Understanding credit check in oracle e business suite

Oracle Order Management Credit
Checking and Multi Currency
Credit Checking
An Oracle White Paper
January 2002

TABLE OF CONTENTS
INTRODUCTION .....................................................................................................................................2
About this White Paper................................................................................................................2
UNDERSTANDING CREDIT CHECK IN THE ORACLE E-BUSINESS SUITE....... 3
Credit Check Key Concepts........................................................................................................3
Using Order Management Credit Check Family Pack G ..................................................6
Credit Check Process Level........................................................................................................7
Pre-Calculated Credit Exposure................................................................................................9
MULTI-CURRENCY CREDIT CHECK...........................................................................10
Organization Default Credit Profile.......................................................................................13
Item Category Credit Profile....................................................................................................16
The Credit Check Processor.....................................................................................................17
New reports...................................................................................................................................18
Modified reports ..........................................................................................................................18
New windows ...............................................................................................................................19
Modified Windows......................................................................................................................22
TABLE OF FIGURES
Figure 1: Credit Profile Selection - Multi-Currency Credit Check ...............................11
Figure 2: Customer Credit Profile Selections - Checking Transaction Credit Limit....13
Figure 3: Credit Profile Selections..................................................................................14
Figure 4: Sales Order, using Order level Credit Check...............................................14
Figure 5: Sales Order, using Line Level Credit Check ................................................15
Figure 6: Define Credit Usage Rules window ..............................................................19
Figure 7: Assign Credit Usage Rules window..............................................................20
Figure 8: Define Credit Profiles window .......................................................................21
Figure 9: Define Credit Check Rules window (Options Tab) ......................................22
Figure 10: Define Credit Check Rules window (Exposure Tab) .................................23

Introduction
About this White Paper
Purpose
This white paper provides process and product information to help you implement credit checking
within Oracle Order Management.
Structure
This document contains the following sections:
Understanding Credit Check in the Oracle E-Business Suite
Describes key concepts that support the credit check process in Oracle Order Management.
Using Order Management Credit Check Family Pack G
Describes how to implement your Credit Management policies using the additional functionality
included in Oracle with Order Management Family Pack G.
Related Documents
Additional credit checking details on the topics covered within this White Paper can be found in the
following documents:
• Oracle Order Management User Guide 11i
• Oracle Receivables User Guide 11i
Page 2

Understanding Credit Check in the Oracle E-Business Suite
Credit Check Key Concepts
This section introduces key functional concepts involved in the Oracle Applications credit checking
process.
Credit Check and the Credit Management Process
Credit management is directed towards the dual goals of maximizing sales and minimizing
customer debts that go uncollected. The task of credit management personnel, then, is to:
1. Classify customers according to important credit criteria (for example, by sales volume or
financial risk assessment)
2. Determine credit thresholds for groups of customers and assign these controls to customers or
customers groups
3. Determine whether or not a customer order should be authorized based on credit limits and
available credit
4. Release orders upon instructions from management, according to company policy and
procedures
Using credit check effectively requires a complete understanding of its functional components and
careful consideration of credit check timing and performance factors.
In order to determine your credit department procedures, you should know how to activate
automatic credit check for your incoming sales orders, and which business events can automatically
execute credit check. The following sections introduce you to the basic Oracle credit check
concepts that are relevant for your system implementation.
Credit Profiles
Credit profiles define the maximum credit you are willing to extend to customers. You can define the
credit profile information at the following levels:
• Customer/customer site: This profile defines your credit policies for individual customers or
customer sites. You can accept the default credit profiles from a customer profile class, or you
can customize credit limits to fit a particular customer.
You can implement credit policy changes by modifying a customer profile class and cascading the
changes to individual customer profiles. Review the current limitations for multi-currency credit
check setup within Multi-currency Credit Check.
• Organization: This type of credit profile is used to define an organization's (operating unit) credit
policy for credit control and credit checking. It is used as a default when customer/customer site
credit profile is missing. This profile is a new credit profile added with Order Management
Family Pack G.
• Item category: This type of credit profile enables you to define credit limits by item category.
This profile is a new credit profile added with Order Management Family Pack G.
Credit Check Rules
Prior to Order Management Family Pack G, Credit Check Rules provided different options to define
your customer’s credit exposure. For example, you could choose to include or exclude Order
Management and Account Receivables open balances, which is a decision based on your Credit
Page 3

