How to do an Order to Cash Process Using the Simple Guide

How to make an Order to Cash Process Using the Simple Guide.

How to make an Order to Cash Proces: Order to Cash (OTC or O2C) is an end-to-end business process in the SAP Enterprise Resource Planning (ERP) software that integrates finance and sales and distribution. The business process begins with the client inquiry and ends with delivery and payment made for the goods or services.

How to make an Order to Cash Process Using the Simple Guide.

It is possible to automate and expedite the entire OTC process, right from the sales order creation stage to the final product fulfillment and accounts receivable stages, with this software.

Process Flow: Summary

The steps in the OTC process typically include the following:

  • Pre-sales activities
  • Order processing
  • Order fulfillment
  • Billing

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 the 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 a quotation but an old customer may not inquire. Moreover, if you have a contracted agreement to sell products at a certain price then the customer will directly order without quotation.

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Order-to-Cash Configuration

This is an imported integration in the SAP landscape. Here are the configuration steps in detail. Its configuration happened in the transaction code OBYC.

  • Inquiry: A customer inquires about the product price and service. This is a very starting point of the OTC process. This process does not have any effect on general ledger accounts and does not have any accounting entries. Once a customer creates an inquiry, an inquiry number is generated. The inquiry is created by the transaction code VA11.
  • Quotation: Quotation is a price quote given to the customer. A quotation follows the inquiry steps. A quotation can be created via inquiry or without an inquiry reference number. A quotation is created by the transaction code VA21.
  • Sales: According to some SAP experts, a Sales order is actually the first step of the OTC process. After inquiry and quotation, once it’s gets created. A sales order can be created with reference to 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.

Order-to-Cash Configuration

  • 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 the 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. The transaction code for delivery is VL01n.
  • Billing: At the billing stage, we send the bill to customers for the goods delivered. We have accounting entries at this stage where we debit customer and credit cash account. The transaction code for billing in SAP is VF01.

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