From the moment a customer places an order to the final step of receiving payment, end-to-end processes in the SAP Order to Cash cycle involves various stages and departments within an organization and facilitate more efficient, streamlined business operations across teams.
And, by leveraging SAP’s comprehensive Order to Cash capabilities, businesses in any industry can effectively manage and optimize each step of the sales order process, resulting in improved order fulfillment, increased customer satisfaction, and enhanced financial performance throughout the entire enterprise.
This article will discuss the key components and capabilities of the SAP Order to Cash process and how to maximize order management functions across teams, as well as where our team of expert SAP consultants can come in to help.
Read on to learn more!
What is SAP OTC?
SAP Order to Cash (OTC) is an integration scenario in SAP that helps customers bring core Financial Accounting (FI) and Sales and Distribution (SD) processes together in one place.
The OTC process refers to the entire lifecycle of a sales order, including the receipt of the sales order, completion of the transaction, customer payment, and more, to meet business requirements and monitor order management processes across the entire enterprise.
Simple Overview of the OTC Process in SAP
Here’s a quick overview of the Order to Cash cycle in SAP, including pre-sales processes, order processing, order fulfillment, and billing…
The first step of the Order to Cash process involves the completion of all processes that occur before the actual creation of a sales order for a customer, including discussions between the customer and business representatives related to the product, quantities, and price.
This would include, for example, a customer requesting a detailed product description to ensure the product would meet their needs, or requiring price negotiations to find a price that meets both customer and supplier needs.
This step requires businesses to create a detailed sales order for a request from a customer. A sales order commitment ensures the business will provide the right products or services to the customer at the agreed upon price point.
In this step, businesses fulfill their previous commitment to provide a specific product or service to a customer. For example, a customer orders a product online, so the order fulfillment in this case would be the delivery of the product to the customer.
The final step requires customers to pay for the product or service they received. Typically, customers will receive a detailed breakdown of their costs, including taxes, delivery costs, and any extra fees, to ensure they’re paying the correct amount for the product or service received.
Understanding Tasks in SAP Order to Cash
Let’s take a look at the key tasks carried out across the OTC process to complete a sales order…
- Processing of orders by their associated back-end SAP system: Subscription Order (SAP Subscription Billing), Service Order (SAP S/4HANA), Sales Order (SAP S/4HANA)
- Creating and assigning service calls in SAP Field Service Management to complete and completing and logging the service order in the SAP Service Cloud
- Splitting orders into subscription, sales, and service orders depending on product type
- Confirming the delivery, provisioning, or installation of the product by the customer
- Initiating billing or invoicing tasks in the back-end system to generate an invoice
- Collecting payment from customers for the product or service costs on the invoice
- Booking and posting revenue collected to documents and records in Finance
Pre-Sales Activities in OTC SAP Process
Let’s take a closer look at a few key pre-sales activities in the SAP OTC cycle, including transaction codes used to complete each step and store information in SAP tables…
A customer inquiry is the first step in the Order to Cash cycle, and it involves a customer inquiring about a specific product, service, or price. An inquiry doesn’t require any accounting entries, and it has no effect on the full general ledger.
And, while inquiries have no effect on financial documentation in the SAP system, an inquiry number is generated using transaction code VA11 when a customer creates an initial inquiry.
The quotation step is initiated when a price quote is created and given to the customer. A product quote includes the product or service requested and the corresponding price.
Quotes can be created based on a specific inquiry or without an inquiry reference number, and they are created using transaction company code VA21.
A contract is a formal agreement between the company and the customer to provide products or services during a specific time period or on certain conditions. An outline of the contract, including key details about price, duration, and order fulfillment methods, can be saved in SAP.
Contracts can be created in SAP by using the transaction code VA41.
A scheduling agreement refers to a formal agreement between a customer and a company to provide products and services with specific delivery dates and qualities.
These agreements can be stored in documents across the SAP system to ensure companies and customers are on the same page.
How to Run an Order to Cash Process in SAP
Here’s a step-by-step guide to the Order to Cash cycle across the SAP system…
- Identify the Sales Organization: First, SAP business users must use the “New Entries” button to create a new sales organization.
- Define the Distribution Channel: Users can leverage the “New Entries” button again to add a new distribution channel record to the existing list of records.
- Select the Plant: Again, use the “New Entries” button to add a new plant record to ensure OTC processes are carried out for the right plant location.
- Maintain FI Customer Master Data: For new customers, FI master data should be maintained for the company. In this step, users must define the company, edit/copy/delete company code, assign Chart of Account/Fiscal Year/Field Status Variant to the company code, and create a new customer reconciliation account for the customer under the specific company code.
- Link Objects: After all necessary business objects are created, the relationships between them should be maintained. To link objects, users can assign companies, plants, sales organizations, distribution channels, and divisions to a specific company code for easy, quick reference to the relationship between objects.
- Maintain Material Master Data: In this step, users can leverage basic functions, relevant key words, and automatically generated material document capabilities to access, view, maintain, and store important material master data. Data can be categorized according to industry sector, material type, organizational level, and more to ensure proper visibility and accessibility for users.
- Add Material Stock: Before creating a sales order, companies must ensure there is enough stock of the product to fulfill the order. Stock can be added by just using initial stock, or users can leverage a specific Purchase Order to add stock to the system.
- Maintain Item Categories: In order for a sales order to be fulfilled correctly, item categories must be maintained. For example, if the goods are deliverable or there is a specific movement type for the product, this should be noted in the item category.
- Create Sales Order: Once all the necessary data has been created, cleaned, and stored in the correct places across the SAP system, sales orders can be created based on the related data. With this, users can create a standard order using “Ship-to-Party” or “Sold-to-Party” numbers and maintain data included in the sales and shipping tabs to ensure sales orders are created and processed correctly.
- Deliver Goods or Services: After the sales order is created, the next step involves delivering the goods to the customer, if the product is classified as deliverable. And, before bills can be sent for the sales order, goods must be picked and delivered properly.
- Create Bill for Sales Order: Once the sales order is fulfilled and customers have received their products, an invoice can be created for the sale. To do this, users will select “F1 Invoice” as the “Billing Type” and the current date as the “Billing Date” and select the “Execute” button to create the invoice.
- Release Billing Document: The billing document created above will not automatically release to an FI Accounting document, so it must be manually transferred. For this, users will click the “Release to Accounting” button to initiate the release of the document and check the FI invoice information using the “Display Document Flow” button.
- Check the Invoice: Once the invoice has been generated, users must check all the information included on the bill to ensure accuracy and reliability in the data. Without checking the correctness of the information, the invoice may not be cleared.
- Process Payment: The last step in the OTC process involves clearing the open invoice by manually processing the incoming payment. But, before this can happen, users must ensure bank-related configurations have been created, and everything is set up correctly in the Order to Cash application.
How Can We Help?
Whether you need help outlining financial accounting integration points across your existing SAP system, an extra hand navigating SAP transaction codes and tables, or additional support keeping your sales order processes operating as expected, Surety Systems is here to help.
Our team of senior-level SAP consultants has the technical skills and functional expertise needed to help you outline, monitor, manage, and optimize your sales order management processes in SAP and maximize your overall investments in the process.
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Interested in learning where our team of SAP consultants can fit in your organization?
Ready to start maximizing the efficiency of your Order to Cash cycle by leveraging the core components and capabilities of SAP OTC, but don’t know where to begin?
Contact us today for more information about our SAP consulting services!