Check Rule definition.
Defining your Credit Check Rules additionally involves:
• Establishing new exposure calculation rules (such as pre-calculated exposure or including
additional freight charges)
• Selecting the credit check process level (determines if credit checking occurs for and order or
order lines)
• Choosing the hold management procedures (such as placing the order or order line on credit
check hold)
• Determine whether to send notifications to the order administrator
With Order Management Family Pack G, you can take advantage of credit checking enhancements
using header or line level information when executing credit check. You also have the ability to
enable holds at the order header or order line level.
For example, if you have an order with two Bill To sites entered at the line level and credit checking
fails for one Bill To site order line and not the other, you have the option of placing holds only for
order lines for the Bill To site (value) that failed, or for the entire order.
Enabling Automatic Credit Check
Credit check is automatically performed when credit checking has been enabled for the following
three separate areas.
• Transaction Type - transaction types enable you to determine the way in which orders are
processed through workflow, including the events that trigger credit checking. You must
choose a Credit Check Rule at either book or shipping (or both) for each transaction type for
which credit check is to be performed.
• Payment Term - payment terms enable you to define the manner in which early payment
discounts are granted for customer orders. You should generally select the credit check box =
‘Yes’. If you do not select credit checking for a payment term, all orders that contain that
payment terms are ignored for credit checking. However, uncollected orders are always be
included within the exposure calculation unless they involve credit card orders.
• Credit Profiles - credit profiles determine the credit limits used in the credit checking process.
You must have a credit profile established for the customer site, customer or organization if you
wish to perform customer credit checking, or an item category credit profile if you wish to
perform item category credit checking. You must also have a credit profile for each currency in
which you place orders, unless you have enabled multi-currency credit checking.
Credit checking occurs on an order when all three levels enable credit checking. If one level
disregards credit checking, credit checking does not occur for the order.
Events Triggering Credit Check
The Credit Check process can be triggered by the following business events:
• Booking - if you have entered a Credit Check Rule for Booking within the Order Management
transaction type window, credit checking will occur at the booking event (if all 3 levels of credit
check are enabled) within the order or line workflow process.
• Pick release and ship confirm - if you have entered a Credit Check Rule for Shipping within
the Order Management transaction type window.
• Order Changes: Any order change that affects the order amount after booking will trigger
credit checking.
Page 4

Performance Considerations
Prior to Order Management Family Pack G, a customers credit exposure was calculated whenever
the credit check process was executed. This process can negatively affect your system’s
performance when dealing with high volumes of data as it involves accessing multiple transactional
tables within the Oracle Order Management and Oracle Account Receivables applications.
With Order Management Family Pack G, you now have the option of performing credit checking
against a pre-calculated credit exposure summary table.
Page 5

Using Order Management Credit Check Family Pack G
This section describes the additional credit check features introduced with Order Management
Family Pack G
New Features in Order Management Credit Check
The following list summarizes the new credit check features introduced with Oracle Order
Management Family Pack G.
Line Level Credit Check
Credit checking can be executed at line level. With this method you can also determine whether
holds are placed at the order or line level.
Multi-Currency Credit Check
Order management now enables global multi-currency support to enable you to perform credit
checking across different currencies.
Pre-calculated Exposure
Improved credit check performance based on the use of pre-calculated exposure. This method
avoids recalculation of credit exposure each time credit checking is run. Instead, you submit a
concurrent program to update credit exposure and the results are saved within a summary table;
the summary table data then becomes the current credit exposure and the exposure amount will not
change until the concurrent program has been successfully resubmitted again.
Item Category Credit Check
Item-category credit check will place on hold transaction amounts over a pre-defined category credit
limits.
Organization Default Credit Check
Default credit profile at operating unit level that enforces a credit checking process for any customer
which does not have credit limits defined at the customer or site level.
Inclusion of Freight and Miscellaneous Charges
Freight and miscellaneous charges may be included/excluded in the credit exposure calculation.
Credit Check Processor
Enables you to run credit check on demand using a new concurrent program.
Notifications
FYI notifications can be sent to the order administrator whenever a sales order fails credit check.
New reports
Two new reports have been introduced with Order Management Family Pack G: Credit Limit Usage
report and Credit Exposure report. Credit Limit Usage report details the multi-currency setup. The
Credit Exposure Report provides accurate information on customer credit exposure based on your
Credit Check Rules.
Page 6

