Credit Management in Dynamics 365 Finance

Credit management in Dynamics 365 Finance is one of the essential features that simplifies all credit-related operations while boosting financial health. It manages credit limits, establishes blocking rules in risk assessments, and centralises the credit information of the entire business. Before understanding the exact use of credit management and its core capabilities for different businesses, let’s know a bit more.

What is Credit Management in Dynamics 365 Finance?

Traditionally, businesses were used to appoint a person to maintain all general ledgers of cash flow, financial transactions, and credit management. And we know that humans are prone to errors and mistakes that can lead to financial loss.

Introducing credit management in D365 F&O that totally eliminates the errors and redundancies from the system, leveraging the power of automation and workflows. In D365, it isn’t a separate module, but it is a feature available in the credit and collection module.

The Credit Management feature of Dynamics 365 Finance takes care of all the tools and capabilities required to streamline diverse credit operations. It maintains the business's cash flow, eliminates the risk associated with credit management, and enhances overall profitability.

Credit management tracks all the financial transactions and ensures payments to the vendor or the customer without any delay. This feature empowers the business to maintain a healthy cash flow while strengthening financial wellbeing.

To activate the Credit Management feature, you need to open Features Management and enable it. Once you activate this, you will be able to get the additional capabilities in the Customer Credit and Collection section.

Core Capabilities of Credit Management in D365 Finance

Credit management comes with a diverse set of functionalities that enable a business to track financial performance and optimise it for better outcomes. Some of the capabilities are:

Credit Management Groups

You might be wondering about what the credit management group in Dynamics 365 is to better understand what credit management can do for your business. If so, credit management groups are a feature that empowers a business to classify different customers in groups based on certain parameters. It eliminates the need to track a customer separately, which leads to saving a lot of time and the user's efficiency.

In the above image, you can see the credits and collections section.

Scoring Groups

Once you have the specified groups of customers that match with the same set of parameters, you can build an automated system that defines a scoring system for these groups to identify the credit risk with any of the customers. Dynamics 365 Finance allows the business to score groups leveraging pre-defined internal programs that can track customers through transaction history, customer records, and financial data of customers.

Risk Score

Set up risk scores for customers or a group of customers based on the captured data. Dynamics 365 Finance allows you to create different scoring groups and scoring values based on specified risk scores. It eliminates the need to analyse each customer and focuses on those who can provide more business.

Blocking Rules

Blocking rules are defined as a set of rules that you can set up on customers or groups of customers to restrict some orders or workflows from being processed automatically. You can set up such rules for the customer to track their credit scores. A customer with a high credit score can bypass all blocking rules, and a customer with a low credit score can easily be flagged.

Based on the blocking rules, you can decide whether a customer is worth focusing on or not.

Grace Period

Grace Period is an additional capability that applies to customers under Blocking Rules. You can understand it as a rule in the form of tenure that can be applied to certain customers where there is a need to adjust credit limits and prevent any kind of disruptions in credit flow.

You can set certain parameters to leverage additional limits for the customers that are passing through blocking rules. Like, if a customer is a defaulter in credit score from the last 2 months, you can apply the grace period rule to take out such customers from the defaulter list and set a minimum tenure of being on the defaulter list as per your requirements. In simple terms, you can exclude the defaulter customers from the list while setting up certain parameters.

Deduction Management

Businesses offer discounts and deductions to customers to increase overall revenue and build brand loyalty. Manually tracking such balances is full of errors and also misses important revenue. Here, credit management in Dynamics 365 Finance allows businesses to keep track of all such deductions within the system. Also, admin has the power to set automated parameters to approve or reject any of the established deductions by fellow employees.

Case Management

Case management in Dynamics 365 Finance allows businesses to track all interactions and activities with customers. You can get a 360-degree view of customers throughout the sales cycle. Also, you can collect such data to offer customers personalised offers and discounts to retain them for the long run.

Collection Letters

Tracking and maintaining overdue payments are essential operations in financial operations. With credit management in finance, you can easily maintain a record of all overdue payments and keep in constant communication with them, increasing the chances of receiving funds. Based on definite parameters, you can set up a series of automated letters, like an email campaign, and customise them based on a specific customer before sending them.

For example, the first letter can be a polite request followed by a warning, then late fees, and legal action against the customer.

How can Dynamics Square utilise complete credit management in Dynamics 365 Finance?

Credit management is one such essential operation that needs precision to perform accurate financial transactions in a business. In case of error with managing credits, the business may need to face a lot of consequences in terms of finance as well as streamlining operations. Eradicate any chances of process failure or error-prone operations with Dynamics Square.

Being a Microsoft Solutions Partner for more than 14 years, we have achieved excellence and expertise to help businesses resolve complex financial issues with cost-effective and efficient solutions. With us, your business can grow continuously and eliminate all redundancies from the system while accelerating towards the growth path.