Define Credit Check Rules

Order Management credit check rules enable you to determine what credit checking criteria is used when determining credit exposure during the credit checking process. Order Management transaction types determine when credit checking actually occurs, and when used in conjunction with credit checking rules, define your credit checking process.

For example, you can define credit checking rules that utilize pre-calculated exposure information to use when comparing a customer's current order amount against their overall exposure; if the order transaction type utilizes this rule, and the order fails during the credit check process, it is automatically placed on credit check hold. You can define as many credit checking rules as you need, and if you inactivate a credit checking rule, you also must remove it from any order types that use it.

Additionally, you can include in or exclude from your credit check rule some or all of your open accounts receivable balances, and some or all of your uninvoiced orders.

Order Management uses the currency of the order you are credit checking to determine which credit limits to use in credit checking calculations. Order Management only includes orders and invoices in the same currency as the order you are credit checking when calculating a customer's outstanding credit balance, unless you have set up multiple currency credit checking.

You can also include/exclude returns based on your credit check rule definition. However this should be used only if you are using return lines with credit memos.

Besides defining your credit exposure composition, the credit check rule also determines:

• Credit check level (order or line)
• Credit Hold level (order or line)
• Conversion type used when you enable multi-currency credit check
• Use of item category credit check
• Send hold notifications to the sales order creator
• Use of pre-calculated exposure

Credit Limits for Credit Checking and Rules Summary

• When the Credit Check flag is turned off at the site level that pertains to the Bill-To address, there will be no credit checking for orders for this Bill-To site. It doesn't roll up to the next level to get the credit limits.

• If the Credit Check flag is turned on at the site level, and both overall credit limits and order credit limits are all NULL/BLANK, then the limits for a customer who owns that bill to site will be automatically considered .

• If the Credit Check flag is turned on at the customer level, and both overall credit limits and order credit limits are all NULL/BLANK, roll up to the next level in the party hierarchy (if any). Otherwise, use the Operating Unit Credit profile. Note that party profiles are used only if Credit Management is setup. If not, from the customer level we go directly to the Operating Unit.

• If the Credit Check flag is turned on at each level, and there is only one field left NULL/BLANK (for example, order limit is null but overall exposure is some number), then this NULL/BLANK field is treated as unlimited and it does not rollup to next level.

• If the last level reached with the Credit Check flag enabled has both overall and order credit limits set as NULL/BLANK, it means no credit checking should be performed. IF the Credit Check flag is enabled and order credit limit is not NULL/BLANK, then a credit check will be performed at the item category level.

• If the Credit Check flag is disabled for item category or if the Credit Check flag is enabled and both order credit limit and overall credit limit are all NULL/BLANK for item category, then credit checking will not happen at the item category level, but credit checking will still be performed for the site-customer-(party)-OU level based on the rules discussed. IF the Credit Check flag is enabled and at least one of the order credit limit and overall credit limit fields are not NULL/BLANK, then a credit check will be performed at the item category level.

Performance Note

In order to improve performance you can enable the use of pre-calculated exposure. Utilizing this option, the credit check engine will use summary balance details stored in a periodically updated summary table. The update is done by running a concurrent program which accesses Order Management and Account Receivable transactional tables. 

This program should be scheduled to run periodically based on your specific business needs. You should also run this concurrent program when you have done major changes in your set up or transactional data (merge customers, incorporate transactions from external systems, change transaction status using customized programs, etc.).

To define a credit check rule:

1. Navigate to the Credit Check Rules window.
2. 
   
3. Enter a name for your credit check rule.
4. Optionally, enter the Effective Dates for your rule.
   Options Tab
5. Select the entity to perform credit checking against for your rule. Select from:
• Sales Order
• Sales Order Line
  