Credit Check Process Level
Credit checking has been enhanced to enables order line level credit checking.
• If you wish to use the credit profile attached to the Bill To site defined at header level, you
should use ‘Order level credit check’.
• If you wish to use specific credit profiles attached to the Bill To sites defined for the order
line level, you should use ‘Line level credit check’.
Order level credit check: Credit check is performed against the order header Bill To site. This
solution provides backward compatibility with previous credit check versions. When selecting this
method, the credit check engine will examine the order total, calculate exposure, and compare the
resulting values against the credit profile attached at order header level Bill To site. Holds are
always applied at header level.
Line level credit check: Credit check is performed against order line level Bill To sites, ignoring the
Bill To site at the order header. The credit check engine will group all order lines belonging to the
same Bill To site and check the available credit for the specific Bill To site. Holds can be placed at
either the order header or order line level. When a line fails credit check, all lines associated with
the same Bill To site are automatically placed on hold. Holds are placed dependent upon the Credit
Check Rule definition (order or line)
Selecting the Credit Check Level
Order level credit check uses header level information and ignores Bill To sites detailed at order line
level. This method is appropriate if an order only uses a single Bill To site.
Order line level credit check is the appropriate choice when sales order lines are attached to
multiple Bill To sites and you want to use the credit profile defined for each Bill To site level.
Additionally, you should use line level credit check when you have defined customer relationships in
your system and you actively use them within Order Management.
Setting up the Credit Check Level and Hold Application Level
The credit check level and hold application are defined in the Credit Check Rules window.
Generally, you should avoid changing the credit check level and hold application settings once you
have begun processing sales orders. If you make such a change, you will need to manually release
all credit check holds previously applied.
Implications when Defining the Credit Check and Hold Levels
The credit check level has the following dependencies for related set up options:
• Hold application:
• If you use order header level credit check, credit check holds are always applied at the
order header level.
• If you select line level credit check you can decide either to apply credit check holds at
either the order header or order line level.
• Exposure calculation: If you use order line level credit check, you must use pre-calculated
exposure to avoid performance limitations (see Pre-Calculated Exposure).
Line Level Credit Check Process
The specific steps involved in the line level credit check process are described below.
Page 7

Step 1: Group sales order lines
The credit check process groups all order lines with the same Bill To site together.
Step 2: Credit profile selection
The system will then attempt to locate a credit profile at the customer Bill To site level. If the credit
profile is found at the Bill To site, the credit check process proceeds to step 3.
If the credit profile is not found at the line Bill To site level, the credit profile search will then check
the credit profile for the Bill To site for the customer that ‘owns’ the line Bill To site. Refer to
“Enabling Order Management Parameters within the Order Management User Guide for details
surrounding customer relationships.)
Prior to Order Management Family Pack G, if a credit profile was not found at either the order Bill
To site or customer level, then the order will automatically bypass credit check. Please note that this
logic has been enhanced with the introduction of an additional credit profile at the organization level
(see Organization Default Credit Check).
Step 3: Validate Overdue Invoices
Credit check validates overdue invoices based on the parameter ‘Maximum Days Past Due’ in the
Credit Check Rules window. If the customer site/customer has an open invoice that violates the
defined value, the sales order/lines are directly placed on hold without further validation.
Step 4: Validate Order Credit Limit
Credit check is performed against the order credit limit first. Order lines which should be summed
are dependent on the level at which the credit profile was found within step 2.
For example, if the credit profile was found at the Bill To site level, only order lines belonging to this
Bill To site will compose the partial order amount to be checked. However, if the credit profile was
found at the customer level, all order lines belonging to the customer who owns the Bill To site will
be considered. Therefore, the process may include additional order lines for the order that are
attached to a different Bill To site but owned by the same customer.
If the order level validation fails, the sales order/lines are automatically placed on hold.
Step 5: Validate Overall Credit Limit
The overall credit limit validation requires the system to calculate the credit exposure. The specific
transactions that make up the exposure amount will depend on the level at which the credit profile
was found in step 2.
If the credit profile was found at the Bill To site level, only order lines belonging to this Bill To site
will be included within the exposure calculation. However, if the credit profile was found at the
customer level, the credit check process considers all customers’ orders lines within the current
Operating Unit irrespective of the Bill To site.
If the validation fails, the sales order/lines are automatically placed on hold.
Page 8

