Import Export Documents

Given below are the documents generated during customs process:

Purchase Order - Export

The international purchase order is the confirmation you require from the buyer that there exists
a commercial deal and that you should prepare and ship the goods accordingly. The purchase
order will include all details of price, transport and payment agreed between you and the buyer,
as well as some of the buyer's concerns. Buyer may also request you to include the statutory
conditions/declarations of his country. For example, his customs department may require a
certificate of origin issued by a Chamber of Commerce to be presented for customs clearance.

Purchase Order - Import

You can use the Create purchase order form to create an import order for a vendor. In most of the
ERP’s you need to select the Import Order check box or use some field to specify that the
purchase order is for import purposes. In some systems, if the vendor that you selected is a
foreign vendor and the Purchase order is selected in the Purchase order field, the Import order
check box is selected automatically. The Customs duties' Tax Calculations and associated tax
components are defaulted to import POs based on some predefined parameters such as Supplier
Category or Benefit ID.

Proforma Invoice

Proforma Invoice is the initiating document of the international transaction. Once the importer
receives your pro forma invoice, he will consider it as final commitment to the transaction. He
may need the pro forma invoice to either obtain a foreign exchange allocation (applicable in
some countries), for making application for an import permit, or for applying application for the
establishment of a documentary credit. You must ensure that the information given in the pro
forma invoice is complete, clear and concise., information lacking in this document will be
absent in later payment and transport arrangements, which could ultimately lead to problems in
the processing of the order.

Proforma Invoice - STP / EHTP

STP bonded warehouses remain under customs control. The materials entered in to a bonded
warehouse is obtained without paying any duty whether import or excisable. Under an STP
scheme, all materials are exempted from customs and excise duties including the materials
sourced locally. Hence, a control on such dutiable materials is required from customs and excise
authorities as such materials are only used for the manufacture and export of STP units subjected
to approval, for every consumption. STP units can import all capital goods those required for
creating STP infrastructure unless the same are in the prohibited list. STP units are allowed to
import equipment on outright purchase or loan or free cost or lease basis after applying for
import certificate in the prescribed format. To apply for import certificate the unit needs to attach
“Proforma Invoice” which should necessarily state the name and location of STP unit and the
name of supplier and country of origin.

Import Invoice

A commercial invoice is a document used in foreign trade. It is used as a customs declaration

provided by the person or corporation that is exporting an item across international borders.
Although there is no standard format, the document must include a few specific pieces of
information such as the parties involved in the shipping transaction, the goods being transported,
the country of manufacture, and the Harmonized System codes for those goods. A commercial
invoice must also include a statement certifying that the invoice is true, and a signature. A
commercial invoice is used to calculate tariffs, international commercial terms (like the Cost in a
CIF) and is commonly used for customs purposes. When the accounting unit is an importer, it is
referred to as Import Invoice.

Export Invoice

A commercial invoice is a document used in foreign trade. It is used as a customs declaration

provided by the person or corporation that is exporting an item across international borders.
Although there is no standard format, the document must include a few specific pieces of
information such as the parties involved in the shipping transaction, the goods being transported,
the country of manufacture, and the Harmonized System codes for those goods. A commercial
invoice must also include a statement certifying that the invoice is true, and a signature. A
commercial invoice is used to calculate tariffs, international commercial terms (like the Cost in a
CIF) and is commonly used for customs purposes. When the accounting unit is an exporter, it is
referred to as Export Invoice.

Import Certificate

Import Certificates are a proposed mechanism to implement balanced trade, and eliminate a
country's trade deficit. An import certificate, (ICs) represent the right to import a certain dollar
amount of goods into the country and is issued to exporters in an amount equal to the dollar
amount of the goods they have exported. Import certificate can be utilized once. Similarly, to
control imports, some governments prescribe that the import can only be done against valid
import certificates for certain category of goods.

Bill of Entry

Bill of Entry is a declaration by an importer or exporter of the exact nature, precise quantity and
value of goods that have landed or are being shipped out. This is usually prepared by a qualified
customs clerk or broker and it is examined by customs authorities for its accuracy and
conformity with the tariff and regulations. The Bill of Entry (BOE) worksheet is created from
import PO or another BOE in typical ERP system. When you save a new BOE, actual customs
duties are determined and calculated for the BOE. When the imported goods arrive at customs,
the BOE is submitted to the customs authorities along with other shipping documentation. You
update the BOE based on the assessment by customs officials. Once the BOE is in Assessed or
Closed status, no changes can be made and customs duties will not be recalculated in the system.

