SAP Order to Cash Process - SD

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Topics to be covered

Introduction

Short introduction of OTC cycle in tabular format

SAP SD OTC process

Key components

Example

Detailed analysis of Example

Benefits

conclusion

Introduction

Hello everyone!

Today we will talk about SAP SD's Order-to-Cash (OTC) process which is a critical function
in SAP SD for any business. We will explore the different steps of the OTC process and how
data flows from start to end. We will also discuss key components and a detailed example
of this process. So let's start!

SAP SD OTC stands for Sales and Distribution Order-to-Cash and is an important process
for any business that wants to streamline their customer orders. The SAP OTC (Order-to-
Cash) process is a series of interconnected steps that help to manage sales transactions in
a business. The SAP SD OTC process starts with the customer placing their order. This
order is then sent to the sales team who then enter it into the system. From here the order is
sent to the warehouse where they can start to prepare the shipment. Once the shipment is
ready, the order is then sent to the billing department where they create the invoice and
send it to the customer.

Once the customer has paid, the entire process is completed and the order is marked as
“closed” in the system. This is referred to as the cash closure. The process is then repeated
for each new customer order.

SAP OTC Process in Tabular Format:

Order to cash process in sap

The user inquires about

products and services price.
Inquiry: VA11
No account entry will be
generated

Quotation is nothing but the

price given to the user. No
Quotation for inquiry:
accounting entry will be
generated.
VA21

Sales order can be created

with reference to quotation or
without reference to
Sales order creation:
quotation. No accounting
entry will be generated while
creation of sales orders.
VA01

Delivery: VL01N Delivery follows the post-

goods issue (PGI). Delivery is
 the actual fulfilment of goods
to the customer's shipping
address. At this stage, an
accounting entry will be
generated during the PGI.
At this stage, we send the bill
to the customer for the goods
Invoice: VF01 delivered. At this stage,
accounting entries will be
generated.

SAP OTC Process:

Inquiry:

The SAP SD OTC Inquiry Step begins with the customer’s inquiry. This process is initiated
when a customer makes an inquiry to the sales department about information related to
their account or order. The inquiry is then routed to the SAP system where the customer’s
account and order data is retrieved. Once the customer has completed their action, the SAP
SD OTC Inquiry Step process is complete. For inquiry we use VA11 as a Transaction Code.
Fig 1. Inquiry

Quotation:

This involves entering the customer's requested product information, such as price,
quantity, and delivery date. You can also enter discounts and other conditions to customize
the quotation to meet the customer's needs. The system will then generate a quotation
document which can be sent to the customer. For quotation we use VA21 as a Transaction
code.

Fig 2. Quotation

Sales:

After inquiry and quotation, creating a sales order in the SAP SD module is a straightforward
process that can be done in a few steps. Sales orders can be made with or without a
quotation reference. In the Create Sales Order screen, enter the Sold-to Party, Ship-to Party,
and other relevant details for the order. For creation of sales order, we use VA01 Transaction
code.

Fig 3. Sales Document

Post Goods Issue:

The Post Goods Issue step is completed when the warehouse has issued the goods to the
customer and the billing documents have been generated. This step is important because it
triggers the creation of the billing documents, such as the invoice or credit memo, and helps
to ensure that the customer pays for the goods received. By completing this step, the
customer can be billed for the goods they have received and the sale is documented.

Delivery:

The delivery step in SAP SD OTC process is an important part of the overall order
management process. It is the step in which the ordered goods and services are physically
delivered to the customer. The order processing, picking, packing, and loading activities are
all crucial parts of this process and must be done correctly in order to ensure that the
customer receives their goods in the expected condition. For delivery we use VL01N as a
Transaction code.

Fig 4. Delivery

Billing:

Billing is an important step in the OTC process, which involves creating an invoice for the
customer and ensuring that it is paid. Once the payment is received, the invoice is marked
as paid and the billing process is completed. For billing we use VF01 as a Transaction code.
Fig 5.Billing

Key Components of the SAP SD OTC Process

Sales Order Processing:

The first step in the OTC process is to receive an order from a customer. The sales team
creates a sales order in the SAP system, using the VA01 transaction code. The sales order
contains all the relevant information about the product, pricing, and delivery requirements.
Once the sales order is created, the availability of the product needs to be checked. This is
done using the MMBE transaction code, which displays the stock levels and any expected
delivery dates if the product needs to be manufactured.

If the product is available, the next step is to deliver it to the customer. This is done by
creating a delivery document using the VL01N transaction code. The delivery document
contains information about the product, delivery details, and any other relevant information.

After the product is delivered, the billing team creates an invoice for the customer using the
VF01 transaction code. The invoice contains the details of the product, pricing, and any
applicable taxes or discounts.

The final step in the OTC process is to receive payment from the customer. The accounting
team receives the payment and posts it in the SAP system using the F-28 transaction code.
They also monitor the customer's account to ensure that payment is received on time.