Pre-Calculated Credit Exposure
Prior to Order Management Family Pack G, credit checking calculated the customer exposure by
accessing transactional tables within the Oracle Order Management and Oracle Accounts
Receivable schema during credit check execution, using the calculated summary details to
generate customer balance information.
In order to improve performance, pre-calculated credit exposure has been introduced. With this new
functionality, the credit check engine will use credit exposure balance details stored in a summary
table (OE_CREDIT_SUMMARIES). The summary table can be periodically updated through the
successful submission of the concurrent program Initialize Credit Summaries Table.
Selecting the Exposure Calculation Method
In Order Management Family Pack G, credit check lets you optimize your credit check processing
time through the pre-calculated exposure mechanism. Calculating customer exposure periodically
in the background reduces the time to complete the check on-line.
Selecting the exposure calculation method involves a tradeoff between performance and accuracy.
If you use pre-calculated credit exposure, you will experience significant performance gains but you
also accept an increase in risk that the exposure calculation is not current when a credit check
operation takes place. If the number of outstanding customer transactions is significant, the use of
pre-calculated exposure may improve credit check performance dramatically.
If you do not use pre-calculated exposure, a new customer exposure snapshot is requested
whenever your credit check process is launched.
Setting up Pre-Calculated Exposure
The use of pre-calculated exposure is defined in the Credit Check Rules window. If you are using
line level credit check you must use pre-calculated exposure (see Line Level Credit Check).
Schedule the concurrent program ‘Initialize Credit Summaries’ to refresh your customer’s balance.
Implications when Using Pre-Calculated Exposure
The following restrictions apply when defining your Credit Check Rules for pre-calculated exposure:
If you select to include uninvoiced orders:
• the field ‘Scheduled Shipping Horizon Days’ is inactivated and all your orders with status
‘Booked’ will be included in your customer exposure regardless of their scheduled shipping day
If you select to include open receivables balance:
• the field ‘Open Receivables Days’ is inactivated and your open transactions in Account
Receivable will be included regardless of the invoice/transaction date.
Page 9

Multi-Currency Credit Check
You have now the ability to perform multiple currency credit checking by sharing credit limits across
currencies you specify. Prior to Order Management Family Pack G, credit checking was performed
for a single currency only. This meant that you had to define a credit limit profile in each currency if
you want to control your customer exposure in US dollars, Euros, or Russian rubles. In other words,
each currency was treated individually for credit check purposes. With the release of Order
Management Family Pack G, you can now perform credit check across multiple currencies by using
a single profile.
Multi Currency Credit Check Concepts
• Usage Rule Sets: Usage Rule Sets define the set of currencies that are included within a
specific credit check process, extending existing credit checking functions to include
transactions in all relevant currencies.
• Assign Usage Rule Sets: Usage Rule Sets can be assigned to:
• Customer profile class
• Customer, customer site, Item Category, or Organization Credit Profiles.
If you do not assign a Credit Usage Rule Set to your credit profiles, then the credit check engine will
only perform single currency credit check.
Selecting the Credit Check Type ( Single or Multi-Currency)
Using multi-currency credit check, you can set up a single profile and use it as the basis for
checking credit across currencies.
Setting up Multi-Currency Credit Check
The following steps specify the process of setting up multi-currency credit check.
Step 1: Set up profile option ‘AR: Credit Limit selection’ to Multi.
This profile option can be set by the system administrator at the site, and responsibility levels but
cannot be updated by the user.
The profile option enables you to perform cross currency (multi currency) credit check. If this profile
option is set to ‘Multi’ you can set up a credit limit in one currency and calculate the exposure taking
into account all transactions regardless of their currency. By default, this profile option is set to
‘Single’; your credit exposure will be calculated using transactions grouped by currency.
Currently, the ability to include open balances in one currency as ‘exposure’ against orders in
another currency has not been implemented.
Step 2: Credit check rules - set up your currency conversion type.
The currency conversion type is used to specify exchange rates used when converting credit
balances and transaction amounts to the credit limit currency.
See: Appendix 1 for more details regarding conversion type and credit check process.
Page 10