Airway Bill (HAWB / MAWB) - Import & Export

Air Waybill (AWB) or air consignment note refers to a receipt issued by an international airline
for goods and an evidence of the contract of carriage. There are several purposes that can be
served by an airway bill, but its main functions are Contract of Carriage; Evidence of Receipt of
Goods; Freight Bill; Certificate of Insurance and aids Customs Declaration. International air
waybills that contain consolidated cargo are called master air waybills (MAWB). MAWBs have
additional papers called house air waybills (HAWB). Each HAWB contains information of each
individual shipment (consignee, contents, etc.) within the consolidation. International AWBs that
are not consolidated (only one shipment in one bill) are called simple AWBs. A house air
waybill can also be created by a freight forwarder. When the shipment is booked, the airline
issues a MAWB to the forwarder, who in turn issues their own house air waybill to the customer.

Bill of Lading - BL – Import & Export

A bill of lading (sometimes abbreviated as B/L or BOL) is a document used in the transport of
goods. It serves several purposes in domestic and international trade. A bill of lading is generated
by a shipper, details a shipment of merchandise, gives title to the goods, and requires the carrier
to deliver the merchandise to the appropriate party. Because the bill of lading represents title to
the goods detailed upon it, it can be traded in much the same way as the goods may be, and even
borrowed upon if desired. This is a very important and common document used in export and
import trade globally and for letter of credit and Documentary Collection transactions, it is
important to retain title to the goods until the transaction is complete. This means that the bill of
lading remains a vital part of international trade.

Packing List – Import & Export

In Exports/Imports Packing list is also a commercial document. Packing list shows how the
material was packed. It is an itemized list of articles usually included in each shipping package,
giving the quantity, description, and weight of the contents. Prepared by the shipper and sent to
the consignee for accurate tallying of the delivered goods.

High Sea Sale Agreement & Invoice

High Sea sales (HSS) is a sale  carried out by the carrier document consignee to another buyer
while the goods are yet on high seas or after their dispatch from the port/ airport of origin and
before their arrival at the port / airport of destination. Hence, high sea sales is a sale made, of a
consignment, while its in sea only. HSS is accepted under the import trade control regulation.
HSS contract/ agreement should be signed after dispatch of goods from origin & prior to their
arrival at destination. The agreement should be on stamp paper. On concluding the HSS
agreement, the B/L should be endorsed in favor of the new buyer.
CE Certificate - Import

CE marking is a declaration by the manufacturer that the product meets all the appropriate
provisions of the relevant legislation implementing certain European Directives. CE marking
gives companies easier access into the European market to sell their products without adaptation
or rechecking. The initials "CE" do not stand for any specific words but are a declaration by the
manufacturer that his product meets the requirements of the applicable European Directive(s).
The CE Mark (officially CE Marking) is a mandatory conformity mark on many products placed
on the single market in the European Economic Area (EEA). By affixing the CE Marking, the
manufacturer, its authorized representative, or person placing the product on the market or
putting it into service asserts that the item meets all the essential requirements of all applicable
EU directives and that the applicable conformity assessment procedures have been applied. For
some products this can only be achieved by using an external test house which evaluates the
product and its documentation, however, in about 90% of cases it can be achieved by a self-
certification process.

ARE - 1 Form

FORM A.R.E. 1 is an application for removal of excisable goods for export by

(Air/Sea/Post/Land) whether without payment of duty or on payment of duty with a claim for
rebate submitted in excise.  Both the original & duplicate copies, duly endorsed by custom is
required to be submitted to the Excise authority (division office, where bond had been executed.)
ARE-1 copies are not for buyer or seller. All the four copies of ARE1 go to the excise
authorities. Fifth optional copy may be retained by the manufacturer exporter for their records.
Invoice is prepared for commercial documents.

SEZ/EOU/EHTP/STPI/BTP/FTWZ Approval letters

The term SEZ that stands for Special economic zones in which the various units like
EOU/EHTP/STPI are located which mainly process goods and services for export. Supplies to
SEZ are exempted from payment of duty. All clearances to SEZ/EOU/STPI/EHTP are treated as
deemed export for the DTA unit.  These units should have approval letters to qualify as special
units.

