About credit verification

Credit verification is invoked each time a user creates an invoice for a customer in Customer ledger.

When you create an invoice and the customer fails the credit check, the system checks the value of the Hold documents on failed credit check check box in the Customer ledger preferences (AR101000) window, which defines what happens to new invoices if the credit check fails:

• If the check box is selected, you may save the document (invoice or debit note) with the On hold status, but the document cannot be released until the credit violation is resolved.
• If the check box is cleared, you can save new documents with the Balanced status and process them regardless of the credit check result, although the system warns users about customers that have failed their credit check.

If the Sales workspace is enabled, credit verification is invoked each time you create an invoice that originates in the Sales workspace. When you create an invoice by using the Customer invoices (SO303000) window and the customer fails the credit check, the system checks the value of the Hold invoices on failed credit check check box in the Sales order preferences (SO101000) window. This check box defines what happens to new invoices if the credit check fails:

• If the check box is selected, the invoice gets the Credit hold status and can be saved with only the Credit hold or On hold status. For invoices with the Credit hold status, in the Process sales invoices (SO505000) window, you can perform the Release from credit hold action. When the action is completed, the system saves the invoice with the Balanced status and you can process it further.
• If the check box is cleared, you can save new documents with the Balanced status and process them regardless of the credit check result, although the system warns users about customers that have failed their credit check.

Credit verification is invoked for orders that are based on an order type that has the Hold document on failed credit check check box selected in the Order types (SO201000) window. For an order of such a type, when you create a sales order and try to change the status of the sales order to Open, the system performs a credit check of the customer, and if the customer fails the credit check, the document gets the Credit hold status (and can be saved with only the Credit hold or On hold status).
For orders with these statuses, in the Process orders (SO501000) window, you can perform the Release from credit hold action. This initiates credit checks for each order selected, and if the credit check is successful, the order receives a status of Open.

You can set credit verification rules for individual customers and for groups of customers.
To provide default credit verification settings for groups of similar customers, you can specify credit rules by customer class in the Customer classes (AR201000) window.
If needed, you can disable or redefine the default rules for individual customers by using the Customers (AR303000) window.

In the Credit verification field in these windows, you can select one of the following options:

• Credit limit:
  If the customer's total outstanding balance is greater than the amount specified in the Credit limit field, the system generates a warning. If the value in the Over-limit amount field is also exceeded, the system puts new invoices on hold or issues a warning, depending on the Hold documents on failed credit check setting and (if the Sales workspace is used) the Hold invoices on failed credit check setting.
• Days past due:
  Payment terms are defined and due dates are calculated based on the customer's terms.
  If the customer has a document that is past due by more days than the number of days past due specified in the Credit days past due field, the system puts new invoices on hold or issues a warning, depending on the Hold documents on failed credit check setting and (if the Sales workspace is used) the Hold invoices on failed credit check setting.
• Limit and days past due:
  Both types of rules are applied: The customer's debt should not exceed the credit limit, and the payment date should not exceed the due date of an invoice by more days than the specified number of days past due.
  If either rule is violated (or both rules are), the system puts new invoices on hold or issues a warning, depending on the Hold documents on failed credit check setting and (if the Sales workspace is used) the Hold invoices on failed credit check setting.
• Disabled:
  No credit rules are to be applied.

You can view the unused credit limit of a customer in the Remaining credit limit field on the General settings tab of the Customers window.