Credit and Controls

- Credit control area is an organizational unit which primarily checks the credit limit of the customer. One credit control area can include more company codes.That means the relation is one too many. This concept is mainly used for facilitating the credit management in Application components such as Account Receivable (AR) and Sales and Distribution.
  The credit control area is determined in the following sequence −
  - User exit
  - Distribution channel
  - Customer master
  - Company code for the sales organization
  How is Credit Control Area used?
  In SAP Financial Accounting, the credit control area is particularly used for credit management accomplishments in the application components Accounts Receivable (FI-AR) and Sales and Distribution (SD). The platform lets the admin declare and establish a credit control area according to the areas of responsibility for credit monitoring. For each credit control area, you enter a key, a name, and the currency in which the credit limit is to be managed in the credit control area. You select a four-character alphanumeric key. In the simplest case, each company code corresponds to one credit control area. In this case, we recommend that you use the same key for the credit control area as for the company code.
  Each credit control area carries out credit control for one or more company codes and, to enable it to do this, you must assign the respective credit control area to the company codes.
  Assigning Customer and Credit Control Area
  Customers can be created in different company codes - the credit control area responsible for a given customer depends on which credit control area the company code is assigned. Customers that are created in company codes with a common credit control area are controlled by this one control area for all company codes.
  If a customer is created in several company codes that are assigned to different credit control areas, a separate credit limit is managed for the customer in each of the different credit control areas.
  How to define a Credit Control Area?
  A Credit Control Area is defined in accordance with the areas of responsibility for credit monitoring. Use the T-code SPRO → click SAP Reference IMG. It will open a new window.
  Expand SAP Customizing implementation guide → Enterprise Structure → Definition → Finance Accounting → Define Credit Control Area → Execute.
  Click Execute → New entries → Enter the below details → Save. Now you have successfully configured the Credit Control Area.
  Once you create the Credit Control Area, the next step is to assign a company code to the credit control area.
  Expand Enterprise structure → Assignment → Finance Accounting → Assign company code to credit control area → Execute.
  A new window will open → click Position → it will open another new window. Enter the company code and click Continue.
  Enter the Credit Control Area in CCAR and save the details.
  Credit Control and Risk Management
  Credit and risk management takes place in the credit control area. According to your corporate requirements, you can implement credit management that is centralized, decentralized, or somewhere in between.
  - For example, if your credit management is centralized, you can define one credit control area for all of your company codes.
  - If on the other hand, your credit policy requires decentralized credit management, you can define credit control areas for each company code or each group of company codes.
  Credit limits and credit exposure are managed at both credit control area and customer level.