Step 3: Create Usage Rule Sets.
The Usage Rule Set defines the group of currencies that will be sharing specific credit limit. You can
enumerate the currencies one by one, or simply create a Usage Rule Set including all the
currencies pre-defined in your system.
Note: the currency code ‘ALL’ means Albanian Lek, not “All currencies”. If you wish to set a Usage
Rule set for all currencies, select ‘All currencies’.
Step 4: Assign Usage Rule Sets to the credit profiles.
You can attach Usage Rule Sets to any credit profile; organization default, customer/site credit
profile, and item category profile. You cannot apply the same Usage Rule Set to multiple profiles.
Usage Rule Sets must be mutually exclusive at customer or site level.
For example, assume that you have a customer with two credit profiles; one defined for currency
USD and another for currency JPY. You have also created a Usage Rule Set including all
currencies. You will need to decide which is the credit profile that will support the multi-currency
credit check and update credit limits accordingly. The credit check process determines the proper
credit limits to be used by examining the order currency and the Usage Rule Sets (see Multi-
Currency Credit Check Process).
You can also attach a Usage Rule Set to a customer profile class. If you attach a Usage Rule Set to
a customer profile class, you can default the value to all the customers linked to the specific profile
class.
Caution: you must assign the Usage Rule Sets to your new customers individually. The Usage Rule
Set assignment in the customer profile class is not defaulted when defining new customers.
Multi-Currency Credit Check Process
The specific steps involved in within the multi-currency credit check process are described below.
Step 1: Credit profile selection
The order currency is examined in order to determine the appropriate credit profile to use for the
credit check. The credit check engine will search all Usage Rule Sets attached to the particular Bill
To site for the order currency first. If a Usage Rule Set is not found, the search then proceeds to the
customer level.
Assume the following scenario:
Business World Order limit Overall limit Attached to Rule Set
Site level - Munich 7,000 EUR 70,000 EUR All currencies
Site level - Munich 3,000 DEM 30,000 DEM N/A
Site level - Miami 6,000 USD 60,000 USD N/A
Customer level 20,000 USD 200,000 USD All currencies
Figure 1: Credit Profile Selection - Multi-Currency Credit Check
Business World places an order for Bill To site Munich, using order currency EUR. Bill To site
Munich has a Usage Rule Set attached, which includes the currency EUR. The credit profile used
during the credit check process will be 7,000 EUR/70,000 EUR.
Page 11

Business World places an order for Bill To site Munich, using order currency DEM. Even though
Munich has a credit profile in DEM, the credit profile used by the credit check process will be 7,000
EUR/70,000 EUR; multi-currency assignments have priority when selecting the credit profile.
Business World places a sales order for Bill To site Miami, using order currency of USD. As Miami
has a credit profile in USD, the credit profile used by the credit check process will be 6,000
USD/60,000 USD.
Business World places a sales order for Bill To site Miami, using order currency of EUR: Munich
does not have a Usage Rule Set attached which includes EUR. When the credit checking process
is invoked, since there is no Usage Rule Set for the order currency (EUR), the process then will
check the customer level. Since there is a Usage Rule Set which includes ‘All Currencies”, the
credit profile used by the credit check process will be 20,000 USD/200,000 USD.
Step 2: Validate Overdue Invoices
Credit check validates overdue invoices based on the parameter ‘Maximum Days Past Due’ in the
Credit Check Rules window. If the customer site/customer has an open invoice that violates the
defined value, the sales order/lines are directly placed on hold without further validation.
Step 3: Validate Order Credit Limit
Credit check is performed against the order credit limit first. The transaction amount and the
customer exposure are converted to the credit limit currency. The conversion type used is defined in
the Credit Check Rules window.
Step 4: Validate Overall Credit Limit
In multi-currency credit check, the transactions that make up the exposure amount will depend on
the credit profile level (Bill To site/customer) and the Usage Rule Set attached to the credit profile.
Using figure 2, suppose that Business World places an order for Bill To site Munich, using order
currency of EUR. All Transactions belonging to the Bill To site Munich, regardless of their currency,
will be included in the exposure calculation.
• If Business World places a sales order for Bill To site Miami, using order currency of USD,
only transactions in USD belonging to Bill To site Miami will be included in the exposure
calculation.
• If Business World places a sales order for Bill To site Miami in EUR, all transactions
belonging to Munich and Miami, regardless of their currency, will be included in the
exposure. This is because the Usage Rule Set attached at customer level includes ‘All
currencies’.
Page 12

Organization Default Credit Profile
You can now use two additional credit profiles when performing credit check: organization default
credit profile and/or item category credit check.
Using the Organization Default Credit Profile
Use the organization default profile to provide a default value for your Operating Unit when
performing credit check. Prior to Order Management Family Pack G, if no credit profile is defined for
a given customer, credit check will never place an order on hold.
Organization default is the highest level in the customer profile hierarchy (customer site - customer -
organization default). The organization default is only used in the absence of customer
site/customer credit profiles.
Credit Profile Selection Logic
The credit check program determines the applicable profile information using the following
sequence:
• Examines the customer site, and if none is available,
• Examines the customer account, and if none is available,
• Uses the organization default. If none is found, the order passes the credit check.
The following figure shows the customer credit profile selection process. The organization default
credit profile can enforce the credit check process among customers for whom you haven’t yet
specified the authorized credit limits
S ta rt
G e t th e s ite c re d it
p ro file
G e t th e c u s to m e r
p ro file
G e t th e
o rg a n iza tio n p ro file
G e t th e tra n s a c tio n
c re d it lim it
C re d it c h e c k
tra n s a c tio n lim it
A p p ly / R e le a s e
h o ld
P ro file e xis t
E ls e
P ro file e xis t
P ro file e xis t
E ls e
N o p ro file : U N L IM IT E D C re d it
L im it d e fin e d
E ls e
Figure 2: Customer Credit Profile Selections - Checking Transaction Credit Limit
Page 13