Procurement Certificate

For the import of duty free capital goods or raw materials, unit has to make an application to
Customs along-with copy of invoice duly attested, packing list, and Import certificate from STPI
in case of STP, HTPI units, IGMS & Airway Bill or Bill of lading. The department will issue a
serial numbered Procurement Certificate for duty free imported goods. The EOUs and
STP/EHTP/EPZ/SEZ units obtain a procurement certificate for clearing goods duty-free under
the relevant exemption notifications at the port of import/airport etc.
Re Warehousing Certificate

Import of goods are allowed without payment of duty on the basis of the particulars in the
Procurement Certificate, the fulfillment of the conditions of duty exemption  under EOU will
become complete only when Re-warehousing Certificates (RWCs) are received from the
concerned jurisdictional Central Excise Authorities.  Once after arrival of goods at STP or EOU
premises, an intimation regarding arrival of goods at STP / EOU unit is effected to EOU/STP
customs authorities. The EOU / STP authorities issues re-warehousing certificate after satisfying
on arrival of such goods on physical verification of goods at STP / EOU premises. Necessary
bond registers have to be maintained for each entry or removal of goods.

Redemption Letters

Redemption letters are issues by DGFT so that the advances and Bank Guarantees etc. given at
the time of obtaining EPCG licenses can be redeemed. Once the redemption letter has been
issues the importer can take the same to the authorities for cancellation of bond/BG/LUT.

Refund documents / DBK Applications

Under Duty Drawback Scheme (DBK) relief of Customs and Central Excise Duties suffered on
the inputs/components used in the manufacture of goods exported is allowed to Exporters. The
admissible duty drawback amount is paid to exporters by depositing it into their nominated bank
account. Section 75 of the Customs Act, 1962 and Section 37 of the Central Excise Act, 1944,
empower the Central Government to grant such duty drawback. Customs and Central Excise
Duties Drawback Rules, 1995 have been framed outlining the procedure to be followed for the
purpose of grant of duty drawback (for both kinds of duties suffered) by the Customs Authorities
processing export documentation.

Shipping Bill – Export Promotion Copy

Export Promotion is a scheme to promote the export of some specific articles (metals, etc.)
where you get subsidy from the government at an prescribed rate known as duty drawback.
Please see the definition of duty drawback in previous paragraph. Export Promotion copy may be
defined as " the document stating the calculations of drawback with rates of drawback & the
weight/value of article (whichever is lower) mentioned on it. It is prepared only if we have to
claim the drawback on any specified invoice or export bill. The prescribed checklist together
with the supporting export documents and challan evidencing payment of duty and/or cess, if
any, shall be presented to the proper officer of customs for making an order permitting clearance,
for loading of goods for exportation, after examination of the export goods if so required. After
making an order under regulation 5, the proper officer shall generate the original (customs copy),
exporter’s copy, exchange control copy and the export promotion copy of shipping bills. The
original (customs copy) of the shipping bill and the checklist shall be retained by the proper
officer. The exporter’s copy, exchange control copy and the export promotion copy of shipping
bill shall after suitable endorsements, be handed over to the authorized person.
Show Cause Notice / Demand Notice

When duty has not been levied, short levied, or erroneously refunded or interest not paid, part
paid or erroneously refunded, a notice demanding the said duties/interest is required to be issued
by the Department. The demand notice or show cause notice should give a clear description of
the allegations and charges against the persons concerned. It should give particulars of facts,
which furnish the reason for issue of the demand notice or show cause notice. The show cause
notice must disclose all the materials/evidence relied upon in making the allegations. An
opportunity of personal hearing must be offered in the Show cause notice. The show cause notice
must give full designation and address of the authority to whom the written submission is to be
made.

TR6 Challan

In India, TR6 challan is used to pay the central excise/service tax/customs duty and some other
types of statutory dues. Whenever money is deposited into PLA then the TR6 challan should be
updated.

Certificate of Origin

A Certificate of Origin (often abbreviated to C/O or COO) is a document used in international

trade. It is a printed form, completed by the exporter or its agent and certified by an issuing body,
attesting that the goods in a particular export shipment have been wholly produced,
manufactured or processed in a particular country. The “origin” does not refer to the country
where the goods were shipped from but to the country where they were made. The certificate of
origin must be signed by the exporter, and, for many countries, also validated by a Chamber of
Commerce, and in the case of certain destination countries by a consulate. Chambers of
Commerce offer certificate of origin services, amongst other organizations. Companies may
consult the Chamber Directory on the World Chambers Network, the official global portal of
Chambers of Commerce dedicated to electronic international trade, to find their nearest chamber
who may offer this service.

