Skip to main content

Order-to-Cash Process



Order-to-Cash Process
Order-to-Cash is an integration point between Finance (FI) and Sales (SD). It is also known as OTC or O2C in short form. It is a business process that involves sales order from customers to delivery and invoice. It comprises SO, Delivery, Post Goods Issue (PGI) and billing to customers. OTC process is a very important process in Enterprise Resource Planning software(ERP Software). Both major ERP software SAP and Oracle include this process.
Its configuration touches both Finance and Sales & Distribution modules. This is an end to end process from customer Inquiry to goods delivery, billing and payment of money. The process starts when a customer inquires for an inventory item (finished goods for a company). The customer gets quote for the item and place an order for the quantity needed. A user from company place the order and pass it for processing. Inventory gets picked up from warehouse and shipped to customer. Billing process also starts with delivery and it can be sent with the item or later. This is an overall OTC scenario in general.
This process gives integration between customer master record, sales organization, sales offices, distribution channels, divisions and plants.
Here in this article, we are going to discuss the steps in details.
SAP Order-to-Cash Process

SAP OTC Process Flow

SAP OTC is a process involved customer sales order creation and satisfying customer requirements via delivery.
Prerequisites are customer master record is set up, sales area (sales organization, divisions and distribution channels) was set up already.
Generally steps are as follows:
·         Customer Inquiry
·         Quotation for customer inquiry
·         Sales Order creation
·         Post Goods issue (PGI)
·         Delivery
·         Billing- Bill sent to customer
·         Receipt of money- Customer Payment

The First two steps that are inquiry and quotation may or may not happen. A new customer may inquire and ask for quotation but an old customer may not inquire. Moreover, if you have contracted agreement to sell products at a certain price than customer will directly order without quotation.
Now, let's see what is the impact on the accounting entries for this cycle steps. Each step has it's own different configuration these steps used in business workflow.As I mentioned earlier, this process involves many different organizational levels. Most important organizational levels in this process is Company code, sales organizations, distribution channels, divisions and plants.

SAP OTC Sales and Distribution

Business Process Associated With SAP

Order-to-Cash Configuration
This is an imported integration in SAP landscape. Here are the configuration steps in details. Its configuration happened in transaction code OBYC.
·         Inquiry : A customer inquire about the product price and service. This is a very starting point of OTC process. This process does not have any effect on general ledger accounts and do not have any accounting entries. Once a customer creates inquiry, an inquiry number is generated. Inquiry is created by transaction code VA11.
·         Quotation: Quotation is a price quote given to the customer. A quotation follows inquiry steps. A quotation can be created via inquiry or without inquiry reference number. A quotation is created by transaction code VA21.
·         Sales: According to some SAP experts, Sales order is actually the first step of OTC process. After inquiry and quotation, once it's gets created. Sales order can be created with reference of quotation or without reference. It does not make any accounting book entry and it does not make any change in General Ledger accounts. It is just a commitment to deliver goods to the customer. SO can be created with transaction code VA01.
·         Post Goods Issue: Post goods issue is the steps where goods are being picked by warehouse, packed and shipped to the customer's given shipping address as per the sales order. We have accounting entries as inventory is being credited against the cost of goods sales (COGS) debited. General ledger accounts associated with the cost of goods sales and inventory is affected respectively.
·         Delivery: Delivery follows post goods issue (PGI).Delivery is the actual fulfillment of goods to the customer shipping address. At delivery stage, we have accounting entries in the books. At this stage, we debit revenue account and credit customer account. Transaction code for delivery is VL01n.
·         Billing: At billing stage, we send the bill to customer for the goods delivered. We have accounting entries at this stage where we debit customer and credit cash account. Transaction code for billing in SAP is VF01.





Comments

Popular posts from this blog

What is Cloud Services and Cloud Computing?

A cloud service is any service made available to users on demand via the Internet from a cloud computing provider's servers as opposed to being provided from a company's own on-premises servers. Cloud services are designed to provide easy, scalable access to applications, resources and services, and are fully managed by a cloud services provider.
On the other hand, Cloud computing is a type of computing that relies on shared computing resources rather than having local servers or personal devices to handle applications. In its most simple description, cloud computing is taking services ("cloud services") and moving them outside an organization's firewall. Applications, storage and other services are accessed via the Web. The services are delivered and used over the Internet and are paid for by the cloud customer on and as-needed or pay-per-use business model.
Cloud Delivery Models
Cloud computing can be divided into several sub-categories depending on the physical lo…

Addiction

When it comes to addictions and the problem that come with them, it is difficult to draw a line on the genesis of the whole vicious matter especially when the victim is going through a destructive phase of the addiction cycle.While there are many forms of addictions, there are those that have defiantly been with the human race for the longest time such as drug and sexual types of addictions and the paper focuses on such types. Addictions in their nature affect the deepest parts of a human being such as the physical and psychological and since they have the potential of chaining the addicted person in ways that are uncontrollable and unhealthy, the need to come up with relatively correct information about their nature becomes imperative.
What is the exact nature of addictions, are they behavioral or genetic? There are divergent schools of thought concerning its nature and while one faction such as the doctors propose that they are caused by genetic and environmental factors, others i…

New SAP Analytics Cloud Content for SAP Business ByDesign

We’re excited to announce the release of new pre-packaged analytics content for SAP Business ByDesign!

For months, our engineering teams have been working hard on a multi-faceted plan to tighten the integration of SAP Analytics Cloud with select SAP Analytics Cloud applications. These plans include an extensive cross-functional team focused on developing content and APIs for more than 20 applications.

Pre-packaged content is an excellent opportunity to extend native application reporting, with advanced, purpose-built analytics from SAP. Moreover, SAP Analytics Cloud content is free-of-charge, can be deployed as is, or can be fully customized to suit your needs.
Here’s what has been delivered for SAP Business ByDesign.
Financial Performance Easily visualize the performance of key financial metrics across your organization, with drill paths and filters which allow you to track profitability across regions and by product.
Procurement Track, spend, and maintain controls over time…