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SAP Order-to-Cash Cycle—FI-SD Integration and

Configuration
Updated on October 21, 2016

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What Is SAP Order-to-Cash?

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)

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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 & Distribution

OTC Process Steps Transaction Code Accounting Entries

Inquiry VA11 No

Quotation VA21 No

Sales Order VA01 No

Post Goods Issue (PGI) VL01n Yes

Delivery VL01n Yes

Billing VF01 Yes

Receipt of Money FB50 Yes

Business Process Associated With SAP

What is the most important integration in SAP ?

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Order to Cash (OTC) (FI-SD Integration)

Procure to Pay (PTP) (FI-MM Integration)

FI-HR Integration

FI-CO Integration

Vote See results

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.

More Reading About SAP

What Is the SAP Software System?
Here is everything you need to know about SAP. You will get answers of what is SAP ? How SAP software works ? Why SAP is one of the top ERP
system ? You also get to know about different SAP modules.
ASAP Methodology—SAP Implementation Phases
ASAP Methodology is an SAP Implementation Methodology which includes 6 phases. ASAP Methodology is an Software Development Lifestyle (SDLC).
SAP FICO Training Tutorial
This is an article on basic understating on SAP software and about SAP FICO. Here is SAP FICO Training curriculum you can follow.

Management and OTC Process

Order management is an important part of SAP Finance and Sales integration. This process also known as SAP OM in short. It is an administrative process.
It automates order processing and seamless integration of data among different modules. OM includes customer master database, customer returns and
refunds, billing information, shipping information, payment terms, payment conditions and other information related to OTC process.

OM along with the OTC process provides improved sales cycle and easy handling of goods and efficient order processing. It is an important process in retail,
health care, telecommunications and customer oriented industries.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not
substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

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