication and defined credit terms can foster trust and stronger relationships with customers.
  • Streamlined Operations: Automated credit checks and integrated workflows improve efficiency in sales order processing and collections.


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Additional Points to Consider:

  • FSCM credit management comes in two versions within SAP S/4HANA: Basic Credit Management (included in the standard license) and Advanced Credit Management (requires an additional license).
  • The advanced version offers features like scorecards, automatic credit limit determination, and integration of external credit information for a more comprehensive risk assessment.
  • FSCM credit management needs proper configuration to integrate seamlessly with other SAP modules like Sales and Distribution and Accounts Receivable.

Overall, FSCM credit management in SAP provides a robust system for businesses to manage customer credit risks, optimize financial performance, and streamline credit-related processes.


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Saurabh Bapat

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