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Credit Management Part 2: Add and adjust credit management information


Hitachi Solutions > Blogs > 2020 > 07 > Credit Management Part 2: Add and adjust credit management information

In Part 1 of this series, I demonstrated how to automatically assign a credit limit using the new credit management feature. In this post, I will cover how to adjust a customer’s credit limit using a journal and how to recognise credit guarantees and insurance within a customer’s credit limit.

Temporary credit limit

A temporary credit limit allows you to support short term situations like product sales, without impacting the long-term credit limits. It is similar to the credit limit and is defined in the same way. However, it has an interval of time for which is active. A temporary credit limit can be created in the credit adjustments journal (Credit and Collections > Credit limit adjustments). During that time, a temporary credit limit overwrites the credit limit.

Let us look at an example:

  1. The customer has a credit limit of 20,000.00.
  2. When the temporary credit limit is created in credit adjustment form (Credit and Collections > Credit limit adjustments), like an automatic credit limit, it is defined value and an interval of time for which the adjusted credit limit will be active.

  3. After posting the credit adjustment, in the customer form, we can see that the temporary credit limit of 5,000.00 has overwritten the original credit of 20,000.00

  4. In the temporary credit limit tab on top (under the credit management tab) we can see the value and the interval of time for which the temporary credit limit is active.

A temporary credit limit can be very useful in a situation of business stress such as an economic crisis when companies do not have the flexibility to give as much credit to their customers as normal and want to reduce their credit risk.

Insurance and Guarantee

It is also possible to add additional information to the customer’s credit limit such as Insurance policy and guarantee and to include them when calculating the credit exposure that the company has when it offers credit to a customer. Credit exposure is a component of credit risk. It indicates the maximum loss of the company if a customer defaults on a payment. Continue using the example above,

  1. The insurance and guarantee for the customer is created in the insurance and guarantee tab, under credit management tab in the customer form.
  2. It is defined as a value for the insurance, an effective and expiration date, and a percentage from 0 to 100 of the guarantee and insurance that you want to include in the credit limit.

  3. After that, the total credit limit of the customer should be updated and incorporate the percentage of the insurance value. In this case, the total credit should be 15,000.00 (5,000.00 of the temporary credit limit plus 50% of 20,000.00 of the insurance and guarantee)

  4. In the related information tab on the side, under credit, you can see the calculated credit exposure, that is influenced by the checkbox “included in exposure” in the insurance and guarantee form.
    1. If that checkbox is selected the value of the exposure, in credit statistics, is equal to the difference between the value of the credit and the amount to update in the credit limit, that means that is the percentage of the insurance and guarantee value previously defined.
    2. If it is not selected the full value of the credit limit is considered as exposure.

Credit statistics

The system provides a quick overview of some credit statistics for each customer. In the customer form, under the related information tab on the right side, there is a new group of FactBoxes call Credit statistics that gives information about the credit and the current situation of the customer. Which is basically a sum up of the customer’s credit information, up to date each time that the credit statistics are refreshed.  

There is a new process in the Credit and Collections > Periodic tasks > Credit management > Calculate balance statistic that can be used to update the values that are shown in the FactBoxes.

This periodic task can also be used to update the calculation of balance statistics that are shown in a new report called Customer Balance Statistics (Credit and Collections > Inquiries and reports > Credit management > Customer balance statistics). In this report, it is possible to see the value of the credit limit and the actual balance of the customer. The system also allows you to calculate the balance statistics for a specific customer or customer group, by the button “calculate” on top.

Stay tuned for part 3 where I will cover the creation of blocking rules and how to dynamically put and release order holds.

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Margarida Santos

Margarida Santos works as a Functional Consultant of Microsoft Dynamics 365 Finance and Operations. Margarida joined Hitachi Solution Europe in 2019 and works from the Portuguese office located in Porto. Margarida has expertise in Credit and Collections and has recently embraced the Supply Chain area.

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