Certificate of Quality and Quantity / Pre Shipment Inspection

Pre-shipment inspection, also called pre-shipment inspection or PSI, is a part of supply chain
management and an important and reliable quality control method for checking goods' quality
while clients buy from the suppliers. After ordering a number of articles, the buyer lets a third
party control the ordered goods before they are dispatched to him. Normally an independent
inspection company is assigned with the task of the PSI, as it is in the interest of the buyer that
somebody not connected with the deal in any way verifies the amount and quality. This way the
buyer makes sure, he gets the goods he paid for. The process involves, checking the total amount
of goods and packing, controlling the quality and/or consistency of goods, checking of all
documentation, including test reports, packaging list, and verifying compliance with the
standards of the destination country (e.g. ASME or CE mark). After the inspection, a certificate
of quality and quantity is issued.
Certificate of Insurance

Certificate of insurance is a document issued by an insurance company. It certifies that an

insurance policy has been bought, and shows an abstract of the most important provisions of the
insurance contract. In marine insurance (where cargo is insured against a floating insurance
policy), COI serves to assure the consignee that insurance is in effect for the goods in transit and
a proper policy will follow. This is also called insurance certificate. This might be required from
the buyer before the shipping of the goods take place.
Accounts Receivable Documents
Given below are the documents generated during the I2C Process:

Purchase Order

A purchase order (PO) is a commercial document and first official offer issued by a buyer to a
seller, indicating types, quantities, and agreed prices for products or services the seller will
provide to the buyer. Sending a purchase order to a supplier constitutes a legal offer to buy
products or services. Acceptance of a purchase order by a seller usually forms a contract between
the buyer and seller, so no contract exists until the purchase order is accepted. It is used to
control the purchasing of products and services from external suppliers. Creating a purchase
order is typically the first step of the Purchase to pay process in an ERP system. In case of order
to cash or accounts receivable process, a purchase order is received from the customer that
triggers the entire invoice to cash process.

Customer Invoice

An invoice or bill is a commercial document issued by a seller to a buyer, indicating the

products, quantities, and agreed prices for products or services the seller has provided the buyer.
An invoice indicates the sale transaction only. Payment terms are independent of the invoice and
are negotiated by the buyer and the seller. Payment terms are usually included on the invoice.
From the point of view of a seller, an invoice is a sales invoice.

Performance Bank Guarantee

The seller issues a Performance Guarantee to ensure or give concrete commitment to the buyer
through its bank. This method ensures the buyer the timely execution of an agreement to have
the goods exported or delivered or services performed. In case the seller defaults on execution of
the terms agreed upon, the Performance Bank Guarantee ensures the buyer the payment of the
guarantee amount by the issuing bank. In case of large projects, buyers generally demand from
seller to provide a performance guarantee to ensure that the conditions of their purchase order
will be fulfilled.

Packing List

In Exports/Imports Packing list is also a commercial document. Packing list shows how the
material was packed. It is an itemized list of articles usually included in each shipping package,
giving the quantity, description, and weight of the contents. Prepared by the shipper and sent to
the consignee for accurate tallying of the delivered goods.  A shipping list, packing list, waybill,
packing slip (also known as a bill of parcel, unpacking note, packaging slip, (delivery) docket,
delivery list, manifest or customer receipt), is a shipping document that accompanies delivery
packages, usually inside an attached shipping pouch or inside the package itself. It commonly
includes an itemized detail of the package contents and does not include customer pricing. It
serves to inform all parties, including transport agencies, government authorities, and customers,
about the contents of the package. It helps them deal with the package accordingly.

Certificate of Origin

A Certificate of Origin (often abbreviated to C/O or COO) is a document used in international

trade. It is a printed form, completed by the exporter or its agent and certified by an issuing body,
attesting that the goods in a particular export shipment have been wholly produced,
manufactured or processed in a particular country. The “origin” does not refer to the country
where the goods were shipped from but to the country where they were made. The certificate of
origin must be signed by the exporter, and, for many countries, also validated by a Chamber of
Commerce, and in the case of certain destination countries by a consulate. Chambers of
Commerce offer certificate of origin services, amongst other organizations. Companies may
consult the Chamber Directory on the World Chambers Network, the official global portal of
Chambers of Commerce dedicated to electronic international trade, to find their nearest chamber
who may offer this service.