  Note: If you select Sales Order Line as your credit check level, the Use Pre-calculated Exposure check box will be checked and protected against update
  If you choose to perform credit checking at the Sales Order level, you are limited to the system generating header level credit holds only. The Credit Hold Level field will default to Sales Order and is protected against update.
6. Select the Credit Hold Level for your credit rule. Select from:
• Sales Order: Sales Order (order level) credit check is performed for the header Bill To site. Sales Order level credit checking provides backward compatibility with previous credit check versions. When credit checking rules are defining using Sales Order as the credit check level, the credit check engine will examine order totals and evaluate credit exposure against the credit profile attached at header level.
  Holds will be always applied at header level.
  Use order level credit check when order lines always have the same Bill To Site as the Order Header.
• Sales Order Line: Sales Order Line (line level) credit check is performed against order line Bill To Sites. The credit check engine will group all order lines belonging to the same Bill To Site and check available credit for each specific Bill To Site. When an order line fails credit check, any remaining lines grouped with the same Bill To Site are placed on hold.
  Holds can be placed at either the order or order line level when you use line level credit checking.
  Use line level credit check when sales order lines are attached to different Bill To Sites and you want to use the credit profile defined at that level. Additionally, you can use line level credit check when you have defined customer relationships within your system and actively use them within Order Management. Using customer relationships, you can create sales orders with order lines attached to different Bill To Sites owned by different customers.
  Order Header level credit checking uses header level information ignoring different bill-to sites detailed at the line. Credit Check uses the credit profile attached to the customer Bill-to site defined at order (header) level. Credit checking at the Order Header level will use order totals and will evaluate credit exposure against the credit profile attached at header level, and holds are always applied at header level.

Special Considerations for Credit Hold Level

• If you update the Credit Hold Level from Sales Order to Sales Order Line, a pop up dialog box will display a message indicating that existing sales order credit holds will need to be released manually. Select Yes to continue or No to not commit the update.
• If you update the Credit Hold Level from Sales Order Line to Sales Order, a pop up dialog box will display a message indicating that existing sales order line credit holds will not be released automatically. Select Yes to continue or No to not commit the update.
5. Override Manual Release check box: This check box enables an order or line which had failed credit checking and then was subsequently manually released to be eligible for additional credit check processing. Select from:
• Yes: Manual Released Holds will be overridden. You must also enter a value within the Days to Honor Manual Release field.
• No: Manual Released Holds will be honored. The field Days to Honor Manual Release will be non-updatable.
6. Days to Honor Manual Release: The field is used in conjunction with the Override Manual Release check box. If you enable the Override Manual Release check box, you must enter a numeric value greater than zero within this field.
   Manual Released Holds (Credit Checking Procedures)
   Each time a credit check failure occurs for order or order line, the corresponding order or order line is placed on credit check hold. However, prior to the credit check holds actually being applied, the credit check process determines:
• If a manually released credit check hold exists and
• If your credit check rule enables override of manually released holds (in conjunction with the value for Days to Honor Manual Release).

If Override Manual Release is not enabled for your credit check rule, then manually released holds are honored and no additional credit checking will occur.
If Override Manual Release is enabled, the credit checking process will validate if the release date is within the interval defined by the value of Days to Honor Manual Release. If the value is within the range defined, then manually released holds will be honored and additional credit checking is not performed. If the value is not within the range defined, credit checking can occur again and credit check holds can be applied if the order or lines fails the credit check process.

Note: The value of OE_HOLD_RELEASES.CREATION_ DATE is used by the credit check process to determine if the duration defined for the credit check rule is within range for additional credit checking: when any hold is released for an order or line, Order Management inserts a record within OE_HOLD_RELEASES.

8. Select the conversion type to use when performing credit checking using your credit rule. The LOV for this field is limited to the values you define within the Oracle General Ledger Conversion Rate Types window.
9. Select the Check Item Categories check box for your credit rule if you wish to perform credit checking for sales orders by Item Categories defined for Order Management.
10. Select the Send Hold Notifications check box if you wish to send hold notifications whenever a credit hold is placed for a sales order or order line. The notification is sent to the creator of the order.
    Determine the type of credit exposure to use when defining your credit check rules by selecting the Exposure Tab within the Define Credit Check Rules window.
    Exposure tab in the Credit Check Rules Window
    
