SAP Order to Cash Process - SD

Introduction
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.

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.

Order to cash process in sap

The user inquires about products and

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

Quotation for inquiry: Quotation is nothing but the price given

to the user. No accounting entry will be
VA21 generated.

Sales order can be created with

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

Delivery follows the post-goods issue

(PGI). Delivery is the actual fulfilment of
Delivery: VL01N 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 delivered. At this
Invoice: VF01
stage, accounting entries will be
generated.
 SAP OTC Process in Tabular Format

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:

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.

• Availability Check:
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.
• Delivery Processing:
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.
Billing:
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.
Payment Processing:
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:

• Sales Order Creation:

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.
• Availability Check:

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.

• Picking and Packing:

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.
• Goods Issue:

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.

• Shipment Creation:

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.

• Invoicing

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.
Payment:
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.

• Delivery Confirmation:

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.

• Post-Sales Activities:

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:

 • Increased efficiency:

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