Certificate of Quality and Quantity / Pre Shipment Inspection

Pre-shipment inspection, also called pre-shipment inspection or PSI, is a part of supply chain
management and an important and reliable quality control method for checking goods' quality
while clients buy from the suppliers. After ordering a number of articles, the buyer lets a third
party control the ordered goods before they are dispatched to him. Normally an independent
inspection company is assigned with the task of the PSI, as it is in the interest of the buyer that
somebody not connected with the deal in any way verifies the amount and quality. This way the
buyer makes sure, he gets the goods he paid for. The process involves, checking the total amount
of goods and packing, controlling the quality and/or consistency of goods, checking of all
documentation, including test reports, packaging list, and verifying compliance with the
standards of the destination country (e.g. ASME or CE mark). After the inspection, a certificate
of quality and quantity is issued.

Certificate of Insurance

Certificate of insurance is a document issued by an insurance company. It certifies that an

insurance policy has been bought, and shows an abstract of the most important provisions of the
insurance contract. In marine insurance (where cargo is insured against a floating insurance
policy), COI serves to assure the consignee that insurance is in effect for the goods in transit and
a proper policy will follow. This is also called insurance certificate. This might be required from
the buyer before the shipping of the goods take place.

Airway Bill

Air Waybill (AWB) or air consignment note refers to a receipt issued by an international airline
for goods and an evidence of the contract of carriage. There are several purposes that can be
served by an airway bill, but its main functions are Contract of Carriage; Evidence of Receipt of
Goods; Freight Bill; Certificate of Insurance and aids Customs Declaration. International air
waybills that contain consolidated cargo are called master air waybills (MAWB). MAWBs have
additional papers called house air waybills (HAWB). Each HAWB contains information of each
individual shipment (consignee, contents, etc.) within the consolidation. International AWBs that
are not consolidated (only one shipment in one bill) are called simple AWBs. A house air
waybill can also be created by a freight forwarder. When the shipment is booked, the airline
issues a MAWB to the forwarder, who in turn issues his or her own house air waybill to the
customer.

Bill of Lading

A bill of lading (sometimes abbreviated as B/L or BOL) is a document used in the transport of
goods. It serves several purposes in domestic and international trade. A bill of lading is generated
by a shipper, details a shipment of merchandise, gives title to the goods, and requires the carrier
to deliver the merchandise to the appropriate party. Because the bill of lading represents title to
the goods detailed upon it, it can be traded in much the same way as the goods may be, and even
borrowed upon if desired. This is a very important and common document used in export and
import trade globally and for letter of credit and Documentary Collection transactions, it is
important to retain title to the goods until the transaction is complete. This means that the bill of
lading remains a vital part of international trade.

Proof of Delivery

Proof of delivery is a method to establish the fact that the recipient received the contents sent by
the sender. Proof of delivery becomes very important when legal and financial documents are to
be exchanged between two parties. In the United States, DHL, UPS and FedEx as well as the US
postal service (USPS) provide proof of delivery. Commercial fleet operators also need to be able
to confirm proof of delivery of goods to their customers. Proof of delivery is generally used
when different courier services are used to deliver the product to the customer.

Lorry Receipt /Truck Receipt

When a person deposits the goods with any transporter for the purpose of transport to a given
destination, the transporter issues a lorry receipt (LR) or consignment note to the person
depositing the goods. The original LR/consignment note is sent either by the person booking the
goods to the consignee directly or through bank. The consignee can collect the goods from the
transporter by presenting the LR/consignment note.  As per trade parlance, the ‘lorry receipt’ or
‘consignment note’ is a ‘document of title’ and ownership of goods passes by delivery of the
LR/consignment note.

Installation Report

Installation report is used to report the successful installation of any equipment, machinery or
project at customer site. This report details the installation, training and support details of that
particular machine/product. This reports generally contains information like machine/product
details, serial number, date of installation, customer name etc. The report is primarily for the
benefit of the person ordering the work and of persons subsequently involved in additional or
remedial work, or further inspections.

