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Former Member
Dec 01, 2011 at 02:43 PM

Credit Limit of a Customer v/s. Validity Date or amount of a bank guarantee

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Hi experts,

We have a group of customers whom we sell goods only after they open a Letter of Credit or provide a Bank Guarantee in our favour. Both documents are a kind of security and have a validity date. Currently our Finance guys maintain credit limit manually (FD32) which means they keep a manual record of expiry dates of all guarantees and letters of credit. Right after the expiry date they reduce the credit limit to "0" if the customer does not provide a fresh guarantee or letter of credit, so that unsecured sales are blocked and risk is minimized.

I am looking to automate this process and need ideas on how to do it. Is there any way to control this credit limit (amount and/or validity date) using any functionality in FI?

One option could be recording all such Guarantees as a noted item but still these will be for reporting purposes only and credit limits would require manual maintenance. How are other companies meeting this requirement?

Thanks in advance.

Moazzam