Difference Between An Automatic Credit Check And A Simple Credit Check
There are several differences between an automatic credit check and a simple credit check. The first difference is the inclusion of open deliveries of goods. Open deliveries of goods are documents and values of delivery items that are not yet invoiced. A simple credit check does not include the customer’s open deliveries of goods and only considers the customer’s open item values. The customer’s open item values are added to the value of the current sales order to calculate the credit limit. An automatic credit check also determines open deliveries of goods aside from open items.
Another difference between an automatic credit check and a simple credit check is the credit limit. When the credit limit exceeds a simple credit check, the system reacts and alerts credit representatives with a warning message. A warning message can be an error message on the sales order or an error message with a delivery block, which is carried out by credit representatives. An automatic credit check, on the other hand, gives extra credit to a particular customer beyond the customer's credit limit.
Automatic credit limit checks are done by the static credit check and the dynamic credit check. The credit limit determination for a static credit check is based on three types of checking groups, such as credit checking groups, risk categories, and credit control areas. Credit checking groups are composed of three levels which are sales, deliveries, and goods issues. These three levels can be blocked by the user. The risk category determines the amount of credit granted to the customer. It also has three levels which are high risk, which constitutes low credit, a low risk which means more credit, and medium risk equals average credit.
The credit limit determination for a dynamic credit check is based on the horizon period. The horizon period determines when the open documents, open deliveries, open billings, and open items will be used by the system to determine the credit limit.
Benefits Of An Automatic Credit Check
There are several benefits of an automatic credit check. The first benefit of an automatic credit check is the credit check, and the credit limit can be defined freely based on the user requirements in the area of credit management. An automatic credit check can be determined by the following, such as credit control area, risk class, and credit group. The credit limit can be determined using the static credit limit check and the dynamic credit limit check.
The next benefit of an automatic credit check is more credit exposure to customers. Customers with good credit histories can enjoy extra credit if they go beyond their credit limits. Automatic credit checks reward customers with good payment history by granting more credit exposure.
Another benefit of an automatic credit check is the method and scope. Automatic credit checks use a comprehensive method for credit check and credit limit determination. This comprehensive method allows automatic credit checks to cover different kinds of customers in different methods, unlike simple credit checks. Simple credit checks use the same method for all kinds of customers.