Warranty Certificate

In contract law, a warranty has various meanings but generally means a guarantee or promise,
which provides assurance by one party to the other party that facts or conditions are true or will
happen. This factual guarantee may be enforced and it allows for a legal remedy if that promise
is not true or followed.  Warranties provided in the sale of goods (tangible products) vary
according to jurisdiction, but commonly new goods are sold with implied warranty that the
goods are as advertised. In the United States, various laws apply, including provisions in the
Uniform Commercial Code, which provide for implied warranties. A certificate specifying the
implied warranty is known as Warranty Certificate.
 What is Order to Cash
Meaning of Order to Cash

 Order to Cash (also known as O2C) manages the life-cycle of a sales process
 This process encompasses the sub processes of receiving and processing customer sales
 A contractual relationship is established with the buyer (This is an Optional step and some
businesses need a formal agreement before they can execute orders)
 Orders are received via different sales channels
 Orders are fulfilled through shipping and logistics
 Invoice is generated and booked as Sales
 Debt is recorded and pursued through collections management
 Funds are received and accounted using cash applications

Sub Processes under Order to Cash Functional area:

 Credit Management
o Managing the credit profile of your customer and putting checks and holds on amount of
credit that can be extended to one customer
 Order Management (Creation of order/Booking of order)
o The process from taking the order and booking the same in the system
 Order Fulfillment
o Making sure that the firm has the product available that can be shipped to the customer
 Distribution – Shipping and Logistics Management
o Actual shipping of the product to the customer
 Invoicing/Customer Billing – Account Receivable Process
o Raising an invoice to the customer as per the regulatory requirements
 Customer Collections
o Dunning process and reminding customer about outstanding dues and collecting the
money
 Cash Application
o Accounting for the cash against a particular invoice
 Dispute Management
o Handling disputes or adjustments arising in the natural course of business

Process Flow for  Order to Cash Process

 Sales Quotation
o Providing a quotation about the quality, price and conditions of sale or product
 Sales Order
o Acknowledging the receipt of an order from the customer and its specifications
 Credit Management
o Ensuring the customer is credit worthy and credit can be extended to the customer
 Shipment
o Sending the goods to the Ship To location; and sending the invoice to the bill to location
 Billing/Invoicing
o Sending the invoice to the customer that is fully complaint with the legal framework
 Collections Management
o Reminding the customer, issuing dunning letters and collecting the money
 Dispute Management
o Addressing the disputes or adjustments due to various reasons
 Customer Returns Management
o Handling the goods that have been returned by the customer
 Customer Payments
o Receiving the payments from customers and depositing them in bank
 Cash Application
o Knocking off a particular invoice against the cash or payment that has been received
 Accounting
o Ensuring proper accounting during the process
 Reporting
o Making available the required reports to the management

Key Roles during the process - Order to Cash

 Sales Personnel
 Order Entry and Management
 Account Receivable Accounting
 Finance
 Materials Management
 Partner / Customer Management
 Key Transactions during the
 Order to Cash Process
 Sales Quotation
 Sales Order
 Goods Shipment
 Return from Customer
 Return Material Receipt
 Create Shipments from Orders
 Sales Invoice
 Create Invoices from Orders
 Generate Invoices

Key Setups / Perquisites

Some key master elements or setups are prequiste to this process before transactions can take
place in any ERP or system:

 Sales Products
 Prices configuration
 Customers Setup
 Credit Scores/Credit Management/Credit Holds
 Shipping Rules
 Ship to/Bill to Setups
 Sales Document types
 Sales Invoice Formats / Commissions and Accounting Rules
 Taxes on Sales – Tax Setups
 Sales Agreements Setups
 Revenue Recognition Rules
 What is Invoice to Cash Process
Meaning of Invoice to Cash

 The Customer Invoice to Cash process involves the process; from the moment the invoice
is created; until the moment the customer's debt (payment) is settled or reconciled.
 The Invoice to Cash business process starts with the invoice and includes all actions that
the user or system performs; to process payments, apply payments, give credits and ultimately to,
collect cash from your customer.
 Payment Operations also has deep ties to Accounting, and one of the objectives of this
process is to ensure correct account receivables accounting.
 Every system has different transactions and business operations, for the Invoice to Cash
Business Process, as businesses may follow different revenue recognition rules.

