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Monitoring Customer Credit Exposure – How Clemens proactively contains credit exposure

Overview

Organization – Clemens Food Group

Sector – Farming, food production, logistics and transportation

Problem –  In the past, Clemens Food Group’s credit limit assessment process was long and complicated, and some customers suffered from supply delays that resulted from this process.

Solution – Using InsightSAP, Clemens Food Group was able to run the credit assessment much faster by automating the process. By automating the process, the company was able to evluate credit problems in advance, while providing products to trusted customers without delaying their orders.

Background & Pain Points

The total credit exposure is calculated as the sum of open orders, open deliveries and open invoices. Clemens manages its credit exposure risk on a customer level and assigns a credit limit to each customer. If, for instance, the credit limit of a given customer is $500,000, then next time an incoming order brings the customer to exceed the credit limit, then the order goes to an ON HOLD status immediately. This causes many delays in processing orders taken by Clemens’s customer experience team, who are logging the orders into SAP’s SD module. When the orders are ON HOLD, the customer experience team needs to call the credit department to get the individual orders OFF HOLD, or alternatively increase credit limits.

As a result of the above, the standard process was not smooth, having many interruptions on its execution that were impacting their business & customers, and distracting the focus of Clemens’s customer experience team.

When orders went ON HOLD, the pain was also felt by the mid-management layer across the entire supply chain: the sales team, the credit department (who needed to either approve excessive credit limits or take orders manually), the product planning team (that faced challenges as the orders were not downloaded to the system on time) – and of course – the customers felt pain when it came to smooth order engagement with Clemens.

Solution: 

Within one day of work, Clemens set up an automated process that included smart automated operational reporting and a daily dispatch of notifications over email with relevant data dispatched to relevant stakeholders (if applicable at any given day).

Prior to using InsightSAP, the treatment of orders that brought the customers to exceed the approved credit limit was handled one-by-one, manually – occasionally only after escalation took place once realized that the order was put ON HOLD (‘passive’ mode). At the time, Clemens could not have regularly anticipated orders that brought customers to exceed the credit limits.

With InsightSAP, Clemens combined the FSCM (‘Financial Supply Chain Management’) credit screen with Open Credit Exposure data on a daily basis. Two operational reports views were created and sent regularly: 60%-80% of credit exposure (‘Nice to know’: start to pay attention to this exposure) and >80% (‘must know’ basis: need to take action).

The Business Partner screen (that adds up all the credit exposure per business partner) was the baseline table used at InsightSAP. Then, Clemens added more customer data columns which are usually not seen in BP, sourced from customer master data. Clemens also used conditional formatting rules to highlight the 60-80% band in one color, and the >80% band in a different color. Formula fields were added in order to calculate the credit limit, which varies from one customer to the other. From this point on, any user with sufficient authorization levels could see combined data in real time at one single report. Also added to this report was a column showing the number of open invoices for the customer. At a line item level this is directly linked to the open receivables, allowing the Credit team to view the open receivables prior to making a decision on the next steps for the customer.

Last but not least, InsightSAP Suite was also used to compile and email out reports through the Publisher. This automated, man-free action occurred on a daily basis.

Result

Before the relevant stakeholders start their working day, they receive an email with relevant ‘nice-to-know’ (60%-80% band) and ‘need-to-take-action’ (>80% band) data, within their areas of their responsibilities. Effectively, these interactive email notifications became the staff’s ‘Good Morning’ action list, every morning.

The greatest impact of this report is that Clemens could now anticipate customer credit-related matters and to prevent upcoming issues. Consequently, orders are no longer getting ON HOLD without anticipating these to happen and the process became much smoother.

Without Insight SAP, it is likely to assume that developing this solution would not have taken place, given the lack of ROI when evaluating the investment required to develop in-house such a solution versus the estimated benefits. Actually, using Insight SAP has created the option to enhance many reports, and to automate multiple processes no one thought before would be realistic to be placed on the ABAP development roadmap.

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