The following example describes the customer profile hierarchy used during credit checking
calculations when profiles exist at the organization, customer level and/or Bill To site.
The first scenario uses order level credit check, and the second scenario uses line level credit
check.
Business Apps Order limit Overall limit
Site level - New York 7,000 USD 100,000 USD
Site level – Miami N/A N/A
Customer level 3,000 USD 200,000 USD
Hillman & Co Order limit Overall limit
Site level – Atlanta N/A N/A
Customer level N/A N/A
Organization Default Order limit Overall limit Effective Dates
Vision Operations 3,000 USD 8,000 USD From: 01-Jan-2000
To:
Figure 3: Credit Profile Selections
Scenario 1 - Order Level credit check
Using figure 4, suppose a sales order is placed by customer Hillman & Co for Bill To site Atlanta.
The credit check engine will use the organization default credit limit (3,000 USD) and will compare it
to the total order amount 12,000 USD. The sales order will fail credit check and will be placed on
hold.
Header: Bill To site: Atlanta Currency: USD
Hold: Yes
Total Amount: 12,000 USD Total Tax: 0 USD Total Freight: 0 USD
Line Bill To site Quantity Unit price (USD) Tax Freight
Charges
On
hold
Credit Limit used
1 Atlanta 4 1,000 0 0 No
2 New York 6 1,000 0 0 No
3 Miami 1 1,000 0 0 No
4 Miami 1 1,000 0 0 No
Figure 4: Sales Order, using Order level Credit Check
Scenario 2 - Line Level credit check
Using figure 4, suppose a new sales order placed by customer Hillman & Co for Bill To site Atlanta.
Page 14

The sales order is identical to the one processed above but line level credit check is instead used.
Each group of lines belonging to a specific Bill To site will be credit checked independently.
• Line 1: The credit check engine will use organization default credit limit (3,000 USD) and
will compare it to the total amount per customer Hillman & Co, 4,000 USD. The line will be
placed on hold.
• Line 2: The credit check engine will use site level New York credit limit (7,000 USD) and will
compare it to the total amount per Bill To site New York (6,000 USD).
• Line 3 and 4: The credit check engine will use Business Apps customer level credit limit
(3,000 USD) and will compare it to the total transaction amount per customer (Bill To site
Miami and Bill To site New York (8,000 USD). The lines will fail credit check and will be
placed on hold.
Header: Bill To site: Atlanta Currency: USD Freight:
Hold:
Total Amount: 12,000 USD Total Tax: 0 USD Total Freight: 0 USD
Line Bill To site Quantity Unit price (USD) Tax Freight
Charges
On
hold
Credit Limit used
1 Atlanta 4 1,000 0 0 Ye Org. default
2 New York 6 1,000 0 0 No Site level - New York
3 Miami 1 1,000 0 0 Ye Customer level - A
4 Miami 1 1,000 0 0 Ye Customer level - A
Figure 5: Sales Order, using Line Level Credit Check
Setting up the Organization Default Credit Profile
You can set up your organization default credit profile through the Define Credit Profiles window.
You can also enable multi-currency credit check attaching a Usage Rule Set to this credit profile.
Page 15

Item Category Credit Profile
Item category credit profile enables you to define item-based transaction limits. Credit check using
item category credit limit is completely independent from other customer credit check processes.
Using the Item Category Credit Profile
Item category credit check validates that transactional amounts do not exceed a pre-defined credit
limit per item category. You may use item category credit profile to control your transactions with
commodities under insurance coverage.
Item category credit check, when enabled, is the first validation performed when executing credit
check process. The item category credit profile can be enabled/disabled through the Credit Check
Rules window.
Note: Overall credit limit does not apply when using item category profile; only transaction
credit limits are validated.
• When using order level credit check, lines are grouped and summarized by item category.
• When using line level credit check, lines are grouped by item category and Bill To site. The
transaction total per Bill To site per a specific item category is checked against the item
category credit profile.
You can also enable multi-currency credit check attaching a Usage Rule Set to this credit profile.
Setting up the Item Category Credit Profile
Item category credit profiles are defined in the Define Credit Profiles window.
Note: Only the transaction credit limits can be defined per item category.
You can also enable multi-currency credit check attaching a Usage Rule Set to this credit profile. To
enable item category credit check you should use Define Credit Check Rules window.
Page 16