Sub Processes under Invoice to Cash Functional area

The process for I to C can be summarized in following steps:

1.Creating a Sales Invoice

 This could be manual entry in the system

 Can be auto created using information from a Sales Order
 Can be created based on Shipment Details
 Or you can use information available on existing invoice to Copy the same Issuing the
invoice

2.Monitoring Payments

3.Receive Payments

4.Manage Discounts, Adjustments, Bad Debts and Disputes

5.Accounting for Receivables to make sure accounting records are correctly updated with the
transactions

Process Flow for Invoice to Cash Process

Invoice to Cash process can be divided into four sub processes;

Step One; Customer Billing or Invoicing

Bills can be raised to customer in many different ways;

One; This could be manual entry in the system

Two; Can be auto created using information from a Sales Order

Three; Can be created based on Shipment Details

Four; Or you can use information available on existing invoice to Copy the same Issuing the
invoice

Five: You can use any other method based on your specific business needs

Step Two; Making Adjustments on Invoices or Outstanding Dues from Customers

There could be various types of adjustments that might be required once the invoice has been
raised on the customer. Some examples are;

One; Adjustments; You might need to make adjustments for various reasons like goods returned,
shipping delays, tax differences etc..

Two; Disputes; The invoices raised can be disputed by the customer, which needs to be tracked
and appropriately closed.

Three; Discounts; Discounts need to be provided to customer based on agreed payment terms or
other conditions.

Four; Bad Debts; The invoice could turn as a bad debt and you might need to write it off; or
make provision in your books.

Step Three; Receiving and Managing Payments from Customers

There could be various ways in which payments can be made by the customer. Some examples
are;

One; Cash;

Two; Cheque;

Three; Bank Transfer;

 Four; Adjustment from the Accounts Payable balance due to the customer as a supplier;

Five; Other agreed methods;

Step four; Application and Accounting of the Cash Received

Once the payment has been received it needs to be knocked off against the dues from the
customer. There are various ways in which payments can be applied like;

One; To the respective invoice against which the payment has been received. In this case; the
outstanding against the particular invoice; becomes zero; and the invoice is closed.

Two; To the respective account; This happens when the payment cannot be identified against a
particular invoice, but the customer is known. In this case; the total “Accounts Receivable” from
that customer gets reduced by the receipt amount; but the respective invoices still remain open.

Three; Remains Unapplied; The cash or payment has been received; but the customer cannot be
identified; in this case the cash is acknowledged and payment is classified as unapplied.

This completes the invoice to cash basic cycle. Other steps like customer relationship
management; bank reconciliation etc. can also be integrated with this cycle.

Key Transaction Fields

Let us understand some key generic fields that are used in almost every system or ERP during
the invoice to cash process;

1. Invoice Date; Date that will be used as the Invoice Date for the generated documents
2. Accounting Date; The date that defines to which accounting period this transaction will
be posted to
3. Invoiced Quantity; Quantity of the product to be invoiced.
4. Net Unit Price; Price applied to the product
5. Line Net Amount; Invoiced Quantity multiplied by Net Unit Price. Price of the line
before taxes.
6. Sales Order; Sales order to generate an invoice for
7. Business Partner; Specific customer to be invoiced
8. Due Date; The deadline by which this payment is supposed to be paid. This date is
calculated depending on the Invoice date and the Payment terms
9. Payment Method; The form of payment of the invoice
10. Expected Amount; Full amount To be paid in the due date.
11. Received; Amount already paid.
12. Outstanding; Amount that remains unpaid.
13. Last Payment Date; Date of the last payment received against this payment plan.
14. Number of payments; Number of payment events against this payment plan.
15. Total Paid; Amount that has been paid against the invoice.
16. Days till Due; Number of  days for the debt to due.
17. Order Reference; An internal reference number used by the Business Partner can be
entered in this field.
18. Payment No; The reference to the Payment Document (e.g., the cheque number)
19. Description; The text added to the payment transaction upon entry.
20. Paid Amount; The amount of the payment made.
21. Received Amount; The amount of the payment received.
22. Cleared; Whether the transaction has been matched to a transaction on the Bank
Statement.

Key Setups / Perquisites

Some key master elements or setups that are perquisite; to this process before transactions can
take place in any ERP or any other system:

1. Organization; Organization to create invoices for.

2. Business Partner; The customer to be invoiced
3. Payment Method; Payment method that the customer will use to pay invoices
4. Payment Terms; The payment term that defines the due date of the invoice
5. Product; The product to be invoiced
6. Tax; Tax to be applied to the product's amount (should be automatically pulled from
product definition)