SAP Sales and Distribution Certification Practice Exam

What is the purpose of the credit management function in SAP SD?

1. To ensure proper inventory levels

2. To monitor customer credit limits and assess risk

3. To manage supplier relations

4. To determine product pricing

The correct answer is: To monitor customer credit limits and assess risk

The purpose of the credit management function in SAP Sales and Distribution (SD) is to monitor customer credit limits and assess risk. This function plays a critical role in the financial health of a business by enabling organizations to evaluate the creditworthiness of customers before approving sales orders. Credit management helps businesses minimize financial risks associated with extending credit to customers. By setting credit limits based on factors such as the customer's payment history, credit rating, and overall financial stability, companies can effectively manage the likelihood of default on payments. If a customer approaches their credit limit, the system can trigger alerts or restrict future transactions, ensuring that the company does not incur unexpected financial losses. This function goes beyond simply managing individual customer accounts; it integrates with various other modules within SAP. For instance, it can connect to the financial aspects of the organization to provide a comprehensive view of credit exposure, and also support decision-making processes by enabling finance teams to track payment trends and evaluate the overall risk portfolio. In contrast, the other functions, such as managing inventory levels, supplier relations, or determining product pricing, serve different purposes and are not directly related to the assessment and management of customer credit. This distinction highlights the core focus of the credit management function: protecting the business from credit-related losses