The Credit Check Processor
The Credit Check Processor can be run on demand to reevaluate booked orders that have not yet
been scheduled. Use the Credit Check processor whenever you change your customer or default
credit set up and you want this changes to immediately take effect in your booked sales orders.
Using the Credit Check Processor
To submit the Credit Check Processor Report, use an Order Management responsibility that has
the correct permissions.
1. In the Standard Report Submission screen, select the Credit Check Processor concurrent
program.
2. Enter the appropriate parameters.
• The Sales Order Date From parameter is required, and defaults to the current system
date.
• The Sort Orders By parameter is required, and determines the processing order during
program runtime for orders eligible for credit checking.
3. Submit the request
When the concurrent program completes normally, all sales orders processed by the concurrent
program are displayed within a report output so you can verify the credit check results. There are
three possible statuses for each sales order:
• Pass: the order passes credit check and any existing credit holds are released.
• Fail: the order fails credit check and the order or order line(s) is placed is on credit hold
(dependent upon credit check rule definition used)
• Error: credit check cannot be completed for the order due to an unexpected error; the order
cannot be placed on credit hold.
Important Note: This program executes credit check based on your system’s current exposure; the
program can either apply or release holds according to the credit check results.
For additional details, please refer to the Order Management Users Guide, R11i.
Page 17

New reports
Credit Limit Usage Report
This report assists you in validating the correctness of your multi-currency credit check setup
information. It includes detailed information regarding:
• Organization default credit profiles: credit limits (order and overall), effective dates and usage
rules.
• Ιtem category credit profiles: credit limits (order), effective dates and usage rules. You can
specify a range of item categories or list the ones assigned to a specific rule set.
• Customer class credit profiles: credit limits (order and overall), and usage rules. You can
specify a range of profile classes or list the ones assigned to a specific rule set.
• Customer/customer site credit profiles: credit limits (order and overall), and usage rules. You
can specify a range of customers or list the ones assigned to a specific rule set.
• Usage Rule Set definitions: currencies included/excluded in a specific rule set
Credit Exposure Report
The Credit Exposure Report provides a powerful tool to analyze total customer’s exposure. The
report output can includes Order Management and Account Receivable balances based on your
Credit Check Rules definition. The Credit exposure report includes detailed information about:
• Overall credit limits per customer and customer site
• Site and customer balances
• Available credit at either site and customer level
• Risks incurred by performing transactions in currencies that are not under credit limit control.
These amounts are reported in the Operating Unit functional currency and are grouped under
the heading Unchecked balance.
Modified reports
Customer Credit Snapshot Report
Customer credit snapshot report has been enhanced to support multi-currency credit check. This
report uses the seeded value ‘Corporate’ as pre-defined conversion type.
Note: This report does not include Order Management balances. These balances can also
affect your available credit based on the Credit Check Rules definition.
For additional details, please refer to the Order Receivables Users Guide, R11i.
Page 18

New windows
Define Credit Usage Rules:
Figure 6: Define Credit Usage Rules window
The Define Credit Usage Rules window is part of the basic setup for multi-currency credit check.
Usage rules determine which currencies will be sharing a predefined credit limit at credit check
time. A seeded value “All currencies” is provided.
Page 19

Assign Credit Usage Rules
Figure 7: Assign Credit Usage Rules window
The Assign Credit Usage Rules is part of the multi-currency credit check basic setup. Through the
window shown above you can attach the rule sets to specific credit profiles.
Page 20

Define Credit Profiles
Figure 8: Define Credit Profiles window
The Define Credit Profiles window is part of the basic credit check setup. Using this window the new
item category and organization default credit profiles can be defined. Please note that the customer
and customer-site credit profiles are defined in the Customer Master window.
Page 21

Modified Windows
Define Credit Check Rules
Figure 9: Define Credit Check Rules window (Options Tab)
The Credit Check Rules window is part of the basic credit check setup. The following fields and
check boxes have been added to the original window:
• Credit Check Level: Determines whether the credit check will be performed at order header or
order line level
• Conversion type: Determines which exchange rate type will be used in multi-currency credit
check
• Credit Hold Level: Determines the level at which holds will be applied
• Check Item Categories (checkbox): When checked the Item Category credit profile is also
considered at credit check time.
• Send Hold Notifications (checkbox): When checked notifications are sent whenever the sales
order fails credit check
Page 22

Define Credit Check Rules
Figure 10: Define Credit Check Rules window (Exposure Tab)
The Credit Check Rules window is part of the basic credit check setup. The following check boxes
have been added to the original window:
• Use Pre-Calculate Exposure: When checked determines the use of the balance summary
tables for the credit check process.
• Include Freight and Special Charges: When checked determines the inclusion of freight and
miscellaneous charges in the customer exposure.
Page 23

