Credit Management

• Credit Management
• • Lines of Credit
  • Line of Credit Scope
  • Credit Exposure
  • Despatch Order Residual Quantities
  • Impact of Credit Management on Despatch Orders
  • Video

Credit management is the process of deciding to which customers to extend credit and evaluating those customers’ creditworthiness over time. It involves setting up lines of credit and credit limits, tracking customer payments, and monitoring credit exposure and risk.

For organisations under credit control in MineMarket, despatch orders (DOs) can only be added to despatches if their credit is approved and their status (and the status of any linked DOs) is a selectable status.

Lines of Credit

Multiple lines of credit can be set up for an organisation:

• Bank Guarantee
• Credit Account
• Letter of Awareness
• Letter of Credit
• Parent Guarantee
• Prepayment

Lines of credit do not affect contract creation; they are associated only with despatch orders (DOs), invoices and payments.

The bank guarantee, credit account, letter of awareness, parent guarantee and prepayment credit lines are the same in all but name. Much more information can be specified for a letter of credit.

Line of Credit Scope

A line of credit can be for sales or purchase:

• Sales—The line of credit represents the credit available to the organisation.
• Purchase—The line of credit represents the credit available to a company that is purchasing from the organisation.

Credit Exposure

The maximum credit exposure of each line of credit is calculated as:

Available Credit = Approved Credit – Uninvoiced Despatch Orders with Approved Credit – Locked Invoice Instalments + Locked Payments – Locked Refunds

Other types of invoices; for example, freight or demurrage invoices, do not affect credit line balances.

The Available Credit is recalculated whenever:

• A modification is made to the credit limit itself, affecting the limit amount or currency
• A despatch order is created, where there was already sufficient credit for the despatch order
• A child despatch order (CDO) is created, where the credit for the aggregated parent despatch order (APDO) was already approved
• Credit for a despatch order is approved
• A despatch order is fulfilled
• A sales or purchase invoice for a despatch order is locked
• A payment is received and locked
• A refund is created and locked

If a DO has a locked final invoice, the monetary value of the DO for credit management is the same as the final invoice total. The monetary value of DOs that do not have a final invoice is updated whenever the MineMarket Marketing Service is run. Active transactions are DOs for which the value that is affecting the credit line has not been fully paid.

Despatch Order Residual Quantities

If despatch order fulfilment is not configured for the contract product, the DO's impact on the credit exposure is initially calculated based on the DO required quantity. When the DO is associated with a despatch transaction, only the monetary value of the actual loaded or unloaded quantity affects the credit exposure.

Whether loading or unloading transactions are considered depends on the Despatch Fulfilment Type specified for the DO.

However, if despatch order fulfilment is configured for the contract product and a DO for that product has been partially loaded or unloaded, both the loaded or unloaded quantity and the residual quantity affect the credit exposure. The residual quantity is the difference between the loaded or unloaded quantity and the required quantity when the required quantity is greater than the loaded or unloaded quantity.

The monetary values of the loaded or unloaded quantity and the residual quantity display on separate lines on the Summary view of the credit transactions. In the Date Range and Only Active Transactions views, the monetary values of the loaded or unloaded quantity and the residual quantity are aggregated for the DO.

When the DO is marked as fulfilled, the residual value is zero. For fulfilled DOs, only the monetary value of the actual loaded or unloaded quantity affects the credit exposure. (The residual quantity is also zero when a final invoice is created for a DO, irrespective of whether the DO is marked as fulfilled.)

The monetary value of the residual quantity is based on the invoice unitary value of the loaded or unloaded quantity:

Invoice Unitary Value = Invoice Value of DO Loaded or Unloaded Quantity / DO Loaded or Unloaded Quantity

Residual Monetary Value = Invoice Unitary Value * DO Residual Quantity

Similar logic applies to APDOs that have at least one loaded or unloaded CDO.

Example: An unfulfilled DO (with the Despatch Fulfilment Type set to Loading) has a required quantity of 1000 lb. The DO is associated with a first loading transaction of 205 lb.

DO Residual Quantity = Required Quantity – Loaded Quantity = 1000 lb – 205 lb = 795 lb

Four more loading transactions are associated with the DO. Each transaction is 195 lb.

DO Residual Quantity = 1000 lb – ( 4 * 195 lb + 205 lb ) = 1000 lb – 985 lb = 15 lb

The DO is marked as fulfilled.

DO Residual Quantity = 0 lb

Example: An unfulfilled APDO (with the Despatch Fulfilment Type set to Unloading) has a required quantity of 1000 lb, and has 5 CDOs, each with a required quantity of 200 lb. One of the CDOs has an unloading transaction of 205 lb.

APDO Residual Quantity = Required Quantity – Unloaded Quantity = 1000 lb – 205 lb = 795 lb

Each of the remaining CDOs has an unloading transaction of 195 lb.

APDO Residual Quantity = 1000 lb – ( 4 * 195 lb + 205 lb ) = 1000 lb – 985 lb = 15 lb

The APDO is marked as fulfilled.

APDO Residual Quantity = 0 lb

Impact of Credit Management on Despatch Orders

For organisations under credit control:

• An individual sales or purchase contract can be excluded from the organisation's credit control.
• DOs can only be added to despatches if their credit is approved and their status (and the status of any linked DOs) is a selectable status.
• For APDOs and consignment parent despatch orders (CPDOs), CDOs can only be added to despatches if credit is approved for the PDO and the PDO's status (and the status of any linked DOs) is a selectable status.
• The credit status of DOs is controlled by the status flow set for the Despatch Order status definition.
• When a DO is created for a contract under credit control, the DO is automatically submitted for credit approval. The DO is assigned the credit-rejected status if:
  • There is insufficient available credit in the line of credit.
  • The planned despatch date is after the expiry date of the line of credit.
  • Any revenue line item has a value of zero (unless the revenue line item is for a toll account or toll return).
• When a CDO is created for an APDO that has approved credit, the APDO is automatically re-submitted for credit approval, unless a final invoice has been created for the APDO or any CDO. If there is insufficient available credit in the line of credit, or if the planned despatch date is after the expiry date of the line of credit, the APDO and all of its CDOs are assigned the credit-rejected status.
• A DO, APDO or CPDO can be manually submitted for credit approval. If there is sufficient available credit in the line of credit, and the planned despatch date is before the expiry date of the line of credit, the status of the DO or PDO is changed to the specified credit approved status.
• To prevent a DO or CDO from being added to a despatch, it is possible to deny credit for a despatch order.
• A user with the Allow the user to override despatch order credit status user group security right can override the credit control by manually changing the DO status.

Video

A Datamine consultant recorded this video about credit management in MineMarket.