    Exposure Tab
11. Select the Use Pre-calculated Exposure check box for your credit rule if you wish to perform credit checking against pre-calculated exposure summary tables.
• When the first credit check rule that has the Use Pre-Calculated Exposure check box checked is successfully saved, the following message will display:
  This credit check rule uses pre-calculated exposure. Please run the Initialize Credit Summaries program to update the pre-calculated data.
• If the Use Pre-calculated Exposure check box is checked and the Include Open Receivables balance check box is checked, then Open Receivables Days is protected against update and is NULL.
• If the Use Pre-calculated Exposure check box is checked and the Include Uninvoiced Orders check box is checked, then Shipping Horizon Days is protected against update and is NULL.
12. Select the Include External Credit Exposure check box if you wish to include external exposure details imported into Order Management during the credit checking process.
    When an Oracle Order Management sales order is credit checked, the exposure data from the external system is included in the overall exposure check. The default value for this check box is un-checked (exclude external exposure details when performing credit checking).
    Receivables Balance Region
13. Select the Open Receivables Balance check box for your credit rule if you wish to include open receivables balances.
    You must enable either the Include Open Receivables Balance check box or the Include Uninvoiced Orders check box in your credit check rule. You can activate both, but you cannot toggle both off.
    If you select both the Pre-calculated Exposure and Open Receivables Balance check boxes, you are unable to specify Open Receivables Days.
14. If you enabled Include Open Receivables Balance in your credit check rule, you can indicate whether to Include Payments at Risk when calculating a customer's outstanding balance.
    Receipts at risk are remitted receipts that have not been cleared, or discounted (factored) receipts that have not been risk eliminated. If the performance of credit checking requires improvement you can toggle off this option.
15. If you enabled Include Open Receivables Balance, enter a value to indicate the range of dates for open receivables you wish to include for your credit check rule.
• Negative Number: Includes past due, current, and future open receivables up to X days beyond the current date
• Positive Number: Includes open receivables with invoice dates X days earlier than the current date
• No Value: Includes all open receivables

Uninvoiced Orders Region

Note: If you do not select the Include Uninvoiced Orders check box, you cannot select any check boxes within the region.


Important: If an order line has been interfaced to the Receivables interface table but hasn't been invoiced yet, the Order Management credit check engine will include this line amount as part of the uninvoiced order amount. If your system enables credit checking and your Receivables Interface table can potentially contain large volume of data, it is recommended that you create a custom index on RA_INTERFACE_LINES_ALL table ORIG_SYSTEM_BILL_CUSTOMER_ID column.

16. Select the Include Uninvoiced Orders check box if you wish to include uninvoiced orders for your credit rule.
    If you enabled Include Uninvoiced Orders:
• Indicate whether to include Freight and Special Charges for uninvoiced orders when performing credit checking.
  Select the Freight and Special charges check box to include Freight and Special Charges.
• Indicate whether to include Tax information for uninvoiced orders when performing credit checking
  Select the Tax check box to include Tax information for uninvoiced orders. Credit checking calculations on open receivables always include tax amounts and are not affected by the Include Tax option. If the performance of credit checking requires improvement you can toggle off this option.
• Indicate the number of scheduled shipping horizon days for your credit rule for uninvoiced orders to be included in your total credit exposure when performing credit checking.
  For example, if you enter 45, the total exposure includes only uninvoiced orders scheduled to ship within 45 days of the current date. Orders scheduled to ship after 45 days are not included when calculating exposure.
  
  Note: If the Use Pre-calculated Exposure check box is checked, Scheduled Shipping Horizon Days is protected against update.
• Indicate whether to Include Orders Currently On hold. Select the Include Orders Currently On hold check box to include orders on hold within the exposure calculation for your credit rule.
17. Indicate the Maximum Days Past Due.
    The Maximum Days Past Due field value specifies the number of day that you will allow an invoice to be past due before holding the customers orders. During the credit checking process, Order Management will verify that no invoices for the customer have been past due beyond the number of days you specified with this field. If there are any such past due invoices, the order is placed on credit hold.
18. Save your work.

Deactivating Credit Checking

There are three ways to deactivate Credit Checking on an order:

• Use an order type that does not have an assigned credit rule
• Define the Customer Profile so that the Credit Check box is not selected
• Use payment terms for which the Credit Check box is not selected

Deactivating Credit Checking does not automatically release orders previously on credit hold. However, the next time you attempt to Book, Pick Release or Purchase Release (for drop shipments), Pack, or Ship Confirm an order which utilizes a Order Management Transaction type that enables credit checking to occur at the specified order points, or you perform an order change that trigger credit checking in the Sales Orders window, Order Management will releases the credit check hold if the order or line meets the requirements for successful credit check.

Related Topics

Payment

Sales Orders

Holds and Releases