Example:

Let’s take an example where customer buying online from an e-commerce application
using SAP OTC process:

The customer visits the e-commerce website and searches for a product they would
like to purchase.

The customer selects the product and adds it to their cart.

The customer proceeds to checkout and enters their billing and shipping information.

The e-commerce application connects with the SAP OTC system and creates a sales
order based on the customer's information and the product details.

The SAP OTC system checks the availability of the product in the inventory.

If the product is available, the system generates a delivery order and sends it to the
warehouse to prepare the product for shipping.
 The warehouse personnel receive the delivery order and pick the product from the
inventory.

The warehouse personnel update the SAP OTC system with the shipping details and
the product is ready for dispatch.

The system generates an invoice and sends it to the customer's email address.

The customer receives the invoice and pays for the product online.

The system updates the payment information and the product is dispatched to the
customer's address.

The customer receives the product and confirms the delivery through the e-commerce
application.

The system updates the delivery information and the order is marked as complete.

Detailed Analysis of above Example:

When the customer selects a product and proceeds to checkout on the e-commerce
website, the SAP OTC process begins with the creation of a sales order. The sales order
contains all the relevant details of the product, the customer, the shipping address, and the
billing information. The sales order is created automatically in the SAP OTC system when
the customer submits their order on the e-commerce website.

The SAP OTC system checks the availability of the product in the inventory by querying the
warehouse management system (WMS) to confirm if the product is in stock or not.

Delivery Order Creation:

If the product is available, the SAP OTC system creates a delivery order and sends it to the
warehouse for product picking and packaging. The delivery order contains information
about the product, the customer, and the shipping address. The warehouse personnel use
the delivery order to pick the product from the inventory and prepare it for shipping.

The warehouse personnel receive the delivery order and pick the product from the inventory.
They verify the product details against the delivery order and pack it for shipping.

After the product is picked and packed, the warehouse personnel update the SAP OTC
system with the shipping details and the product is ready for dispatch. The SAP OTC
system records the goods issue against the delivery order.

The SAP OTC system creates a shipment document that contains all the details of the
delivery order, such as the product, the customer, the shipping address, and the carrier
information.

After the product is shipped, the SAP OTC system generates an invoice for the customer.
The invoice contains all the details of the product, the customer, and the billing information.

The customer receives the invoice and pays for the product online. The payment is recorded
in the SAP OTC system against the customer's account.

After the customer has received the product, they confirm the delivery through the e-
commerce website. The SAP OTC system updates the delivery information and the order is
marked as complete.

The SAP OTC process also includes post-sales activities such as returns, refunds, and
customer support. If the customer needs to return the product, a return order is created in
the SAP OTC system, and the process is repeated in reverse.

Benefits of SAP SD OTC Process:

The SAP SD OTC process automates manual tasks such as order processing, pricing, and
invoicing, which can improve the overall efficiency of the business. It also provides real-time
visibility into inventory levels, sales orders, and customer data.

Improved customer service:

The SAP SD OTC process enables businesses to respond to customer inquiries quickly,
provide accurate pricing, and deliver products on time. It also allows customers to track
their orders and access their order history online.

Better inventory management:

The SAP SD OTC process provides real-time visibility into inventory levels, which can help
businesses optimize their inventory levels and reduce the risk of stock outs and
overstocking.

Enhanced financial management:

The SAP SD OTC process integrates the sales process with financial processes such as
billing and invoicing, which can help businesses streamline their financial operations and
improve cash flow management.

Improved analytics and reporting:

The SAP SD OTC process provides real-time access to sales data and analytics, which can
help businesses make better decisions, identify trends, and optimize their sales and
distribution processes.
Fig 6. SAP OTC CYCLE

One of the great things about the SAP SD OTC process is that it can be customized to meet
the needs of each business. For example, businesses can choose to enable credit control in
the system, which means they can set up rules on when orders should be shipped and when
payment should be received from the customer. This helps to reduce the risk of late
payments and enables businesses to run the process more efficiently.

Overall, the SAP SD OTC process is an important part of any sales and distribution system.
It helps to streamline the process and ensure that customers receive their orders quickly
and efficiently. It also helps to reduce the risk of late payments and enables business
owners to have more control over their sales process

Conclusion:

Throughout this blog, I have discussed a trending topic. I explained each component in a
way that every consultant could understand it immediately. This is merely a basic
understanding of the OTC procedure, which I have discussed in this blog. I will try to provide
more specific information in the future. This blog post provided basic knowledge of SAP
OTC Cycle. Please note that the SAP SD OTC Cycle may vary depending on the specific
business requirements and configuration in the SAP system. Please correct me if I’m wrong
somewhere, or leave a comment. I appreciate your comments on this blog. You can expect
many more blogs written by me about SAP functional modules. Follow me for more articles.

Thank you!

If you need more information, you can check out some references.

https://blogs.sap.com/2020/03/02/step-by-step-to-run-a-simple-order-to-cash-
process/

https://erproof.com/sd/free-training/sap-order-cash-process/