Appendix 1: Conversion type in Multi-currency credit check
Conversion type
You can define a specific conversion type for credit check in the Define Credit Check Rules
window. When you specific a conversion type for credit check, you can model a fixed exchange
rate between currencies (i.e. insurance) or use an average exchange rate (i.e. high inflation
currencies).
Note: The credit limit currency does not necessarily have to be the same as the system
functional currency. For this reason and in order to avoid system exceptions, all credit check
procedures use the following same conversion routines:
• Use the exchange rate defined for the credit check date (system date) between the
transaction currency and the credit limit currency. If not available,
• Use the earliest available rate (up to 30 days before the system date) between the
transaction currency and the credit limit currency. If not available,
• Triangulate using the functional currency for the system date.
• Place the order/line on hold if none of the above is available. The hold comments give you
the following information ‘Currency exception: exchange rate between credit limit currency
and transaction currency not available’.
For example,
1. the credit limit is in USD.
2. the transaction has been placed in JPY.
3. the system functional currency is EUR.
The credit check process determines the applicable exchange rate using the following
sequence:
• Uses the exchange rate defined between USD and JPY for the credit check date.
If not available,
• Uses the earliest available rate (up to 30 days before the credit check date), If not
available,
• Triangulates using the functional currency
⇒ Converts transaction currency to functional currency (JPY: EUR)
⇒ Converts the previous amount to credit limit currency (EUR: USD)
• Place the order/line on hold if none of the above is available. The hold comments give you the
following information ‘Currency exception: exchange rate between USD and JPY not
available’.
Page 1

Appendix 2: Glossary
Credit check
A process that enables you to control your customer credit risk incurred when operating
with your customers. Credit check enables you to place on hold orders that will increase
customer credit risk above an accepted level.
Credit exposure
Reflects the use of credit limits done by your customer. Credit Exposure is the result of
calculating your customer outstanding balance based on a Credit Check Rule. These
transactions may affect the customer exposure: paying or crediting invoices, releasing
orders from hold, invoicing orders…
Credit check rules
Credit check rules are the formulas you use to calculate total credit exposure for a
customer or customer site. You may include or exclude several different balances that
Order Management uses to derive a customer’s outstanding credit balance. For example,
you can include all outstanding receivables, only past due receivables, or only receivables
within a certain date range.
Credit profile
A credit profile is a set of criteria that define an organization's credit policy used for credit
control and credit checking. It includes the credit limit and other data needed to perform
the credit check. A credit profile is an agreed credit policy for any part of the internal
organization and/or a customer/site. Oracle receivables use credit profiles to assign
statement cycles, dunning letter cycles, sales persons and collectors to your customers.
Order Management uses the overall and total order limits when performing credit check.
Credit usage rule
Credit Usage rule enables cross-currency credit checking. It specifies which currency
transactions can be grouped together to use a profile set up in any other currency.
Credit Usage Rule Set
Credit Usage Rule Set is a named set of Credit Usage Rules.
Credit usage
Credit Usage is an association between a credit limit and a Credit Usage Rule Set. This
ultimately defines the coverage of any given credit limit. A credit limit's usage may extend
to one or more pre-defined Credit Usage Rule Sets (and their member Credit Usage
Rules).
Item Category credit profile
The Item Category credit profile is used to control credit for a specific item category across
all customers. An item category credit profile only applies to an order and thus only has a
transaction credit limit.
Page 2

Organization Default credit profile
A credit profile that is used to provide default credit limits and terms for any customer or
customer site within an organization that do not have a credit limit defined.
Page 3

Oracle Order Management Credit Checking and Multi Currency Credit Checking
January 2002
Author: Matilde Jareno,
Contributing Author: James Siri, Charlene Chandonia
Oracle Corporation
World Headquarters
500 Oracle Parkway
Redwood Shores, CA 94065
U.S.A.
Worldwide Inquiries:
Phone: +1.650.506.7000
Fax: +1.650.506.7200
Web: www.oracle.com
This document is provided for informational purposes
only and the information herein is subject to change
without notice. Please report any errors herein to
Oracle Corporation. Oracle Corporation does not
provide any warranties covering and specifically
disclaims any liability in connection with this document.
Oracle is a registered trademark, and Oracle Order Management is a
trademark(s) or registered trademark(s) of Oracle Corporation.
All other names may be trademarks of their respective owners.
Copyright © Oracle Corporation 2000
All Rights Reserved

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